In the upcoming months television networks will begin negotiations with several sports leagues for new TV contracts. The NHL and MLS are expected to open up negotiations as their current agreements expire. MLB which has already extended agreements with Fox and Turner Sports has ESPN up next. However, no contract renewal will be more important (or expensive) than the NFL.
NFL: The NFL is the most popular “show” on television. In 2019 regular season games averaged 16.5 million viewers, a 5% increase from 2018. Sunday Night Football has been the top-rated primetime show for nine years running. Overall, in 2019, NFL games accounted for 47 of the 50 highest rated telecasts. The ratings for the ten postseason games are significantly higher followed by the Super Bowl. In 2020, the NFL will add an additional playoff (wild card) game in both conferences. The league is also expected to increase the regular season from 16 to 17 games as soon as 2021.
The current NFL contract with ESPN expires at the end of the 2021 season. Under the current eight-year agreement, ESPN paid the NFL $1.9 billion each season. The rights fees for the three broadcast networks all expire in 2022. With the present nine-year agreement for Sunday games, Fox pays $1.2 billion, NBC $1.1 billion and CBS $1 billion per season. Additionally, Fox has a five-year agreement at $660 per annum to televise eleven Thursday night games. This contract also runs through the 2022 season. The Thursday games are simulcast on the NFL Network and Amazon Prime Video.
DirecTV has had a Sunday Ticket package with the NFL since 1994, which allows the subscribers to watch out-of-market games. For the most recent agreement begun in 2015, DirecTV pays the NFL $1.5 billion each year. Sunday Ticket has an estimated 2 million subscribers with the most basic package costing subscribers nearly $300 each season.
It is widely expected the four networks will renew their NFL deals at a significant cost increase. Some analysts project the annual TV rights fees could possibly double to $2 billion for the three broadcast networks and ESPN could see a 50% increase to $3 billion. As with previous negotiations, the length of the contract is expected to be about eight years. It is not expected the NFL will add any streaming companies to its television packages. In any event, expect a substantial revenue increase for the NFL from their TV partners.
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There could be some changes with a new NFL deal:
· Disney may want to move some NFL games from ESPN to ABC and/or simulcast Monday Night Football games on ABC. Also, Disney wants to be included in the Super Bowl rotation of networks.
· AT&T, which is looking to sell DirecTV, has been losing subscribers and they are not expected to renew Sunday Ticket. It’s possible a streaming provider such as Apple+, ESPN+, Amazon or YouTube may pick up the package, or it could be a split among several online services.
· The NFL could eliminate which network televises which conference on Sunday afternoon. For years CBS had televised AFC games and Fox NFC games. That could change.
· If Fox is cash strapped from the fees of Sunday games, they may not be interested in renewing Thursday night games.
· There could be a bidding war between ESPN/ABC and NBC for Sunday Night Football.
NHL: The NHL’s ten-year agreement with NBC Sports at $200 million per annum expires at the end of the 2020-21 season. The NHL is looking for a significant increase in TV rights fee. Comcast and NBC have been the U.S. television home since the 2005-06 season and has introduced such popular marketing events as The Winter Classic on New Year’s Day and The Stadium Series. NBC would prefer to keep exclusive rights to the NHL but other networks are interested which will drive up the price. It has been reported NBC has the right of first refusal.
Both ESPN and Fox have indicated interest in televising hockey games. The two networks have a history in televising the NHL. ESPN televised games in 1980-82, 1985-88, and, more recently, 1992-2004. Also, ESPN has expanded their studio coverage of NHL games. The NHL on Fox aired for five seasons from 1994-1999. Fox since selling assets to Disney has been relying more on sports. Also, since the last negotiations, Fox has launched FS1, which could televise a bulk of the games. It’s also been reported that CBS may be interested in televising NHL games. CBS was the first U.S. network to televise NHL games and also has a cable sports network seeking live content.
There is also the possibility that a streaming video service may be a part of the negotiations, Facebook, Amazon, and YouTube have all been looking at live sports. A dark horse in the negotiations could be DAZN, a subscription sports streaming service launched in 2016 run by former ESPN head John Skipper.
MLB: Major League Baseball has three television partners; Fox, ESPN and Turner Sports. Fox and Turner have already renewed their agreements with MLB. In November 2018, Fox extended their agreement with MLB set to expire in 2021. With the contract renewal, Fox will pay MLB $728.6 million annually ($5.1 billion in total) through the 2028 season, a 36% increase from the previous agreement. Fox will continue to televise the annual All-Star Game, World Series and other postseason games. Fox and FS1 will also continue televising weekly MLB games.
In September 2020, Turner Sports finalized their renewal agreement with MLB. Turner Sports will pay MLB $535 million per annum ($3.7 billion in total), a 65% increase. Similar to Fox, the new agreement starts in 2022 and runs through the 2028 season. Under the terms of the new deal, TBS will shift its half-season of Sunday afternoon games to a full-season of Tuesday night games. In addition to televising two division series and one LCS series, TBS will now air a wild-card playoff game.
ESPN is expected to renew their agreement with MLB soon. Under the current eight-year contract that also runs through the 2021 season, ESPN pays the MLB $700 million each year ($5.6 billion in total). ESPN may want to drop the weeknight Monday and Wednesday games but keep Sunday Night Baseball. ESPN would continue to televise the Home Run Derby during the All-Star break. It’s been reported ESPN wants MLB to continue the three-game wild card series which was temporarily implemented for the shortened 2020 season. It is expected when ESPN contract extension is finalized, MLB will receive over $2 billion in TV rights fees each year.
MLS: The MLS current television contract expires in 2022, ESPN and Fox have an eight-year agreement begun in 2015, at an annual cost of $75 million ($600 million in total). Univision televises MLS games in Spanish, its eight-year agreement also began in 2015 at an annual cost of $15 million ($120 million in total).
The MLS is appealing for several reasons. With 30 teams there are over 500 regular season matches, plus playoffs, an All-Star game, The Campeones Cup and other events spread out over nine months. This offers numerous hours of live sports. In addition, soccer is popular with younger audiences.
The MLS typically ties their media rights fees with the U.S. Men’s National Team. If U.S. Men’s team qualifies for the 2022 FIFA Men’s World Cup in Qatar, it will add more value and interest. Furthermore, the 2026 FIFA World Cup will expand from 32 nations to 48 nations. More importantly, the U.S. along with Mexico and Canada will host the 2026 World Cup. Of the 80 matches to be played, 60 will be in the U.S.
The MLS has been having rights fees talks with their current media partners and Turner Sports may also be interested. Not surprisingly, the MLS is looking to grow revenue and is also looking for a streaming deal. With most franchises losing money these next round of negotiations will be important.
Looking back at 2020, Michael Neuman, the Founder, EVP and Managing Partner, Scout Sports and Entertainment, a division of Horizon Media says, “Nobody should expect the ratings rollercoaster of 2020 again. We went from full stop of sports programming to a period of “test and learn” (e.g. NASCAR and simulated iRacing), to impressive numbers across the Last Dance and the NFL Draft, then months with consistent broadcast schedules of competing sports programming. Add in a strong desire for many people, who had locked themselves away in their homes to avoid COVID, getting outside during the warmer months; and an election news cycle that produced outrageous storylines on a daily basis, we experienced a television year quite like no other”.
Neuman adds, “However, the importance of live sports to the networks and their advertisers has never been more important. The future of sports media remains solid, there is simply nothing like it. In a time of great divisiveness, live sports are the ultimate unifier. In the safest of times, it’s a builder of communities, bringing people together at the same time, unlike anything else the networks are offering these days. Close to 90% of the top-rated programs per year, pre-COVID-19 were live sports. When you combine the broadcast audiences with the reach of streaming and the hours avid sports fans engage with ancillary sports content, it’s hard for advertisers to find those valuable impressions elsewhere. With promising news about a COVID-19 vaccine on the way, sports will be the comeback story of 2021”.