NFL Signs on for Ten More Years of Television
After watching the league nearly fritter away its popularity with a lockout and a tense player-owner standoff, the league redeemed itself Wednesday, inking a series of deals with its broadcast partners that will keep NFL games on television for another ten years.
After sorting through their labor problems, the NFL and the players agreed on a ten-year deal, outlining the specifics on player salaries, salary caps, and other revenue and competition issues. Once that deal was done, the league was able to approach the various networks that broadcast NFL games and get a similar package put together.
"(The deals) will ensure the NFL will stay on free television for another 11 years, which I think is great for fans," Commissioner Roger Goodell said at the owners' meetings outside Dallas. "It will continue to allow us to grow our audience. It's a tribute to the players and (union chief DeMaurice) Smith for extending our labor agreement for 10 years. I think that kind of stability gave us the ability to get these contract extensions."
And boy, did they get a good deal. The three main networks that broadcast NFL games — CBS, Fox, and NBC — agreed to pay approximately one billion dollars each, per year, for the life of the deal. This gives the league nearly $3.1 billion per year in television revenue from the three networks. The increases will occur incrementally at about 7 percent per season.
This deal comes after the league already completed negotiations with ESPN for the rights to broadcast Monday Night Football. ESPN paid $1.9 billion annually for a contract that runs through the 2021 season.
The new deals give the NFL some flexibility with its Thursday night games, which it hopes to expand starting next season. The NFL already airs Thursday games on Thanksgiving Day, and through the latter half of the season. Starting next season, the NFL can air more of these games, and air them on their own NFL network. At some point, the league hopes to put together a Thursday Night package that it can sell, similar to the Monday Night package.
NFL games account for 92% of the highest rated television programs in the fall, which is why each network was so eager to sign on at nearly any price. After all, $1 billion per season is a pretty steep price for a football game.
"This is incredibly powerful programming," said NBC Sports Group Chairman Mark Lazarus.
"It's as sure as you can get with anything today," said Fox Sports Co-President Eric Shanks.
"It's an unbelievably important product to associate ourselves with," said CBS Sports Chairman Sean McManus.
The three networks also retained the right to rotate the Super Bowl coverage throughout the deal.
Under the terms of the deal, CBS will continue to show AFC games on Sunday afternoons as it has since 1998, while Fox still retains the NFC package that it first acquired in 1994. "Sunday Night Football" will remain on NBC, which picked it up in 2006. NBC also picks up the Thanksgiving Day prime-time game, and gets to add a divisional playoff game as well as create a Sunday Morning pregame show. They also get three Superbowls in the next nine years.
Each of the networks will also have more options to swap games around for their prime slots, allowing the league and the networks to highlight good, playoff-bound teams in their prime-time slots. (We at Benzinga know how much our readers love options, right? A lot of money to be had for commodity and options traders!)
Traders who believe that the NFL's TV deals point toward good economic times for the league and its sponsors might want to consider the following trades:
- If you think these things are great for the networks, then they might make good investments. Consider NBC, which is owned in large part by General Electric (NYSE: GE) and CBS (NYSE: CBS).
- Big advertisers are also in a position to make a killing off this deal. While they may have to pay more for their football ads, they do so knowing that these are the highest rated programs of the season. Consider someone like Budweiser parent company Anheuser-Busch (NYSE: BUD).
- NFL games, as part of the deal, will be more accessible on devices like tablets and cell phones. If you like the tablet end of that idea, consider tablet maker Apple (NASDAQ: AAPL). If you think that the cell-phone (especially with all the 4g coverage coming in 2012 and beyond) is more interesting, you'll want to look at Verizon (NYSE: VZ), as Verizon has the sole provider access for cell phone distribution of games.
Traders who believe that it's bad business to spend $1 billion per year on NFL games may consider alternative positions:
- You could buy Kimberly-Clark (NYSE: KMB), which makes Kleenex. You'll need the tissues to sop up all the tears of joy after watching Matthew Stafford lead the Lions to the 2013 Super Bowl.
- You could buy an ETF that shorts the S&P 500, such as ProShares Short S&P500 (NYSE: SH). After all, if NFL football is suddenly a bad investment, odds are good that the entire world is ending. Going short the market might be a smart play.
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