The National Football League partners with multiple media outlets, receiving millions annually for exclusive broadcasting rights to regular season games, NFL Playoffs, and the Super Bowl.
As streaming platforms join the bidding war for these sports rights, one analyst suggests a bold move for the NFL.
The Disney Analyst: Needham analyst Laura Martin has a Hold rating and no price target on The Walt Disney Company DIS.
The Analyst Takeaways: Disney is one of the media partners of the NFL with its ESPN unit having rights to “Monday Night Football” games, some of which also air on ABC.
Many speculate that ESPN, owned by Disney, could be on the chopping block with any asset sales. The company’s ABC network could also be sold, which leads to Martin’s latest take on Disney.
“The NFL should buy ABC from Disney. The NFL is standing by and witnessing the destruction of the linear TV ecosystem, with its powerful economics that largely flow to the NFL and other sports leagues,” Martin said.
Martin said the NFL has used the ability to sell TV rights to a number of networks as a bargaining chip to maximize revenue. With competition from streaming companies accelerating, Martin said the NFL may want to make a move.
“The NFL is fiddling while Rome burns, in our view,” the analyst noted.
Related Link: Disney Q3 Earnigns Highlights: Revenue Miss, EPS Beat, 105.7 Million Core Disney+ Subscribers
With media rights deals signed for nine years through 2032, Martin said the NFL may believe it is in a “safe” place, but adds a word of caution. Martin said Major League Baseball also thought it was safe with its deals with regional sports networks owned by Sinclair Inc SBGI. Diamond Sports Corp, which owned the media rights for many MLB, NBA and NHL teams declared bankruptcy.
“If the linear TV ecosystem continues on its current trajectory, the NFL could face a similar problem, we believe,” she said.
In nine years, the NFL could see fewer bidders for rights to games according to Martin. The analyst thinks that Amazon.com Inc AMZN could be the only return bidder for NFL rights.
Martin said Apple Inc AAPL and Netflix Inc NFLX are likely less interested given their global scale and the NFL being less popular outside the U.S.
Current rights partners like Paramount Global PARAPARAA and Disney could be forced out of bidding from Amazon.
“A single bidder is always bad for content creator economics because that distributor has many incentives to bid low.”
Martin also said that Prime Video might not be best for the NFL given its demographic of higher-income families and individuals.
The analyst said the best way for the NFL to “protect its economics” and the value of NFL teams is to buy ABC from Disney or buy CBS from Paramount.
“That would guarantee its reach into 100% of US homes for the long term. That is, it could never be held hostage by AMZN or others.”
Martin said content without distribution is worthless, no matter how good the content.
“The NFL should figure out how many bidders will survive and be able to bid MORE for NFL content rights after 2032, or risk declining team values.”
DIS Price Action: Disney shares trade at $84.88 versus a 52-week trading range of $78.73 to $118.18. Shares of Disney are down 4.6% year-to-date in 2023 and down 24% over the last five years.
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