When I was head of Fox, we had the broadcast rights to the NFC and CBS had the same for the AFC. We were early into a five-year deal and had lost a lot of money in the first year, as had CBS. Fortunately, there are promotional benefits of broadcasting NFL games that are intangible, yet important and real.
During that time I received a frantic call from an executive at CBS who indicated that we needed to extend our NFL deals and increase the price or risk losing the broadcast rights to NBC.
Rather than agreeing to an extension, Fox set about the business of making more money with our existing deal. The NFL was agreeable to many of our proposals, such as in-game sponsorships. The NFL certainly likes to make money, but also like its partners to do well. I asked if it was shopping an extension of the five-year deal. The NFL replied by asking, “Why would we shop a deal when our partners are losing money?”
While this perspective was noble, it was also smart. The NFL believed it had the best product and would grow in popularity, which meant substantially more money over time. Anyone who believes their product will be more valuable over time should negotiate shorter contracts – whether they be employment contracts, futures contracts or any other type of bargained agreement.
I received another call from that same CBS executive and indicated to him that the NFL told me they weren’t shopping an extension. But the executive thought this might be a head fake. After all, 20 years earlier the NFL had burned CBS when Fox stole the NFL from it. In the process, CBS was harmed not only financially, but also lost an important promotional vehicle for its other shows.
Which brings me to the upcoming initial year of the NFL on CBS on Thursday nights. Thursday is the most lucrative ad revenue night of the week because many household weekend buying decisions are made then. Sellers of products and entertainment covet that night for their ad spend.
The one-year CBS/NFL deal is non-exclusive (along with the NFL Network) for half of the 16 regular-season games for a whopping $250 million. Is this a good deal for CBS? Absolutely.
Thursday night is a fierce TV battleground for the aforementioned reasons. And if those weren’t enough, Univision recently outdrew CBS in ratings. It’s tough enough battling the English-speaking networks, CBS now has to battle a Hispanic one, too. Further, CBS has to compete with the ESPN Thursday night college football games.
From an accounting standpoint, CBS may lose money on Thursday nights, but it is getting a great promotional vehicle for the five new shows it is launching in prime time after the NFL broadcasts.
CBS will hurt the ratings of its network competition because it will win the night with NFL. While the ESPN Thursday night college games are great, college football is still tribal (local) and not national relative to the NFL. An added bonus is that the NFL over-indexes in the Hispanic markets, thus delivering a modest blow to Univision. As CBS does so, it builds a tighter relationship with the NFL, which is never a bad thing.
Although the NFL is expensive, CBS understands perhaps better than any other network that it may prove to be even more costly not to have a relationship with the NFL.
Brian Mulligan is currently the CEO of Brooknol Advisors, a Media, Entertainment and Sports Advisory Company. Mr. Mulligan has held CEO, Chairman, COO or CFO position of virtually every media/entertainment vertical for majors over a 30 year career, from Co-Chairman of Universal Pictures, CEO of Universal Television, Chairman of FOX Broadcasting and Cable, EVP/CFO of a Fortune 50 Company, SVP of MCA INC, EVP of Strategic Planning and Corporate Development Universal, Senior Executive Advisor Boston Consulting, Vice Chairman of Media/Telecom of a Money Center Bank, and worked extensively in/with private equity. Instrumental in over $175 billion of media and entertainment transactions.