It’s not outlandish to entertain a previously unthinkable prospect: Might ESPN elect to go without rights to NFL games? ?In a span of less than five years, industry giant ESPN has seen its narrative transformed from that of a mighty colossus into the hard-luck tale of a ragtag warrior. As it struggles to regain heretofore heroic heights — levels of growth that are probably no longer attainable — ESPN has had to endure a slew of significant workforce layoffs (with more reportedly on the way) and a once-doting Wall Street that has turned a skeptically cold shoulder. Astonishing increases in earnings, previously viewed as faits acomplis, now seem like fantasies from another world, thanks to the now-familiar combo of cord-cutting and burgeoning rights fees. ?With so much of ESPN’s universe asunder, it’s not outlandish now to entertain a previously unthinkable prospect: Might ESPN elect to go without rights to NFL games after the expiration of its eight-year deal for Monday Night Football in 2021?! ?“Impossible”? Yeah, we know — NFL games have been the backbone of ESPN’s existence since 1987, and the biggest, most critical element of its financial dominance ever since. The network basically can’t exist without an NFL rights package. ?Well, think again — like some execs at the network have started to do — and consider the following: First, quietly, ESPN has been able to pull off a dramatic judo move in recent agreements with its affiliates, one whose importance cannot be overstated: There is no longer specific contract language that requires the cable giant to have NFL games in order to earn its lofty (and industry-envied) subscriber fees, currently more than $7 per household. This means the network would not face automatic decreases in that vital artery of its dual revenue stream. Sure, distributors would be aghast, demanding to negotiate lower fees probably immediately, but the point is, there would be negotiations, enabling ESPN to do everything it could to keep those numbers as high as possible. ?Second, when ESPN agreed to pay $15.2 billion for its current Monday Night Football deal, some of its key executives believed they were buying the schedule of the previous MNF package, i.e., more often than not, the best game or at least one of the top games of the week. But Sunday Night Football got that pedigree, and Fox and CBS games since then have also generally been more desirable than ESPN’s matchups. With the advent of Thursday Night Football several years ago, ESPN’s Monday night schedule has been further diluted of quality matchups, and the network hasn't been shy about voicing dissatisfaction. ?NFL scheduling guru Howard Katz can keep more plates spinning in the air than anyone else in sports, and he’s done the Lord’s work trying to please everyone, but math is math, and there just aren’t enough good games to go around. Yes, Monday Night Football ratings are up about 5 percent this year over last year, but it’s still far behind 2015’s viewership, for example. ESPN is averaging roughly 11 million viewers for its games; given myriad challenges the network is facing, will parent Disney believe that an audience of that size for only 17 weeks a year is worth billions? ?Third, ESPN pays a disproportionally steeper rights fee for NFL games than CBS, Fox and NBC, because ESPN's deals give it access to NFL footage outside the games — NFL films and other NFL-related opportunities. So, when ESPN's Pardon the Interruption, for instance, wants to run a highlight, or SportsCenter and all the network’s NFL shoulder programming want to dissect games and plays till the cows wander home, ESPN producers can use all the NFL footage they want. At the time of ESPN's last deal, industry experts estimated that 15 percent to 20 percent of its total cost could be attributed to those additional rights and privileges, and ESPN had no choice but to pay up. How could the network survive without those? The answer is they might not have to because of NFL Capitalism 101: Cash Equals Truth. Can anyone imagine the NFL turning down an offer from ESPN of $300 or $400 million for just those rights, even if ESPN didn’t have game rights? It’s doubtful.
James Andrew Miller: Why ESPN Could Abandon NFL Football
The Hollywood Reporter | Oct 30