NEW YORK -- As CBS, ABC/ESPN and Fox celebrated their new eight-year NFL contracts, NBC Sports president Dick Ebersol predicted his rivals will each lose $150 million to $200 million annually, and that's assuming the economy remains strong. If the economy goes south, Ebersol said, the losses could double.
NBC competitors chalked up Ebersol's comments as sour grapes. After 33 years of broadcasting pro football, the Peacock network decided the huge license fee increases paid by the other networks did not make financial sense and passed on the deal.
"We drew a line in the sand," said Ebersol during a Wednesday conference call with reporters. "We believe that $500 million is a reckless number to pay for the AFC."
That's the price CBS agreed to pay per year to snare the AFC package for eight years. Ebersol said NBC valued the AFC at $300 million annually and was prepared to bid $340 to keep the package. When the NFL informed NBC on Tuesday, Jan. 6, that CBS was prepared to pay $500 million, NBC passed.
The network informed NFL officials Jan. 7 that it was interested in bidding on the Monday night game. NBC reasoned that if it was going to lose a bundle on pro football, it might as well give its primetime lineup a boost.
NBC was prepared to pay $500 million for Monday Night Football, a figure more than double the $230 million ABC paid during the contract that just expired. At that number, NBC would lose $60 million-$70 million a year. "We thought it would put us so far ahead of our competition on Monday night that we could handle the loss," said Ebersol.
When the NFL went back to incumbent ABC, the Disney-owned network offered $550 million for Monday night and $600 million for the company's ESPN to take the full season cable package. The league accepted Disney's deal.
ABC, Fox and, especially, CBS disputed NBC projections of massive losses. "If we weren't successful in getting the package, we would be saying that the successful bidder bid too much," said ABC Sports president Steve Bornstein during an ABC/ESPN conference call Wednesday.
ABC and Fox said that while it will be a challenge, both networks claimed break-even on the NFL deals is possible. Fox Sports president David Hill said the network will likely lose money at the beginning of the contract, but the deal will smell rosy during the latter part of the eight-year pact.
"The value of the deal is not right now or next year," said Hill. "As television becomes more and more diversified and viewers have more and more options, the NFL is the only solid ground in a scary swamp."
Prophecy of profit
CBS stations president Mel Karmazin boldly proclaimed Tuesday that the Eye network will turn a profit on its $4 billion NFL investment beginning in the first year of the contract. Karmazin argued that CBS has an advantage over NBC in local ad sales derived from owned-and-operated stations. Karmazin said 12 of CBS' 14 O&Os are in NFL markets, and seven of the stations are in AFC team markets. NBC only had three stations.
Ebersol bought Karmazin's argument, but said the extra revenue CBS generates from its stations won't be anywhere near enough to take the network into the ballpark of break-even. Ebersol predicted CBS would earn an extra $25 million-$30 million from its stations.
Like Bornstein, Fox Television's chairman and CEO Chase Carey also dismissed Ebersol's dour predictions as "the angle from a guy that's not in." But not all industry observers took Ebersol's numbers with a grain of salt.
"NBC made an economic decision and dodged a bullet," said Chris Dixon, a media analyst with Paine Webber.
Added Roy Currlin, a sports media buyer for Ammirati & Puris/Lintas, "Based on standard accounting practices, networks will no longer make money on big-time sports anymore."
If a network such as CBS does lose hundreds of millions of dollars due to its NFL deal, Smith Barney analyst Paul Sweeney suggested the NFL may regret it cut deals at such high levels. "You have to wonder if the NFL is being too aggressive by threatening the long-term viability of its network partners," said Sweeney.
Dixon agreed with Ebersol that, dollar for dollar, NBC will be better served by its Olympics deals than having bought the NFL at the current pricing levels. "The notion that NBC is in trouble because it lost football and "Seinfeld" is wrong," said Dixon. "They'll position themselves for years as the Olympics Network. They'll be fine."
Ebersol said one of the reasons NBC didn't go to the mat to retain an NFL package was that, unlike the Olympics, pro football is not an exclusive property. An NFL network has competitors that can undersell each other to advertisers.
"We didn't buy five Olympics for billions of dollars for the great promotional opportunities," said Ebersol. "We bought it because we thought it would be wonderful financially."
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