Originally Published: September 21, 2006 4 a.m.
Warning to all TV networks and cable system operators: A 600-pound gorilla with a voracious appetite is on the loose.
The NFL has begun competing with its broadcast partners by showing eight games this season on its two-year-old cable channel, the NFL Network. NFL spokesman Seth Palansky was quick to downplay the competition with rights holders. "Nothing has changed the NFL landscape," he said. "The NFL network is a complementary service. It benefits all our TV partners by helping whet the appetite of fans. More fans is (sic) good for everyone." Good especially for the NFL.
At stake is hundreds of millions of dollars in additional revenue above the $6 billion the league will take in this year, $3.7 billion of it from television rights agreements with CBS, NBC, ESPN, Fox and DirecTV.
The NFL Network is currently available in 41 million of the 91 million homes with cable. "Once they get in 80 million or 90 million homes, they'll be profiting from both subscriber fees and ad revenue, plus there will be the potential to provide a pay-per-view package down the road," said Jim Spence, a former senior vice president at ABC Sport and now president of New York-based Sports Television International.
Most networks lose money on the NFL, but make it up by using the games to promote their other programming. According to Spence and other media executives, the day will come when networks can no longer justify the losses from NFL contracts and the league will be forced to carry its own games. The short-term risk is that the NFL will alienate its broadcast partners before it's in position to assume full responsibility for broadcasting its product.
In preparation for the inevitable, the NFL committed $100 million in the second half of '06 to pressure cable companies to carry its network. Time Warner Cable, with 14.5 million subscribers, recently sacked the NFL Network. At issue: An additional $100 million in fees that the NFL is seeking from Time Warner. Subscribers in Cleveland, Dallas and Buffalo are currently affected, with more to follow.
Subscriber interest in the NFL Network has been lukewarm to date, with the channel currently rated as the 35th most watched cable outlet. The lack of interest is understandable. Until this season, network programming consisted of pre-season games, weekly highlights, reruns, and pre- and post-game analysis. But live game broadcasts, unavailable anywhere else on the dial, are sure to increase interest among the country's rabid football fans. The NFL is betting that leads to subscriber demand on cable systems.
As the dust settles over the next decade, the NFL TV landscape will look quite different than it does today. The one certainty is that the NFL will be even richer.
(Jordan Kobritz can be reached at firstname.lastname@example.org)