Will Nets Pass High Cost Of NFL To Advertisers?

Although ESPN under its new contract with the National Football League will pay nearly twice the television rights fee to air Monday Night Football as it now pays to air Sunday night games, insiders say ESPN will still make a profit on the deal. And NBC, which won the right to air Sunday night games, can count on an additional $100 million in ad revenue as a consequence. But at what cost to advertisers? Betsy Lazar, general director of media and advertising operations for General Motors, said through a rep that the increase in rights doesn't mean that the networks will pass along those costs to the advertisers in the form of higher rates, because demand in the marketplace is what drives the price for media properties. And while advertisers value the NFL telecasts, and say they are willing to work with the network to a degree, they are not going to tolerate any huge bumps in ad rates. "It's fair to say the NFL has the strongest brand among sports properties," said Steve Margosian, general manager of Busch Media Group, the media-buying arm of major NFL advertiser Anheuser-Busch. "The NFL delivers our target demographics in a consistent weekly platform, and there's value to that." But Margosian said while ESPN and the other networks will try to cover some of the rights fees by raising ad rate cost-per-thousand, "at the end of the day, hopefully, we'll be able to come up with a deal that works for both sides."Mark Shapiro, ESPN executive vp of programming and production, said the $1.1 billion annual fee, which kicks in at the start of the 2006 NFL season, can be recouped by the network in a multitude of ways. "[Spanish-language network]ESPN Deportes will also air all the NFL games with their own telecast and sell their own advertising," he said. "We also have all high-definition telecast rights and the telecast on ESPN HD. We have all wireless rights, and the ability to stream games and highlights on ESPN cell phones. We have the rights to NFL Films, which are a big part of SportsCenter during the season. We have a fantasy license and use of the NFL's official data feed ... It will be 24 hours of focused coverage, not just the Monday Night game."And ratings will be higher than the 6.2 household number the NFL averaged on ESPN last season, although probably not close to the 10.9 rating ABC's telecast of MNF averaged last season.ABC is paying $550 million annually for its MNF TV rights, and taking in only $400 million a year; so the question is, can all of the value-added incentives ESPN is getting from the NFL bring in the additional $700 million in revenue that it will take to break even on the deal? Most insiders believe the difference will need to be made up by affiliate subscriber fees.For NBC, meanwhile, a unique portion of NBC Universal's Sunday Night Football TV rights deal with the NFL will enable the network to bring in an additional $75 million to $100 million in profits a year that could make the $600 million annual deal profitable for NBC parent General Electric. All 30 NFL teams will be required to use GE products, such as financial, healthcare and medical services, stadium lighting and electrical products. A Prudential Equity Group report estimates GE could sell between $300 million to $500 million in products to NFL teams each year.Under the new agreement, NBC will get to air a one-hour pre-game show, plus an additional hour of the game in prime time. That is expected to bring in an additional $100 million in ad revenues to the NBC coffers. Combining the GE product sales profits and the additional ad revenue dollars will push the annual take close to break even.The Prudential report also predicted that NBC's Sunday Night football telecasts could get ratings as much as 10 percent higher than ABC's current Monday Night broadcast window. The flexible sheduling provision, which will allow NBC over the last seven weeks of the season, to select a top NFL game each week from the CBS or Fox daytime schedule, could also help boost viewership. But media buyers aren't willing to go that far. Ray Warren, managing director at Omnicom's OMD, said he is concerned about viewer football burnout, after watching six hours of games earlier Sunday on CBS and Fox. But he believes the move by NBC to get NFL telecasts back is a good one. "NBC's prime-time ratings are off by 15 percent this season, and that is a major issue for advertisers," Warren said. "The NFL will help NBC with ratings not only on Sunday night, but to drive viewers to other nights. Maybe NBC can develop more prime time shows targeting male viewers.The NFL will not solve all their prime time problems, but it will help."

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Will Nets Pass High Cost Of NFL To Advertisers?

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