4 Burning Questions About CBS’ New NFL Package

Football will be a game-changer

In securing the rights to the National Football League’s new Thursday night franchise, CBS effectively pulled the rug out from under its broadcast competition. While it’s no secret that NBC has been having a rough time of it on the crucial night, Fox isn’t faring all that well on fall Thursdays, either. (While its 8 p.m. time slot remains a quandary, ABC’s battery of the indefatigable Grey’s Anatomy and the smash hit Scandal make it bulletproof, especially among female viewers.)

Those who were absolutely convinced that NBC would spend its way to a rights win remain perplexed by how the Peacock let itself get outflanked by CBS. But according to sources with insight into the auction, CBS’ offer, which was estimated to be around $275 million, actually did not overshadow its rivals—in fact, one suitor suggests that NBC’s bid was the highest of the five.

Instead, the network’s dominance on Thursday nights and its willingness to shoulder the load on the production costs for all 16 games (this includes the eight telecasts that will run on NFL Network in the second half of the season) gave CBS the edge. And while the impact of erecting another broadcast NFL tent pole will be significant, CBS faces some uncertainty as it plans its fall schedule. Here are four of the biggest questions facing the network as of today:

1) What’s going to happen to The Big Bang Theory?

It’s a ratings monster and generates tremendous amounts of ad sales revenue, but the endearingly nerdy sitcom’s 8 p.m. start time is likely to overlap CBS’ pre-game show. (NFL Network’s Thursday Night Football games kick off at 8:29 p.m. ET.) So, while CBS could just as soon bench The Big Bang Theory until Nov. 6, it’s more likely to shift the show to Monday night in the slot currently occupied by the departing How I Met Your Mother. If nothing else, such a move would give a shot in the arm to the mix of returning and new comedies CBS is expected to program next fall,

That said, any such realignment almost certainly wouldn’t be permanent. Thursdays are too important for movie studios, automakers and retailers, and the NFL’s residency on CBS is a mere eight weeks. At the same time, should Bang find itself back on the Monday night grid, pulling it from the anchor spot after two months could destabilize the entire lineup. (And once Bang returns to its home base, what does CBS install in its stead?) There are worse problems to have, but this is definitely going to be one of the upfront’s biggest reveals.

2) Can CBS actually make money with a limited NFL package?

“We suspect on pure spot monetization versus cost per game basis, the NFL contract for the Thursday Night package would be a very modest loss leader,” RBC Capital Markets analyst David Bank wrote Wednesday night in a note to investors. Given the relatively sober price CBS paid for the games (back-of-the-envelope math puts the going rate at around $35 million per contest), and the estimated 112 units that are available in a standard NFL broadcast, a base rate of $300,000 per :30 would bring CBS pretty close to breaking even. If that sounds like a big chunk of change for a half-minute of airtime, it’s nowhere near what CBS commands for a spot in its late national games—which air outside of prime time. (Technically speaking, the 4 p.m. games run from early fringe through prime access.) Of course, none of the above factors in the potential windfall associated with landing presenting sponsorships and integrations…nor does it take into account production costs, salaries and other game-day expenses.

But the power of the NFL isn’t limited to its status as the foremost ad-delivery vehicle known to man. As Bank notes, CBS’ AFC package functions as a tremendously efficient promotional machine. “Because CBS owns so much of its own content, every show it ‘breaks’ or builds has not only value on the prime time schedule, but in the long-tail of syndication as well,” Bank said. “A hit on CBS is thus arguably worth more to its parent company than most other networks that tend to produce and own less of their prime time schedules than CBS.”

3)What are the long-term implications of the Thursday night experiment?

That remains to be seen. For one thing, this is a one-year deal, although the NFL retains the right to exercise a second season renewal option. But as the incumbent, CBS already has a huge advantage over its rivals; the NFL demonstrably prefers to maintain continuity in its media rights deals. Thus, if the first season goes off without a hitch, this could be the cornerstone of CBS’ fall roster for years to come.

The longer CBS lays claim to Thursday Night Football, the more leverage the property will give it in negotiations with distributors. Already the industry’s most aggressive collector of retransmission consent dollars, CBS’ prime time NFL content should only serve to build up that side of the business. Industry estimates suggest that CBS in 2014 should take in around $229 million in retrans consent fees, which should put it a good year ahead of its earlier stated goal to reach the $1 billion mark by 2017.

Noting that the new NFL deal may help CBS further accelerate its retrans growth, Nomura analyst Anthony DiClemente added that any gains would not happen “right away.” In a note to investors, DiClemente predicted that any halo effect would be contingent on the length of a renewed deal: “If this agreement works well and continues for future seasons, we are hopeful it strengthens the value…CBS can provide to distributors.”

At least one analyst is unconvinced that the football package will contribute to the bottom line. In a note issued shortly after the deal was announced, Bernstein Research’s Todd Juenger said the fact that the CBS games would be simulcast on NFL Network essentially nullifies any talk of a retrans lift. “This doesn’t add much to their retrans argument, as the games will continue to be available on NFL Network as well,” Juenger said. “[The games are] not unique to CBS.”

4) Will the games be worth watching?

In what was not exactly a banner year for the AFC—10 of the conference’s 16 franchises finished .500 or under, and 2-14 Houston posted the worst record of any team in the league—one may well imagine that CBS will lobby for a few interconference matchups. Only two of the network’s late national games featured NFC teams (Denver visited the Giants on Sept. 15, and the Colts traveled to San Francisco the following week), which are contractually aligned with Fox.

While CBS is not expected to be saddled with the sort of leftovers that tend to fall NFL Net’s way, the NFL has to balance the relative attractiveness of the new package with the established prime time offerings on NBC and ESPN. At the same time, CBS is a loyal partner of the league and its ratings dwarf those of the lesser-distributed ESPN. Per Nielsen, CBS’ 2013 NFL coverage averaged 18.6 million viewers and a 12.8 household rating, marking its biggest overall deliveries since 2010. Meanwhile, if you isolate CBS’ late national suite from its 1 p.m. games, those eight broadcasts account for the second-most successful program on television, averaging 26.4 million viewers and a 15.2 HH rating.

Ultimately, if the pilot program is to succeed, the NFL will have to carve out some compelling matchups for CBS, said ESPN personality Tony Kornheiser. “What CBS goes to the NFL and says is, ‘We have been a partner for a long time. We’re going to help you out here for our benefit and for your benefit, so you’ve got to give us better games,’” Korneheiser said during Wednesday’s installment of Pardon the Interruption. “So you give them San Francisco-Seattle, and you give them New England-Denver and boom!—you make it rain.”