If one were to apply the language of football to the ad sales market, deploying the martially inflected argot sportswriters toss around like small bills—the bombs, the blitzes, the controlled bursts of aerial assault—it would be safe to say that this is the year the National Football League went thermonuclear.
But on the eve of what promises to be the most-watched Super Bowl in history, a labor dispute between team owners and the players’ union could silence the artillery altogether.
The NFL collective bargaining agreement is set to expire on March 4, and as both sides remain entrenched, a lockout now seems all but inevitable. In a worst-case scenario, the entire 2011-12 campaign would be scuttled, resulting in losses of hundreds of millions of dollars in ad revenue and sending media buyers scrambling for replacements. Indeed, the NFL plays such a critical role in the TV market that even the loss of a handful of games could be catastrophic to the spring upfront.
Understandably, the league’s broadcast partners (CBS, NBC, Fox, ESPN) are assessing the specter of a work stoppage with all the enthusiasm of someone being asked to handle a radioactive dog turd.
When asked to comment on the fact that Super Bowl XLV may prove to be the final NFL broadcast of 2011, Fox Sports Media Group chairman and executive producer David Hill could offer little in the way of reassurance.
“It would be a great tragedy,” Hill said. “We all know what happens after a strike or a lockout; fans turn away and it takes a while for them to come back.”
In the short term, the loss of the NFL will wipe as much as $3 billion in ad revenue off the books at the four networks. Fox has the most skin in the game, having generated north of $975 million in ad dollars with its Sunday NFC package. Per industry estimates, NBC hauled in some $850 million courtesy of its Sunday Night Football juggernaut, while CBS’ AFC coverage churned up around $825 million. Per terms of its rights deal, ESPN’s Monday Night Football carries the lightest spot load, with ad sales adding up to around $175 million.
The real pain will begin to be felt when the NFL collects its rights fees. Per terms of their pacts with the league, the networks will have to pony up as much as $4 billion regardless of whether there are any games for them to air. ESPN, which is negotiating a renewal, is on the hook for an annual sum of $1.1 billion, while Fox pays $720 million per season to carry NFL action. CBS plunks down $620 million for its package, while NBC kicks in north of $600 million. The three broadcast deals expire in 2013; ESPN’s pact runs out the following year.
Ironically, the networks may be complicit in the lockout. According to the union, in reworking their contracts to provide for what amounts to lockout insurance, the broadcasters effectively solidified the NFL’s financial prospects at the expense of the players. “Every dollar the NFL left on the table to obtain its lockout protection is paid for out of the players’ share of total revenues,” said NFLPA counsel Jeffrey Kessler, in a pre-season complaint.
While the NFL’s last labor war was brought on by markedly different circumstances, the 1987 season may be a good model for what to expect this time around. “The players opted to strike, and as a result there was one missed week followed by three games with replacement personnel,” said Brian Hughes, evp, director of audience analysis, MagnaGlobal. “A lockout is something altogether different. It would preclude staging replacement games, leaving nothing for the networks to air except coverage of the negotiations.”
One sports sales vet active during the strike years said the hard-won lessons of ’87 and ’82 are not likely to be forgotten. “As was proven in the past, replacement programming doesn’t work. It became a landscape of illegitimate sports,” the former sales boss said. “College football would be the first to benefit.” This would put ESPN in the catbird seat, given that it and broadcast sibling ABC control roughly 90 percent of NCAA football regular-season GRPs and carry 33 of the 35 bowl games.
In a worst-case scenario, the broadcasters would stand to lose between 25-30 percent of their fourth-quarter 18-49 ratings points. And while football-targeted dollars would likely fall to college games, the NHL and baseball, sponsors with a marked NFL presence would need to shift money to prime-time entertainment.
“There are still a few reach vehicles out there, the American Idols, the stuff on CBS,” said one national TV buyer. “It will call for some big upstream shifts in thinking, and the usual suspects, the beer guys, aren’t going to be happy. But the momentum behind auto dollars is real and the scatter market just keeps building. Losing football would suck, but it’s not an end-game scenario.”