The NFL Returns, Giving Struggling Networks a $5 Billion Ad Revenue Lifeline

Key InsightsMore ad money is moving to the NFL as a result of college football postponements, which left advertisers with fewer gross ratings points options. Super Bowl talks are proceeding more slowly than last year, but have picked up in recent weeks. After most professional sports were sidelined in March by Covid-19, several leagues, including the MLB and NBA, have returned in the past two months to great audience and advertiser excitement. But when it comes to both ad revenue and audience size, those sports pale in comparison to the NFL, which kicks off its season tonight—and is throwing struggling networks an ad revenue lifeline that could be as much as $5 billion. While the advertising industry has been bracing for an NFL season unlike any other, “We all feel really good about the NFL,” said Carrie Drinkwater, executive director of integrated investments at Mediahub. “Everyone is so excited about it” and anticipating big ratings for the new season, which begins tonight on NBC as the Kansas City Chiefs take on the Houston Texans. Several media companies whose bottom lines have been decimated during the pandemic, in large part because of the lack of live sports (including ViacomCBS, which reported a 27% decline in Q2 advertising revenue due to Covid-19, and NBCUniversal, which had a similar 27% Q2 ad revenue drop), are counting on the NFL to help them rebound at the end of the year. After all, last season the NFL generated an estimated $4.6 billion in national TV ad revenue, according to Kantar Media: $3.3 billion in the regular season and an additional $1.3 billion in the playoffs and Super Bowl. That’s more than double the national TV ad revenue last season from the NBA, MLB and NHL combined ($2 billion). That number could climb even higher this year, as the Big Ten and Pac-12 have already postponed their college football seasons due to Covid-19, and continued production shutdowns mean the biggest scripted broadcast series won’t return to the air until November or early 2021, leaving advertisers with fewer options for gross ratings points in the fourth quarter. “We've got a marginalized college football season,” said Dan Lovinger, evp of advertising sales at NBC Sports Group. “And there's no doubt there's diminished capacity overall in prime time over the past couple of years. That is leading marketers to say, where can I go find quality ratings and reach, and Sunday Night Football is first in line for most marketers there.” As a result, NBC Sports has seen greater Sunday Night Football demand this year than it did at this point last year, said Lovinger, while Fox’s NFL sales are also pacing ahead of previous years, according to a source. And CBS has sold as much NFL inventory going into the season as it did at the same point last season, said John Bogusz, evp, sports sales and marketing, CBS Network sales. Even in a normal year, the NFL would have been one of TV’s top draws this fall. “The NFL is an important asset from a media plan execution standpoint. It is a consistent product that delivers significant ratings week in and week out without some of the challenges that entertainment programming has, and you know what you're getting into,” said Gibbs Haljun, total investment lead at GroupM’s Mindshare. “So that creates this opportunity, particularly in the current environment, for clients to look at: Is there a way to expand?” This is especially the case given that the NFL will have less of the pitfalls that have caused several MLB games to be postponed due to positive Covid-19 tests. NFL teams will only play one game a week, which means less travel and less chance of potential coronavirus exposure. “We have a growing sense of confidence that while certainly there's very likely to be some kind of disruptions, that the NFL seems fully committed to playing a season. And with their ability to adjust the schedule, and even if there are matchups that need to get cancelled, they'll have enough matchups to fill a weekend, that TV windows probably won't be missed,” said David Campanelli, co-chief investment officer, Horizon Media. That said, this year’s NFL ad market moved later than usual, in part because upfront negotiations were also delayed due to prolonged economic uncertainty stemming from the pandemic. While several advertisers have multiyear NFL deals, the rest of the market “moved later, but it moved extremely quickly once it moved,” said Lovinger. Following last month’s college football postponements, “we were able to close most of our business within a week or two of that.” Fox, meanwhile, completed its first big NFL deal in July, and the marketplace picked up in early August, finishing later in the month, according to a source. Its first weekend is virtually sold out, though it has inventory available later in the season. The theatrical category is down, with so many major movie releases postponed until 2021, but NFL business is booming for several other categories. Among the most popular this year: insurance (“if you name the insurance carrier, I would probably say, 'Yep, they're there and their spending is up,” said Bogusz), tech (FAANG companies: Facebook, Apple, Amazon, Netflix, Google, have all increased spending), daily fantasy, retail, consumer packaged goods (“which would tell you that it's probably a lot of what was formerly prime-time money moving into the NFL," said Lovinger), pharmaceuticals and political advertising. And once NFL games begin this week, many publishers anticipate the NFL marketplace will accelerate even further as advertisers that have remained on the sidelines see “proof of performance,” as Seth Winter, evp of sports sales at Fox Sports, told Adweek in July. As was the case with the MLB in July, some marketers “want to be comfortable that we will have a product on the field” before they’ll commit. Already, networks have seen additional advertising money flow into the NFL as a result of last month’s college football postponements. CBS will have three fewer SEC games this season due to the conference’s modified schedule and saw some of those units move to the NFL, while some of Fox Sports’ Big Ten football advertisers shifted their spend to the company’s NFL and MLB games. If more Covid outbreaks happen on the college football level, causing additional postponements and cancellations, buyers expect even more ad dollars to move to the NFL but caution that shifting that spend can be easier said than done. “There definitely was some college football money shifted to NFL, but the unit cost of NFL is obviously significantly higher than college football. And a lot of the marketing elements that some clients have in college football can't be attained through NFL given some of the guidelines and restrictions,” Drinkwater said. As for the possibility of NFL games being canceled or postponed, all of the networks are stressing flexibility in their negotiations with clients. “Should games get canceled, we would work with clients to mutually agree to re-express dollars elsewhere in the CBS portfolio,” Bogusz said. “But if the games are truly canceled, they do have the right to take their dollars back.” For the other leagues that were postponed earlier this year, “many of our advertisers have shown us that they want to stay with the sport,” Lovinger said. “But if somebody is extraordinarily flighted and they can't really move, we'll work with them. And nobody's going to be forced to keep their money on the books in the event of a cancellation.” Meanwhile, marketers have been so focused on the pandemic that no one has raised any concerns about the possibility of player protests on the heels of this summer’s national protests against police brutality and racial injustice. Three years ago, some NFL advertisers threatened to pull their spend over protest coverage, but most networks told Adweek they haven’t heard a peep from them this year, despite the likelihood that the games will feature some form of protest in line with what has been displayed in other leagues, including the NBA. Still, “I don’t think anybody is looking at it in terms of concern,” said one source. ‘Delayed’ Super Bowl talks heat up The late-moving NFL market also has slowed this year’s Super Bowl talks, which aren’t proceeding at the same rapid pace as last year, when Fox Sports sold out Super Bowl LIV 10 weeks early, the earliest finish in nine years. Super Bowl LIV sold out 10 weeks early, but this year's marketplace is unfolding more slowly. CBS will air Super Bowl LV on Feb. 7. For now, clients are “taking a more cautious approach and a bit of a delayed approach,” said Campanelli, who expects that in September and October, advertisers more focused on the Super Bowl and not NFL regular season games will start to have conversations. However, Super Bowl talks have “accelerated” over the past few days, said Jo Ann Ross, president and chief advertising revenue officer of domestic advertising sales at ViacomCBS. The network has already sold out of all its A positions (the first spot that runs in an ad pod) during the game’s first half. “We feel like we’re in really good shape.” As clients and agencies realized the NFL season would indeed be played as scheduled in recent weeks, “we began having very constructive, substantive conversations,” Ross said. Ads have been selling for around $5.5 million per 30-second spot, which is slightly below last year’s $5.6 million threshold, but the CBS deals also require marketers to pay an additional $300,000 to be included in the digital livestream. Some buyers said they are wary of putting down that kind of money so early in the NFL season, when it’s still unclear whether the NFL will be able to make it safely through all, or most, of its games and there is still so much economic uncertainty, and others want to wait until the NFL gives more clarity about what to expect—including the halftime show. In addition to buying the spot itself, marketers in the Super Bowl also pay for the creative, purchase other media to create a platform and construct an overall marketing plan around the game—which is a lot of work if the Super Bowl doesn’t happen. “There's going to be a little bit of a push and pull on how long can we wait to get as much solid information as possible? How is the season going? Are they able to keep any outbreaks at bay, if there are any, to get some amount of confidence before moving forward with a buy?” said Campanelli. The Super Bowl buys have similar flexibility as the regular season NFL deals, though as Bogusz pointed out, if the Big Game is canceled, most clients will end up taking their money back: “In terms of re-expressing Super Bowl, there is only one Super Bowl!”