NFL Has a Lot of Leverage in Negotiating TV Deals

Networks forced to play by NFL's rules or go home

Headshot of Erik Oster

When the NFL negotiated with TV networks on the rights to broadcast eight "Thursday Night Football" games this season, the contract stipulated that term was only for one year, that games would air simultaneously on the league's own NFL Network and that the winning bidder would cover all production costs on all sixteen "Thursday Night Football" broadcasts (including two Saturday games).

“Media companies lined up to bid anyway,” The Wall Street Journal reported. CBS ultimately prevailed, agreeing to pay $300 million for the broadcast rights, with the first game in the new lineup premiering next week (tonight's season opener is being broadcast by NBC as part of an earlier agreement).

The negotiation and what CBS paid illustrate the extreme leverage the NFL wields with networks. NBC, CBS and ESPN together have contracts that make up between $5 and $5 billion per year to broadcast NFL games through the 2021-22 season. "It's almost like the networks are afraid to say no to the NFL," one senior executive told The Wall Street Journal.

Anyone in a traditional TV exec’s shoes would be. While networks face threats like the rise of streaming video services, the NFL offers a bankable product that consumers won't just wait to catch on Netflix. According to securities firm Jefferies Group, 97 percent of all sports are watched live. Add to that the NFL's short season and 17.4 million average regular season game viewers in the 18-49 demo and each game becomes a hot ticket.

At the same time, the NFL is amping up its digital push by offering new or expanded online programs. This includes NFL Now, a new online video service offering NFL-made films, shows, documentaries and new footage from teams for $1.99 per month. The NFL also is strengthening a one-year agreement with Twitter to tweet highlights from in-progress games and increasing the number of games streamed to smart phones as part of a four-year, $1 billion agreement with Verizon. As The Wall Street Journal notes, both of these deals include rights denied of the NFL's television broadcast partners.

What's more, some television executives fear that NFL Now will stream games directly to fans. Brian Rolapp, evp of media for the NFL, doesn't rule out such a possibility. "If the world shifts dramatically as people think, it'll be nice to have an asset like NFL Now just like it's nice to have NFL Network," he told the Journal, adding that "selling game-streaming rights to an online company is a matter of 'when, not if.'"

DirecTV also finds itself backed against a wall in negotiations with the NFL. Last year, the league floated the idea of licensing its Sunday Ticket package to tech companies such as Google and Microsoft, following reluctance on DirecTV's to absorb a large rate increase. In May, the satellite provider agreed to sell itself to AT&T for $49 billion, with the stipulation that AT&T could back out of the deal should DirecTV prove unable to renew its Sunday Ticket contract–giving the NFL even more leverage in the ongoing negotiations. According to Wall Street Journal sources, both sides are "optimistic they will reach an agreement," which will purportedly include a 30-40 percent increase in DirecTV's costs over the multi-year agreement.

@ErikDOster Erik Oster is an agencies reporter for Adweek.