Broadcasters’ Goal-Line Stand

CBS Corp. chairman and CEO Les Moonves has long been one of broadcast television’s most indefatigable boosters, so it was no great surprise this week to hear him tell an investor conference that he expects the traditional broadcast networks to remain the mainstay of the National Football League’s TV rights package when the current contract is up in 2022, despite the near-certain interest from Facebook, Google, and other aspiring digital TV outlets.

“Look, the tech giants all want to be involved in the NFL. It’s the best product in television,” Moonves told the Deutsche Bank 2017 Media and Telecom Conference. “There’s going to be a lot of activity. As we head toward that large deal, I think these companies are going to be part of it, [but] I think the NFL still believes in the sanctity of broadcasting.”

Moonves was also likely correct in his assessment. Despite the accelerating pace of cord-cutting, and the ongoing unbundling and rebundling of the pay-TV ecosystem, and declining overall viewership the broadcast networks remain atop the ratings heap. While all of those trends are likely to accelerate further between now and 2017, the broadcast networks are likely to remain the NFL’s most efficient path to the largest audience, however those channels end up being delivered.

In a study released just this week by TiVo’s Digitalsmiths unit, ABC, CBS, NBC, and Fox took four of the top six slots among consumers when asked about the most desirable channels in a hypothetical a la carte world.

With negotiations on a new NFL TV deal likely to get underway in 2020 — just three years from now — the broadcast networks will remain the biggest fish.

Whether the pond will still be worth what the broadcasters will likely have to pay to swim in it, however, let alone dominate it, is another matter.

Despite a 9 percent drop in overall ratings last season, and the continued erosion of real-time viewing of live events in general, the negotiating environment will strongly favor the NFL. For one thing, as Moonves acknowledged, there will be a lot more bidders at the table, which can only drive up prices.

In addition to CBS, Fox, NBC, and Fox, Twitter, which currently shares the Thursday Night package with CBS, will likely still be in the mix if it’s still around. DirecTV, now backed by AT&T, will certainly want to hold on to its out-of-market streaming package. By then, AT&T might well own HBO as well, assuming its pending acquisition of Time Warner goes through, which might lead it to expand its NFL footprint. Verizon might also be eager for a bigger piece of the NFL pie beyond its current in-market streaming package.

Then there are Facebook and Google. both of which are hell-bent on grabbing a piece of the $70 billion annual U.S. TV advertising pot and see live events and live programming as their best wedge. Amazon, which already has a huge digital broadcasting platform in Twitch, could also be a factor. E-sports focused Twitch, might offer the NFL’s best platform for connecting with 18-24 year olds, which the drop off in football viewership has been most pronounced.

The NFL, in other words, has every incentive, both strategically and financially, to slice the rights onion as thin as possible, meaning more dilution of the audience on top of the overall erosion of live viewing.

Worse still, for the broadcasters, they’ll be bidding against outlets for whom NFL programming would be a coup but is not essential to their basic business model. It’s quite possible the broadcasters will end up paying more, on a per-viewer basis, then they’re paying now, while assuming greater risk.

Hardest of all, though, will be trying to forecast where the rapidly changing market will be come 2028 or 2030, which is when the next deal is likely to run through. It will be like trying to thread a pass into double coverage 40 yards down the field. Tom Brady might be able to do it; whether Les Moonves and his peers are able to will be a real nail-biter.