American Football: ESPN to take MNF, NBC to get back in with SNFl

[Ming]

ABC is thrilled to lose this one...

Advertising Age 4/19/05
Drain on ABC
The 35-year-old Monday Night Football franchise has been a loss leader for ABC, draining a reported $100 to $150 million a year thanks to its $550 million a year price tag. "Retaining Monday Night Football didn't make smart financial sense for ABC," Mr. Bodenheimer, president of ABC Sports and ESPN, said. "We couldn't reconcile the fees against the revenues and that's when we decided the best decision for our company was to move this property to ESPN."

Plus, added Mark Shapiro, executive vice president for programming and production at ESPN, "you can launch a show in September and can carry a show through the season, unlike with Monday Night Football which has always forced you to rebuild mid-season."

By the way... NBC is paying $600 million a year
When NBC was asked about the deal...

'This one we can afford'
When asked whether it would be profitable, NBC Universal chairman and CEO Bob Wright responded: "This one we can afford." Though he would not comment on questions about whether NBC affiliates would be asked to chip in for the costs.

Notice he didn't claim that it would be profitable for them Based on the losses at a lower price for ABC, NBC can not make money on the deal. They were desperate to get NFL Football back, and they paid too much for it.

While some might look at the $8.9 billion that ESPN paid for an eight year contract, please remember that they were paying for more than just MNF...

The ESPN deal includes rights to 17 regular season games plus rights across a wide variety of ESPN television and other assets, including NFL PrimeTime; the NFL Draft, which ESPN has covered since 1980; NFL Live; ESPN HD; ESPN Deportes; NFL Films programming; fantasy, ESPN Mobile, video game and data feed platforms.

[JohnT]

TV ad spending set to peak in 2006

New report shows broadcast networks will lose market share to the Web in 2007.

April 18, 2005: 6:07 PM EDT
By Krysten Crawford, CNN/Money staff writer

NEW YORK (CNN/Money) - A quarter century of television advertising growth is expected to peak in 2006 when broadcast networks begin losing market share to the Internet and other emerging forms of advertising, according to a report released Monday.

As part of a broader study, Zenith Optimedia, a London-based unit of the French advertising giant Publicis Groupe (Research), predicted that television's share of the estimated $417 billion global ad market will begin to fall in 2007 as advertisers steer more of their marketing dollars to the Web.

Overall, the Zenith Optimedia report concluded that the robust global ad market of recent years will continue. The company raised its global ad growth projections each of the next three years, including a projected 2005 growth rate of 5.4 percent, to $371.4 billion. Previously, the agency had predicted 5 percent growth.

Still, Zenith Optimedia's 2005 global forecast was tempered given that the ad market will not benefit from the Euro soccer championship, the Olympic Games and the U.S. presidential elections, which contributed to a blistering 7.5 percent growth rate, to $346 billion, in 2004.

Signs of an overall healthy ad market are encouraging given some potentially worrisome indicators in the United States, including a recent spate of retail mergers, ongoing woes in the automotive sector, and the possibility raised last week by IBM's surprisingly negative earnings report that the technology sector is headed for trouble.

The broadcast networks could also be breathing a sigh of relief as they head into next month's "upfront," when they plan to sell roughly 80 percent of commercial time for the new television season that starts in September. Last year an estimated $9.5 billion worth of broadcast ads were sold during the upfront.

The rise of ad-zapping digital video recorders, alternative forms of entertainment and newer advertising media like the Internet are making network executives anxious.

Based on Zenith Optimedia's report, however, they don't have anything to worry about until 2007.

The estimated decline in television advertising as a percent of total market share -- from a peak 37.9 percent in 2006 to 37.8 percent in 2007 -- might seem trivial. But it will come after years of steady growth in television advertising since at least 1980.

Television's ascendancy has been driven by a slew of factors, including deregulation in Europe, the gradual decline of newspaper and magazine circulation in developed countries and better forms of audience measurement.

The only other year in which television's share of worldwide ad spending fell was in 2001. Zenith Optimedia suggested that the falloff then was an anomaly, the result of the dot.com bubble burst.

The dot.com implosion hit Internet advertising hard. But it has since rebounded as the economy has recovered and marketers have become savvier about the Web.

Internet advertising is still the second smallest form of advertising, sandwiched in terms of market share between outdoor and movie theater advertising, and is expected to hold that ranking through 2007.

As a percent of the total ad market, the Internet's share should increase from 3.6 percent in 2004 to 4.4 percent in 2007, Zenith Optimedia found.

The study tracked seven major advertising forums, including radio, magazines, and newspapers. Categories not covered included video game advertising.

[rah]

Originally posted by Ming

While some might look at the $8.9 billion that ESPN paid for an eight year contract, please remember that they were paying for more than just MNF...

The ESPN deal includes rights to 17 regular season games plus rights across a wide variety of ESPN television and other assets, including NFL PrimeTime; the NFL Draft, which ESPN has covered since 1980; NFL Live; ESPN HD; ESPN Deportes; NFL Films programming; fantasy, ESPN Mobile, video game and data feed platforms.

Thanks for the clarifaction on this one. When I first heard 1.1 billion a year, I was flabergasted.

[Ming]

I was shocked by that number at first as well... Since everybody thought the last ABC contract for $550 million a year was moronic (and proved to be so)... I saw ESPN's new contract numbers as really silly... at first

[Dis]

Originally posted by Imran Siddiqui
Yes... like for the last few years.

sometimes they don't like during the world series or sometimes they don't if they have thursday night games.

[Imran Siddiqui]

What, you think that the NFL Draft, rights for Primetime, NFL Live, and NFL Films shows is worth $500 million a year?

After all, ABC has had HD with MNF. And EA is the one who has the rights for video games, who also bought the ESPN name. They don't have their own NFL video game.

[Imran Siddiqui]

Also there seem to be some rumors that NBC is getting prefered scheduling. Ie, they can pick the game they want in the 2nd half of the season to be on Sunday Nights. Much easier to do with a Sunday game than a Monday one.

[Ming]

You are correct Imran... that was part of the deal. I have no clue how much lead time they will have picking the games... the advertising columns haven't confirmed the final details yet. It should help the ratings, because of the late season MNF games have been totally meaningless except as a background for serious drinking

And yes, all the other NFL related properties (including Fantasy) are worth the money. They are VERY profitable for ESPN, unlike the ABC TV deal was last year

[Imran Siddiqui]

Well, even if all the stuff is worth ~$500 million a year, that means Disney is STILL paying the same amount for MNF, just putting it on ESPN.

Unless those properties are now worth $750 million a year under ESPN's contract.

Oh, and the NFL has to work out the flex-schedule, but NBC should, at least, be able to pick the second half of the season after game 4 or so. At best, they'll get 1-2 weeks before each game to pick which one will get Prime Time treatment.

[Dis]

I'm too much of a conservative when it comes to football. I don't like change

Bring back Dennis Miller on MNF!!

[Ming]

I've yet to see the actual breakdown of costs per property for the ESPN contract... and we may never see it

But please remember that you have to figure in ABC's losses for the last few years into the contract. While they may end up paying similar dollars... ABC will make a profit on Monday Nights again... and not lose 100 million + a year. ESPN advertising on Monday night opposite MNF wasn't too great, since they always ran trash sports against it. So it's a plus plus. ESPN NEEDS the NFL... ABC needs to make a profit... and didn't really need the NFL.

[Imran Siddiqui]

But do the losses then get shifted to ESPN? ABC may make a profit, but Disney may still take a loss.

[Ming]

While ESPN MNF will show a loss... please remember that ABC will now actually make a profit on Monday Night. The revenue they make is tons more than ESPN was making running crap against MNF. So they will actually be making money to offset some of ESPN losses... And again, ESPN will be making money on their other NFL properties...