Sunday, December 18, 2011

Television. The Sweetest Slice of the NFL Revenue Pie

When the NFL players started getting itchy pants this summer as the lockout reached a critical go or no-go junction, I believed they balked at the very moment of truth where they could have thrown league owners into a full blown panic.

When you think of these last few months, and then close your eyes and imagine NO football on Sundays, it's impossible to overstate the financial carnage that would be wreaked on the owners, the TV networks, and everyone else down the line on the NFL "food chain."

Sure, the players would have lost out too. But their losses were basically fixed. Most were under contract. Many of those contracts crappy and one-sided. And while their careers are short, losing a half season or a whole season would not have been nearly the financial ruin as old men with huge stadium mortgages.

But eh, when it came down to it, the prevailing wisdom was "why bother, we are ALL going to be rich! Watch these next TV deals!"

Sure enough, the television Fort Knox doors were swung open this past week, and sure enough, the players are going to be in the chips. Especially since they now get 55% of all TV revenue, and they agreed to let owners keep more of the "local" club revenue (i.e. stadium gate).

Guess which part of the NFL pie looks tastier going forward?

Forbes laid it out this week in even more detail.
This week, the NFL announced that nine-year extensions were reached withFOX, CBS and NBC that will run through 2022. The agreements kick in at the end of this season. It has been reported that in-total, those deals alone could translate to $3 billion annually, up from $1.9 billion prior. That’s an approx. 37% increase. That doesn’t include the $1 billion annual amount paid by DirecTV for Sunday Ticket out-of-market package, or ESPN’s recent extension that increased to $1.9 billion annually. All told, each year the NFL will see television revenues that hit an eye-popping $5.9 billion. 
But it was the shrewd move by DeMaurice Smith and the NFLPA that really makes the deal kick up player salaries. 
A key negotiating point that the players came in with was the minimum amount of the cap that the owners needed to spend. Instead of clubs having lower payroll, which cut margins and increased profits, the players fought for, and got, a provision by which clubs have to spend 99% of the cap in each of the first two years of the new labor deal and decreases to a lower amount over the life of the CBA. 
What does it all mean? 
With the massive boost in TV money coming in, along with a fixed amount that owners must spend on player salaries based on incoming revenues, player salaries across the board are going to skyrocket beginning next year as that 55% of television money hits the coffers in conjunction with the television rights extensions. In doing the math, just TV money translating to player salaries in the cap space comes in at approx. $3.245 billion for next season, alone.
Okay, so I'm a dummy who has now learned his lesson.

The next time any league threatens a "lock out" or "strike" or "shutdown" or whatever, I will just yawn and say "call me when you are ready for my money again."

Sure, our cable bills and DirecTV Sunday Ticket is going to skyrocket because of these deals, but what are you going to do? Not have cable? Not watch professional tackle football on Sundays?

Right. Thought so.

1 comment:

  1. There is no way that DirecTV could pass along the 4 billion dollars they spent to get the Sunday Ticket no matter how much they charged each Sunday Ticket subscriber (unless they charge everyone for the price of it which is what they are doing.) I don’t think it is fair to pay for programming that I don’t watch or can’t afford to buy but would like to watch which I believe is why DirecTV is more expensive than DISH Network’s packages. I have DISH to save money but I also get more and better free equipment from them despite being an employee as does everyone. I think that’s the best part about DISH because they have the 922 HD DVR with a terabyte hard drive and Blockbuster On Demand which rivals many other cable companies.

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