The NFL Will Bleed Cable Dry Before Tech Takes Over TV
When it comes to television, there is only really one show that truly matters: the NFL. Programs that win awards and have robust viewership are nice. But they're icing on the cake. The NFL is the cake. Everyone already knows this stat, but it's no less incredible: of the top 20 most-watched programs last year, either 18, 19, or all 20 were NFL games (there's some discrepancy in various ratings).
Which is to say that the NFL has an insanely strong hand when it comes to rights negotiations. Either you have an NFL package or you're simply not a player. It's undoubtedly part of the reason why Warner Bros Discovery had to sell. Yes, they were silly in fumbling their NBA rights, but it's the lack of NFL rights that kills them – or, specifically, keeps their networks shrinking. Their buyer, Paramount Skydance, of course, owns CBS. And CBS owns an NFL package. It's their most important asset. They can leverage it. And boy are they!
And actually, because of the earlier deal which saw Skydance take over Paramount, a change-of-ownership clause was triggered that allows the NFL to renegotiate that package even though the deal isn't up yet. And that, in turn, is going to lead to every other NFL rights holder renegotiating their rights. They technically don't have to, but what are they gonna do, tell the NFL no? Good luck on that next rights negotiation in a few years.
Instead, the holders will agree to a new, much higher fee, especially since the NBA just wrapped up their own massive new packages while dunking on WBD. The NBA is great. But the NBA brings a fraction of the viewership of the NFL (though yes, with many more games). The NFL can certainly make the case that any renegotiation isn't so outlandish with that in mind. Meanwhile, the current holders will try to trade that for a far longer deal so they don't have to do this all over again in a few years. But they will always have to do this all over again in a few years. Because the NFL is that powerful. And because there are a range of new players on the board.
Netflix has been in the news a lot recently thanks to their own attempt to take over Warner Bros. But the truth is that they don't need it. They're going to dictate the future of streaming regardless, and that's in part because they have yes, an NFL package! Granted, it's tiny right now – just two games on Christmas. But as some say 'NFL' stands for, not for long.
Here's Jessica Toonkel and Joe Flint for The Wall Street Journal:
Netflix is ready for more football.
The streamer is looking to expand its current two-game package to four games, according to people familiar with the matter. It is interested in adding the National Football League’s new Thanksgiving Eve game and an international game, likely in the season’s opening week, those people said.
Netflix is in the final year of its three-year Christmas Day game package, for which it paid about $75 million a game.
For as much grief as Netflix took over their backtracking on their movie theater stance to try to secure the Warner deal (which they were inevitably going to do anyway), their long-stated position that they were not interested in sports – and in particular, live sports, was even more ridiculous. This was always the end game for Netflix. Because the end game is taking over television.
Granted, they have competition now beyond the traditional rights holders. And wouldn't you know it, all of them would like more NFL rights too:
Google’s YouTube, which last season carried an international game and has the rights to the Sunday Ticket package offering out-of-market games, has expressed interest in additional games, people familiar with the situation said. Some broadcast partners and Amazon, which carries Thursday Night Football, are also open to potentially adding more games, said people familiar with their plans.
The traditional players, naturally, are freaking out about this possibility. They're lobbying the FCC to intervene to make sure the NFL doesn't keep moving towards these newfangled services. But that will just delay the inevitable. Cable television has been dying for years – the death isn't even particularly slow any more. The only thing propping it up has been sports rights. Broadcast television is in a slightly better position because they don't rely on cable subs, but that's only because they rely on advertising – and that advertising is driven by those NFL games. If those go away. Bye bye.
The aforementioned CBS is by far the best performing of the networks, but it's also by far the oldest when it comes to demographics. It's dying because, sadly, its base is literally dying. The FCC isn't going to change that. Again, they may delay it – well, to be clear, not the deaths of those demographics – but the game is over.
The NFL, of course, knows this. Much like Disney had to do with ESPN back in the day, they're doing a delicate dance. You might think the NFL would just go with the highest bidder for all these rights and no one can bid more than Big Tech. But the NFL (and all the leagues – but the NFL in particular) also cares about reach. Broadcast TV, for all its faults, is still everywhere, even if you're increasingly using the internet to access it.
The big argument to the FCC by broadcasters is that these games are getting locked behind paywalls which isn't good for consumers. That's not wrong. But the obvious answer is going to be for the streamers to open free ad-supported tiers (FAST, in the industry parlance). Many other streamers have been doing this for a while, but the big boys are doing a bit of double-dipping – putting these games on their lower-priced ad-supported tiers.
But as they all ramp up their ad networks, it only makes sense to go for the widest reach possible for these games, and really, all of sports. Live television is the last-remaining place where ads aren't just tolerated, they're a feature! And the NFL has made the single greatest advertising delivery mechanism this side of Google and Meta. There is a comically small amount of actual gameplay in a 60-minute game, there are far more ads. Including all over the field, the stadium, soon enough jerseys, etc.
So we're looking at a world in which all the streamers have free tiers that are driven by live sports. Just like broadcast TV! YouTube is already there, but they have the smallest premium rights packages right now. (Yes, they have NFL Sunday Ticket, but that's on the other end of the spectrum – a super expensive tier.) That will change. As they continue to compete with Netflix for eyeballs, it has to.
Netflix, meanwhile, is also competing with Amazon, which was far earlier to the streaming sports rights game and seems positioned well. As mentioned, ESPN was later than it should have been due to Disney's legacy commitments, but is here now with a chance to be the main player as well. Apple, as is their way, is ever-so-slowly joining the party with sports they can more fully control. But they too will get-in-the-game John Madden style eventually.
So depending how these new negotiations go, we're looking at a world, perhaps in a decade, but at most two, where the NFL games are on Amazon, Apple, ESPN, Netflix, and YouTube. All of them.
The broadcasters will hang on for as long as they can, but again, demographics and time will do their inevitable thing. As badly as Paramount Skydance needed Warner Bros Discovery to try to be a player, this upcoming re-negotiation with the NFL is far more existential. As such, any price will be on the table. They simply cannot lose the NFL. And David Ellison is insisting that they will not.
And they undoubtedly will not – right now. Again, the NFL likes the current situation where they dominate every and all ratings. But they're simply trying to time it right for when those ratings transition over to the newer players. It will kick off a new flywheel where dominate ratings thanks to the NFL super-charges their advertising. And as such, streaming will look a lot like broadcast TV to many!1
Assuming I'm right, the main issue is that Netflix doesn't actually have any of the major NFL rights beyond this small special package and so it will be years before they can truly be a player with the NFL. But I think that works well for them too, as they can slowly but surely ramp up other sports content – while continuing to deny their broader ambitions – until the next NFL rights become available and then boom goes the dynamite.
The match has been lit...
One more thing: the wildcard in all this is if the NFL decides to "go direct" as it were. Again, they already do with Sunday Ticket, but what if they tried to control the entire package for all the games exclusively? It's simply hard to see that happening due to the economics outlined above. Other leagues, with less reach, sure. But the NFL has started what will be a successful transition from broadcast and cable to streaming, with the rights just going up from here...
1 Though, good luck finding those games! Someone will eventually fix this right? RIGHT? ↩