Team: B.A.M.F.

NFL Audit James Corne

Bob Edmiston Geoff Kowalski

Jon Schultz

Team: B.A.M.F.

How does the NFL manage its content portfolio?

•  Goal: Quality Product to Maximum Audience •  Saturation, Breakeven, Allocation •  Content NOT Distribution?

Where is the NFL?

Coverage Map

Why has this Worked?

•  28/30 Most Watched Television Programs •  $9.4 Billion Revenue •  Time-Sensitive Content

Investment & Production Costs?

$ $

$ $

Risk!!!

Personal Conduct Policy

And the Winner Is…

Quality Control $560M/8yrs  

$400M  

$207M/WASH  

How has it Worked? •  Value Map & Sources •  Silos & Exclusivity •  Competition

NBC  is  first  network  to  pick  

up  the  NFL  

1939  

1959  

CBS  picks  up  NFL  

         1987  ESPN  is  a  nobody,  

picks  up  NFL  

1994  Fox  lagging  in  raGngs,  buy  rights  to  NFL  for  

1.8  B.      

Media Timeline

2006  

NFL  Network  Created  

Value Map: How Fans get the NFL

$622.5M  

$650M  

$1.1B  

$712.5M  

Per  Year:    2006-­‐2013    

$3.09B  

$180M  

Per  Year:    2009-­‐2012    

$1B  

Per  Year:    2011-­‐2014    

Max Revenues: Silos & Exclusivity

Bully Networks NOT Fans!

Period AFC  Package NFC  Package Sunday  Night Monday  Night Thursday  Night Total  Amount

1982–1986 NBC CBS None ABC   $420  million/yr

1987–1989 NBC CBS ESPN  (2nd  half) ABC   $473  million/yr

1990–1993 NBC CBS TNT  (1st  half)

ABC   $900  million/yr

ESPN  (2nd  half)

1994–1997 NBC Fox  ($395  million/yr)

TNT  (1st  half) ABC   $1.1  billion/yr

ESPN  (2nd  half)

1998–2005 CBS  ($500  million/yr)

Fox  ($550  million/yr)

ESPN  ($600  million/yr)

ABC  ($550  million/yr) ESPN $2.2  billion/yr

2006–2013 CBS  ($622.5  million/yr)

Fox  ($712.5  million/yr)

NBC  ($650  million/yr)

ESPN  ($1.1  billion/yr)

NFL  Network  ($0/yr)

$3.085  billion/yr

Network Revenues

Will it Continue to Work?

•  Contract Length •  Mobile vs. Wireless •  Bring In-house?

Length, Channels & Revenue

0  

1  

2  

3  

4  

5  

6  

7  

8  

82-­‐'86   87-­‐'89   90-­‐'93   94-­‐'97   98-­‐'05   06-­‐'13  

Contract  Length  

Number  of  Distributors  

Revenue  (Billions)  

$622.5M  

$650M  

$1.1B  

$712.5M  

Per  Year:    2006-­‐2013    

$3.09B  

$180M  

Per  Year:    2009-­‐2012    

$1B  

Per  Year:    2011-­‐2014    

Max Revenues: Silos & Exclusivity

? ? 2 year Deals

NFL Mobile

1999

2005

Text, Email, Web

Video

NFL Mobile

$15B by 2013 ($2.2B in Q1&Q2 ‘10)

NFL Mobile

= $720 M/4-yrs

Mobile vs. Wireless Internet TV?

Question…

•  New Silo- Wireless •  Exclusive?

•  AT&T? •  Verizon? •  Apple? •  Samsung?

•  Wait & See •  Emerging or Established? •  Develop or License?

•  Contract •  Length vs. Value

Tablets

Rank   MSO   BasicVideoSubscribers  

1   Comcast  CorporaTon   22,937,000  

2   DirecTV   18,934,000  

3   Dish  Network  CorporaTon   14,289,000  

4   Time  Warner  Cable,  Inc.   12,551,000  

5   Cox  CommunicaTons,  Inc.1   4,968,000  

6   Charter  CommunicaTons,  Inc.   4,653,000  

7   Verizon  CommunicaTons,  Inc.   3,290,000  

8   Cablevision  Systems  CorporaTon   3,043,000  

9   AT&T,  Inc.   2,739,000  

Multiple System Operators

NBC  

Xbox  360?  Microso`  

Silo-­‐ed  

Silo-­‐ed  

Website Rank (US Traffic)

ESPN.com 22nd

NFL.com 184th

MLB.com 291st

NBA.com 303rd

Web Traffic Ranking

Internet TV • GoogleTV? •  “wait & see” • Winner?

•  In-house? • Decrease risk? • Cord-Cutting? •  Length? • Reversible?

Internet TV changing the game?

•  Revenue:  –  Direct  or  Indirect  from  consumer?  

•  NFL  as  a  Distributor:  –  Furthering  NFL  Network  and  NFL  RedZone  channels?  

•  GlobalizaTon:  –  Channel  for  distribuTon?  

•  Engagement:  –  How  important  is  fan  interacTon?  

•  Mobility:  –  Greater  access  with  increasing  connecTvity?  

•  Other?  

Current TV Market Pie

CBS  

FOX  ESPN  

DirecTV  

NBC  

$4  Billion  

Ad  $$  

Ad  $$  

Ad  $$  

Ad  $$  

Subscriber  $$  

$8  Billion  

$3.4  B  Ad  Revenue  $600  M  Subscriber  

Breakeven Revenues for the NFL

1.9  

1.1  

1  

Current  TV  

Network  

ESPN  

DirecTV   1.1  

1  1.9  

Internet  TV  

ESPN  

DirecTV  

New  Revenue  

$  4  Billion  

Networks  get  approx.  $2.2  Billion  from  adverGsing  

Ad  Revenue?  

Key Numbers for Internet TV

•  NFL  games  Reached…    – 207,700,000  unique  viewers  in  2010  in  the  U.S.  

•  On  average…    – 17.9  million  viewers  per  game  

What would NFL charge to breakeven?

Viewership   100%   90%   75%   60%   45%   10%  

Keep  ESPN   Season    $              9.15      $        10.16      $        12.20      $        15.25      $        20.33      $        91.48    

A  la  carte    $              0.42      $              0.47      $              0.56      $              0.70      $              0.94      $              4.23    

No  ESPN   Season    $        14.44      $        16.05      $        19.26      $        24.07      $        32.10      $    144.44    

A  la  carte    $              0.63      $              0.70      $              0.84      $              1.05      $              1.39      $              6.28    

*  DirecTV  is  charging  $350!  

NFL Internet TV Pie Potential

$4  Billion  $6.2  Billion  $11.5  Billion  

Ad  Rev.  equal  to  Networks  +  10%  Subscribe  

at  $350  

Lower  Ticket  Prices  

Increase  Intl  

 Exposure  

Cover  $1.9  with  Subs.  +  Gain  Ad  Rev    equal  to  Networks  

Cover  $1.9B  lost  with  Ad  

Rev.  

What is stopping the NFL? •  Does  this  fit  the  goals  of  the  NFL?  –  Not  currently  since  internet  connecTvity  is  only  at  77.3%  with  only  57%  having  high-­‐speed  

– While  99%  of  the  US  has  TV  access  –  However  internet  is  trending  up  

•  Requires  the  NFL  to  become  a  distributor  –  Experience  with  NFL  Network  and  NFL  RedZone  

•  NFL  would  have  to  interact  on  a  higher  level  with  fans  •  NFL  does  not  know  how  this  channel  will  develop  –  Goes  against  their  “Wait  &  See”  strategy  

•  Is  this  decision  reversible?  

THANK  YOU!  

QUESTIONS?

Back- up Slides Ahead

NFL  vs.  PrimeTme  Viewership  

Most  Watched  Shows  for  Fall  TV  Season  

15  Most  Watched  Basic  Cable  Shows  of  2010  

History  of  the  NFL  Where  is  the  NFL?  User  Paths  to  Product  

Map of Cable Coverage

The  NFL  is  a  Content  Producer  

CompeGGon  

Opportunity  Cost  

$5M/year

$5/sub

$7/month 2.3Subs $3B/yr rv Xbox IPTV

Key  is  in  the  Strategy  and  Contracts  •  Strategy:  Wait  &  See,  Silo  &  Exclusivity    

–  The  NFL  is  in  a  financial  posiTon  that  they  can  afford  to  wait  for  a  clear  winner(s)  to  emerge  before  signing  content  distribuTon  contracts  

–  Puts  the  NFL  in  a  great  posiTon  to  take  advantage  of  new  technology  as  it  becomes  established  while  minimizing  their  risks  and  profiTng  greatly  

•  Contracts:  Length  of  new  contracts  will  be  a  very  telling  signal  of  the  future  of  the  NFL  content  –  Long  contracts:  Signal  that  the  NFL  wants  to  milk  the  cash  from  this  established  distribuTon  because  it  is  established  and  not  at  risk  of  disappearing  or  being  disrupted  greatly  

–  Short  contracts:  Signal  that  the  NFL  wants  to  potenTally  get  in  or  out  of  a  distribuTon  method  

–  What    kill  switches    are  included  on  behalf  of  the  NFL?  

Contract  Lengths  and  End  Dates  •  TV  Contracts:  

–  CBS,  FOX,  NBC,  and  ESPN  expire  in  2013  •  Started  2006  

–  DirecTV  expires  in  2014  –  ESPN  rumored  to  be  close  to  a  deal  to  lock  up  MNF  past  2020  –  but  hasn’t  happened  yet  •  In  the  news  January  2011  

•  Wireless:  –  Verizon  signed  a  4  year  deal  for  2010-­‐2014  

•  Will  be  interesTng  to  see  who  gets  and  how  long  new  distribuTon  contracts  are  for?  –  Depending  on  how  other  distribuTon  channels  advance  and  how  quickly  they  become  mainstream  could  affect  the  new  deals  of  the  TV  networks,  if  they  even  get  new  contracts.  

TV  is  STll  Making  Money  Off  the  NFL  

•  Current  Profit:  –  CBS:  $146  million  –  FOX:  $107  million  –  ESPN:  $83  million  – NBC:  $12  million  

•  However,  the  quesTon  is  will  this  last?  – Analysts  suggest  that  it  will  and  that  these  profits  will  actually  grow  as  well  –  but  analysts  have  been  wrong  before  

•  All  depends  on  companies  being  willing  to  spend  huge  $$$$$  on  adverTsements  

Bring  Content  DistribuTon  In-­‐House  

•  US  Pop:  307  million  •  NFL  Revenue:  $9.4  billion  •  Revenue  from  Networks:  approx.  $4  billion  •  2010  regular  season  reached  207.7  million  unique  viewers  

•  NFL  games  were  watched  by  an  average  of  17.9  million  viewers  

•  $3  billion/207.7  million  =  $14.44  •  Leave  ESPN  the  most  profitable  contract  in  place  for  MNF  -­‐  $1.1  billion  per  year  

•  $1.9  billion/  (207.7  million  –  17.9  million)  =  $10.01  

Value Added Process

           

Fans  

Emerging Sports on Cable

Established Cable

$5M/year

Investment Costs?

Production Costs?

How  the  NFL’s  Brand  Translates  to  Revenue  for  the  League  

Period AFC  Package NFC  Package Sunday  Night Monday  Night Thursday  Night Total  Amount

1982–1986 NBC CBS None ABC   $420  million/yr

1987–1989 NBC CBS ESPN  (2nd  half) ABC   $473  million/yr

1990–1993 NBC CBS TNT  (1st  half)

ABC   $900  million/yr

ESPN  (2nd  half)

1994–1997 NBC Fox  ($395  million/yr)

TNT  (1st  half) ABC   $1.1  billion/yr

ESPN  (2nd  half)

1998–2005 CBS  ($500  million/yr)

Fox  ($550  million/yr)

ESPN  ($600  million/yr)

ABC  ($550  million/yr) ESPN $2.2  billion/yr

2006–2013 CBS  ($622.5  million/yr)

Fox  ($712.5  million/yr)

NBC  ($650  million/yr)

ESPN  ($1.1  billion/yr)

NFL  Network  ($0/yr)

$3.085  billion/yr

Damage Control •  Corporate  Partners  

•  Player  Sponsors  

Rank   MSO   BasicVideoSubscribers  

1   Comcast  CorporaTon   22,937,000  

2   DirecTV   18,934,000  

3   Dish  Network  CorporaTon   14,289,000  

4   Time  Warner  Cable,  Inc.   12,551,000  

5   Cox  CommunicaTons,  Inc.1   4,968,000  

6   Charter  CommunicaTons,  Inc.   4,653,000  

7   Verizon  CommunicaTons,  Inc.   3,290,000  

8   Cablevision  Systems  CorporaTon   3,043,000  

9   AT&T,  Inc.   2,739,000  

NFL  as  a  Content  Distributor    

•  NFL  distributes  Thursday  Night  Games  •  NFL  Network  and  NFL  RedZone  –  Sold  to  cable  companies  

•  Comcast  pays  $5  million  a  year  to  have  these  channels  

– Many  cable  companies  have  not  picked  them  up  •  Represents  a  missed  opportunity  for  addiTonal  revenue  •  Does  not  compare  to  the  revenue  brought  in  by  networks  

–  This  represents  a  risk  of  going  to  internet  TV  right  now  since  it  is  not  an  established  market  

Move  to  Internet  TV  •  NFL  Revenue:  $9.4  billion  •  Revenue  from  Networks:  approx.  $3  billion  •  Reached  207.7  million  unique  viewers  in  2010  •  Games  watched  by  an  average  of  17.9  million  viewers  •  $3  billion/207.7  million  =  $14.44  for  season  •  Leave  ESPN  the  most  profitable  contract  and  largest  online  

presence  in  place  for  MNF  -­‐  $1.1  billion  per  year  •  $1.9  billion/  (207.7  million  –  17.9  million)  =  $10.01  for  season  •  DirecTV  charges  $350  for  NFL  Sunday  Ticket  •  256  regular  season  games  +  11  playoff  games  =  267  •  $3  billion  /  (267  games  x  17.9million)  =  $0.63  per  game  •  $1.9  billion  /  ((267  games  –  16  MNF  games)  x  17.9million)  =  $0.42  

Internet TV changing the game?

•  Revenue  –  Direct  or  Indirect  from  consumer?  •  GlobalizaTon  –  channel  for  distribuTon?  •  Engagement  –  how  important  is  fan  interacTon?  •  Mobility  –  greater  access  with  increasing  connecTvity?  

•  NFL  as  a  distributor  of  their  content?    – NFL  Network  and  NFL  RedZone  channels  

•  Other?  

Breakeven Revenues for the NFL

1.9  

1.1  

1  

Current  TV  

Network  

ESPN  

DirecTV  

1.1   1.9  

1  

Internet  TV  

ESPN  

New  NFL  Rev  

DirecTV  

$  4  Billion  

Networks  and  ESPN  get  $3.4  Billion  from  adverGsing  DirecTV  gets  $600  Million  from  subscribers  

Key Numbers for Internet TV

•  NFL  games  Reached…    – 207,700,000  unique  viewers  in  2010  in  the  U.S.  

•  On  average…    – 17.9  million  viewers  per  game  

Current TV Market Pie

CBS  

FOX  ESPN  

DirecTV  

NBC  

$4  Billion  Ad  $$  

Ad  $$  

Ad  $$  

Ad  $$  

Subscriber  $$  

$8  Billion  

What would NFL charge?

Viewership   100%   90%   75%   60%   45%  

Keep  ESPN   Season    $              9.15      $        10.16      $        12.20      $        15.25      $        20.33    

A  la  carte    $              0.42      $              0.47      $              0.56      $              0.70      $              0.94    

No  ESPN   Season    $        14.44      $        16.05      $        19.26      $        24.07      $        32.10    

A  la  carte    $              0.63      $              0.70      $              0.84      $              1.05      $              1.39    

*  DirecTV  is  charging  $350!  

Silo via ESPN3.com?

Ad  $$  

Ad  $$  

Ad  $$  

Ad  $$  

AD  $$  

ESPN  

$6  Billion  Subs  &  Ad  Revenues  

$2Billion  

Current, Breakeven & Potential

$4  Billion  

$8  Billion  

$12  Billion   45%  Subscribe  at  $175  

Lower  Ticket  Prices  

Increase  Intl  

 Exposure  

What is stopping the NFL? •  Does  this  fit  the  goals  of  the  NFL?  –  Not  currently  since  internet  connecTvity  is  only  at  77.3%  with  only  57%  having  high-­‐speed  

– While  99%  of  the  US  has  TV  access  –  However  internet  is  trending  up  

•  Requires  the  NFL  to  become  a  distributor  –  Experience  with  NFL  Network  and  NFL  RedZone  

•  NFL  would  have  to  interact  with  the  fan  on  a  higher  level  –  new  to  them  

•  NFL  does  not  know  how  this  channel  will  develop  –  Goes  against  their  “Wait  &  See”  strategy  

•  Is  this  decision  reversible?