vurbano said:
Ive always thought that the NFL could lower its price for ST and sell it to all providers and inturn make even more money through volume. Makes sense to me but I'm always told Im wrong at AVS?
Of course you're always wrong, vurbano.
Simply take a look at some of the aggregate numbers that were originally supplied when the news broke about this deal...
Major League Baseball was making about $2 million per club off of Extra Innings. Multiply by 30 teams, and you have an aggregate total of $60 million profit to MLB last year from Extra Innings.
The original number of subscribers for last year in the same article was 750,000. The average selling price for Extra Innings was about $160. That translates to $120 million in revenue last year.
So, MLB made $60 million and the cablers and satellite companies made $60 million between all of them.
The exclusive changes the game. Most exclusive sports contracts are money losers for the broadcaster partner. We know for a fact that FOX loses a little money on the NFL contract. We know that CBS may eek out a little profit. We know that DirecTV is probably slightly in the red on Sunday Ticket. All of these are exclusives, and there is a discernable pattern.
The NFL makes $700 million a year from Sunday Ticket, because that is the amount DirecTV pays the NFL for the exclusive. If Sunday Ticket were ever to be opened up to all multichannel providers:
1) The NFL will not make a guaranteed $700 million from Sunday Ticket for DirecTV. Sunday Ticket would then look a lot like last year's Extra Innings, where the multichannel providers keep half of the revenue for each subscriber and pay the other half to the leagues. In order to for the NFL to make $700 million on Sunday Ticket at $229 a pop (average price) on a non-exclusive basis, the package would have to be taken by just over 3 million subscribers (which it has never done). However, that only provides $700 million in revenue for the entire package, but the multichannel providers get to keep half. Therefore, to get to $700 million profit, the numbers need to be doubled, and that means Sunday Ticket would need 6 million subscribers for the NFL to make their $700 million. That could be an issue, but it bumps into the next issue...
2) Network contracts. There is a reason why either only FOX or CBS have a doubleheader each week. It provides the broadcast network an exclusive. Take the first Sunday afternoon game in the 2006 season. FOX received a 17 rating for the 4:00 Jacksonville at Dallas game. One rating point equates to 1.1 million households, so that is 18.7 million households. One can assume that just over 2 million households have access to Sunday Ticket. Increase that number to just over 6 million, and take a look at the numbers against that first game last year.
The NFL does not want to devalue their CBS and FOX contracts, even though the NFL now receives more money yearly from DirecTV than either CBS or FOX. It is CBS and FOX that have to pay for production of all of those games. Each of those networks will be rotating the Super Bowl along with NBC.
That is why opening up Sunday Ticket to all multichannel providers would force the NFL to take less than their current $700 million a year. As matter of fact, when Senator Arlen Specter held his hearing about the issue after Election Day, 2006, Sen. Spector suggested the NFL take less money and open up Sunday Ticket to all. This coming from the man that represents Comcast, who also will not open up Comcast Sports Network Philadelphia to either DirecTV or Dish Network.