For Disney, Pressure Is On to Make a Play For NFL Contract
By JOE FLINT and STEFAN FATSIS
Staff Reporters of THE WALL STREET JOURNAL
November 10, 2004; Page B1
Source
Walt Disney Co. has one more headache: what to do about the National Football League. On Monday, Viacom Inc.'s CBS and News Corp.'s Fox agreed to pay a total of $8 billion over six years to extend relationships with the league.
News Corp.'s DirecTV Group Inc. satellite service renewed its valuable "Sunday Ticket" football deal for seven more years for an additional $3 billion, locking out cable operators from the package.
That puts Walt Disney under new, unexpected pressure to decide its future with the popular sports league. Disney's ABC broadcast network airs "Monday Night Football" and its ESPN cable network carries a weekly Sunday-night game.
"Right now you'd have to say the ball's in Disney's court," says Denver Broncos owner Pat Bowlen, chairman of the NFL's TV committee.
It may take Disney a while to figure that out. The company faces internal tumult regarding the search for a successor to Chairman Michael Eisner and a distraction in the trial over former company president Michael Ovitz's exit package. George Bodenheimer, president of ABC Sports and ESPN, says the networks won't be rushed into a deal. "Our timetable has not changed, and our intention remains the same: to renew both packages," he said in a statement yesterday.
Behind the scenes, however, the pressure is on. The central question for Disney is whether to pony up for "Monday Night Football," a fixture at ABC for 35 years but also a perennial money loser. The ESPN cable package has been profitable. Disney brass has met with top NFL executives, most recently in Los Angeles three weeks ago, and Disney President Robert Iger and NFL Commissioner Paul Tagliabue have had multiple phone conversations over the past 48 hours.
At the time of the Los Angeles meeting, "it appeared they didn't want to do anything," Mr. Bowlen says of Disney. "I can understand that. They have different problems that are attracting their attention." Now, however, he says, "they know where we're at."
People involved in the negotiations say Disney executives were caught off guard by the timing and the size of the CBS and Fox deals, which set a baseline price increase of 25%. That would boost the cost of a Disney package for Sunday and Monday nights to between $1.4 billion and $1.5 billion a year, from $1.15 billion now. Analysts have estimated that ABC has lost between $150 million and $250 million annually on "Monday Night Football," figures that people at the company don't debate.
Additionally, football and TV industry executives say other networks, broadcast and cable, are angling for Disney's NFL assets. Waiting too long could give competitors greater opportunity to meet with the NFL and formalize proposals -- potentially raising the league's asking price for the programming. While the NFL can talk to other networks, it can't cut a deal with anyone else until Nov. 1, 2005. Mr. Bodenheimer has said Disney doesn't want to begin serious negotiations until the current season ends in February.
"There are other people out there that are interested," says Gene Upshaw, executive director of the NFL players' union.
Possible suitors for "Monday Night Football" include Fox and General Electric Co.'s NBC, which has walked away from major professional sports leagues because of the cost but may be having second thoughts as its prime-time schedule takes on water. Fox adding Monday night to its Sunday package -- as well as to its lineup of postseason baseball -- seems unlikely. But News Corp. Chairman Rupert Murdoch has been aggressive in using sports to expand his network.
People familiar with Disney's thinking say the company wants to keep both Sunday and Monday nights, but the ESPN games are the bigger priority. "The economics of 'Monday Night Football' are pretty daunting," says Neal Pilson, a former CBS Sports president who runs his own consulting firm. Though the audience is smaller, the dual revenue stream of advertising revenue and subscriber fees makes cable more appealing. And ABC finally has some prime-time bright spots with "Desperate Housewives" and other shows.
One potential solution for Disney: Let ESPN absorb a much larger chunk of the NFL costs, insulating ABC from big losses. Disney already has done this in the past with the National Basketball Association and National Hockey League.
The NFL is offering ABC one big carrot: agree to demands by ABC to reschedule games late in the season to guarantee better matchups on Monday night. That would avoid late-season clunkers, a longtime ABC irritant.
The league also is considering a package of games for broadcast or cable on Thursday and Saturday nights. Disney could argue the extra games would dilute its prime-time exclusivity, helping to reduce the Monday price. NBC, and its cable USA Network, among others, are considered possible bidders for such a package.
Write to Joe Flint at joe.flint@wsj.com5 and Stefan Fatsis at stefan.fatsis@wsj.com6
By JOE FLINT and STEFAN FATSIS
Staff Reporters of THE WALL STREET JOURNAL
November 10, 2004; Page B1
Source
Walt Disney Co. has one more headache: what to do about the National Football League. On Monday, Viacom Inc.'s CBS and News Corp.'s Fox agreed to pay a total of $8 billion over six years to extend relationships with the league.
News Corp.'s DirecTV Group Inc. satellite service renewed its valuable "Sunday Ticket" football deal for seven more years for an additional $3 billion, locking out cable operators from the package.
That puts Walt Disney under new, unexpected pressure to decide its future with the popular sports league. Disney's ABC broadcast network airs "Monday Night Football" and its ESPN cable network carries a weekly Sunday-night game.
"Right now you'd have to say the ball's in Disney's court," says Denver Broncos owner Pat Bowlen, chairman of the NFL's TV committee.
It may take Disney a while to figure that out. The company faces internal tumult regarding the search for a successor to Chairman Michael Eisner and a distraction in the trial over former company president Michael Ovitz's exit package. George Bodenheimer, president of ABC Sports and ESPN, says the networks won't be rushed into a deal. "Our timetable has not changed, and our intention remains the same: to renew both packages," he said in a statement yesterday.
Behind the scenes, however, the pressure is on. The central question for Disney is whether to pony up for "Monday Night Football," a fixture at ABC for 35 years but also a perennial money loser. The ESPN cable package has been profitable. Disney brass has met with top NFL executives, most recently in Los Angeles three weeks ago, and Disney President Robert Iger and NFL Commissioner Paul Tagliabue have had multiple phone conversations over the past 48 hours.
At the time of the Los Angeles meeting, "it appeared they didn't want to do anything," Mr. Bowlen says of Disney. "I can understand that. They have different problems that are attracting their attention." Now, however, he says, "they know where we're at."
People involved in the negotiations say Disney executives were caught off guard by the timing and the size of the CBS and Fox deals, which set a baseline price increase of 25%. That would boost the cost of a Disney package for Sunday and Monday nights to between $1.4 billion and $1.5 billion a year, from $1.15 billion now. Analysts have estimated that ABC has lost between $150 million and $250 million annually on "Monday Night Football," figures that people at the company don't debate.
Additionally, football and TV industry executives say other networks, broadcast and cable, are angling for Disney's NFL assets. Waiting too long could give competitors greater opportunity to meet with the NFL and formalize proposals -- potentially raising the league's asking price for the programming. While the NFL can talk to other networks, it can't cut a deal with anyone else until Nov. 1, 2005. Mr. Bodenheimer has said Disney doesn't want to begin serious negotiations until the current season ends in February.
"There are other people out there that are interested," says Gene Upshaw, executive director of the NFL players' union.
Possible suitors for "Monday Night Football" include Fox and General Electric Co.'s NBC, which has walked away from major professional sports leagues because of the cost but may be having second thoughts as its prime-time schedule takes on water. Fox adding Monday night to its Sunday package -- as well as to its lineup of postseason baseball -- seems unlikely. But News Corp. Chairman Rupert Murdoch has been aggressive in using sports to expand his network.
People familiar with Disney's thinking say the company wants to keep both Sunday and Monday nights, but the ESPN games are the bigger priority. "The economics of 'Monday Night Football' are pretty daunting," says Neal Pilson, a former CBS Sports president who runs his own consulting firm. Though the audience is smaller, the dual revenue stream of advertising revenue and subscriber fees makes cable more appealing. And ABC finally has some prime-time bright spots with "Desperate Housewives" and other shows.
One potential solution for Disney: Let ESPN absorb a much larger chunk of the NFL costs, insulating ABC from big losses. Disney already has done this in the past with the National Basketball Association and National Hockey League.
The NFL is offering ABC one big carrot: agree to demands by ABC to reschedule games late in the season to guarantee better matchups on Monday night. That would avoid late-season clunkers, a longtime ABC irritant.
The league also is considering a package of games for broadcast or cable on Thursday and Saturday nights. Disney could argue the extra games would dilute its prime-time exclusivity, helping to reduce the Monday price. NBC, and its cable USA Network, among others, are considered possible bidders for such a package.
Write to Joe Flint at joe.flint@wsj.com5 and Stefan Fatsis at stefan.fatsis@wsj.com6
