* Up to $3 billion of advertising rev at risk - analyst
* Broadcasters expect to be 'made whole' if games missed
* DirecTV may lose some football fans if games missed
By Yinka Adegoke and Liana B. Baker
NEW YORK, March 2 Media companies are bracing
for a big revenue hit from a possible lockout by the National
Football League but hold out hope that college football and
other prime-time shows could pick up the slack for lost
Team owners are currently in collective bargaining
negotiations with the NFL Players Association over salary caps
and a range of related issues to replace a contract that
expires at midnight on Thursday. It could potentially shut down
the NFL for some or all of the 2011 season.
It is difficult to overstate the importance of the NFL to
the revenue and profits of broadcasters like CBS Corp (CBS.N),
Walt Disney Co's (DIS.N) ESPN, Comcast Corp's (CMCSA.O) NBC and
News Corp's (NWSA.O) Fox. It's also been a key driver behind
the success of satellite TV operator DirecTV Group DTV.O, the
one pay-TV provider that has consistently added subscribers
even while rival cable and satellite companies have shrunk.
"In an era of multichannels and multiscreen, viewing of NFL
games continue to defy gravity," said Brad Adgate, an analyst
at Horizon Media.
He said the audience on the networks that carry the NFL
grew by 7.4 percent in 2010 with NBC's Sunday Night Football
and ESPN's Monday Night Football being the top-rated programs
on TV with adults 18-49 the most coveted demographic for many
So what will advertisers of say, cars or financial products
aimed at that key demographic do to reach the most viewers?
Media executives, who spoke on background because plans are
not finalized, said they see college football games and
post-season baseball playing an important role for pulling in
They also think some prime-time shows could benefit if a
lockout extends into the crucial May Upfronts advertising sales
"When there's no pro football to push, advertisers will
still need to reach eyeballs so this might create a higher
demand for prime-time programming," said one of the executives
who asked not to be named.
But executives said privately it will be difficult to even
come close to the marketing power of the NFL juggernaut. The
revenues generated by the NFL are impressive.
This year's Super Bowl brought in a record audience of 111
million and raked in $3 million for a 30-second spot.
Nomura analysts estimate the NFL could generate $4.2
billion in revenue from television next season or nearly half
the total dollars spent on national sports rights in the U.S.
Regular season NFL games generate around $200,000 on average
for a 30-second spot.
"A strike would risk over $3 billion in gross national
advertising dollars generated by the NFL," said Nomura analyst
Michael Nathanson in a client report.
Analysts said that while revenue is at serious risk with
the absence of football on TV, the broadcasters' cost structure
will be protected because their contracts with NFL mean they'll
be 'made whole' if some games are missing.
ESPN currently pays the highest annual rights fee with an
estimated $1.15 billion for the season followed by Fox with
$780 million. CBS and NBC have paid around $650 million each.
TV executives are understandably very nervous but have
generally tried to play it down.
"I hope and pray fervently that it doesn't happen," said
Fox Sports Media Group Chairman David Hill. "We know what
happens to sports after a strike or a lockout: people turn away
and it takes a while for them to come back. It would be a great
tragedy if both sides weren't able to reach an agreement."
CBS CEO Les Moonves said on a conference call last month
that its agreement with the NFL would see the company part with
some money but the contract would be extended if any games are
"So ultimately, at the end of the day, we do not anticipate
losing any revenue," said Moonves. "We think we will get the
games back in some way, shape, or form. So, there will be an
Analysts said DirecTV, which has grown strongly in the last
decade in part thanks to its $1 billion a year Sunday Ticket
partnership with the NFL, could lose some of the estimated 2.2
million football fans who pay $300 a year for Sunday Ticket.
The deal allows fans to see NFL games outside of their local
DirecTV has said that if a full season of play is lost, it
is required to make payments to the NFL but the satellite
provider gets to add on an extra season at the end of its
contract. If only a couple of games are missed, their payments
to the NFL are also reduced, the company said.
The wider football economy is expected to be hurt by the
walkout with everything from shirt sales to hot dog concessions
at stadiums. Even video games -- which might have been expected
to benefit as an alternative to the real thing -- are expected
to suffer, according to the maker of the most popular football
John Riccitiello, Electronic Arts Inc's ERTS.O chief
executive, said on Tuesday at an investor conference that it
would sell 30 percent to 45 percent fewer Madden games if a
full season is missed, because no football on TV "consequently
reduces interest in the sport," he said.
But based on EA's new contract with the NFL, Riccitiello
said, "in the event of a lockout, we are largely insulated from
the financial hurt."
The company could not elaborate on any more details on the
(Editing by Phil Berlowitz; To query or comment on this story