What The NFL's New Deal Means to IP TV

On the eve of the 2005 NFL Draft, the NFL announced TV rights for its flagship Monday Night Football had been sold to ESPN for $1.1 billion. The NFL will continue to show all cable games on free, over-the air television in home markets. That means that local stations will carry ESPN's Monday night games in the cities of the teams involved.

At the same time, NBC purchased rights to Sunday night games, two Super Bowl broadcasts, and key preseason and postseason games for about $600 million. This package gives NBC some badly-needed counterprograming to "Desperate Housewives".

The NFL has been busy flexing its licensing muscles in videogames, mobile phones and soon, interactive radio with Infinity Broadcasting. Look to the NFL Network itself to reassess the value of Sunday and Thursday night games later in the season. They've arguably got the most powerful sports franchise in the world.

If the phone companies want to launch their IPTV platforms, they're going to need to follow the footsteps of Comcast's work with the NFL Network On Demand and DirecTV's NFL Sunday Ticket to build their own NFL franchises. They'll need to think about the long haul: all the potential exclusives - except for perhaps VOD - are drying up. The ESPN deal is for 8 years, NBC for 6 and DirecTV for 5. CBS and Fox have six more years of Sunday afternoon games.

The carriers might want to read a 2002 report that Berkeley economics professor David Romer wrote entitled "It's Fourth Down and What Does the Bellman Equation Say?" (Adobe Acrobat required) As CNNSI reported, Romer analyzed almost 20,000 first quarter plays to determine the economic benefit going for it on fourth down. The report concluded that when faced with a fourth down, NFL teams on average should go for it.

I think the carriers should likewise go for broke and pursue a VOD deal with either CBS or Fox to establish an IPTV sports franchise. There's a precedent: for years, ABC has paid MNF $550 million a year based on its ability to draw traffic, despite reportedly losing as much as $150 million a year. By shifting the game to its sister network ESPN, the sports licensing costs are shared with the cable and satellite companies.

Link: My take on IPTV and Roger McNamee's Video on the Internet blogs