NFL's New Media Distribution Pacts Reveal Lower Floor of MVPD Subs: LightShed

Amazon’s score last week in NFL long-term media rights distribution agreements is a “big win” for the tech giant, LightShed Partners wrote investors Friday. The long-term media distribution rights agreements with Amazon, CBS, ESPN/ABC, Fox and NBC take effect in 2023 and run through 2033, said the NFL Thursday.

LightShed analysts had predicted major NFL rights holders would retain their packages under the new long-term pacts, with Fox ceding Thursday Night Football to Amazon and the NFL keeping seven Thursday night games on NFL Network “to protect its MVPD/[virtual] MVPD carriage.” But Amazon will be the “exclusive home of Thursday Night Football across hundreds of compatible digital devices,” said the NFL, noting it first partnered with Amazon on Thursday games as part of a tri-cast distribution model in 2017. The NFL had atri-cast deal with Twitter, NFL Network, and NBC and CBS in 2016. The NFL called the next-generation rights agreement the “first ever all-digital package.” LightShed called it “the day the multichannel TV bundle died.”

The bundle will be around for years to come , LightShed said, but “the future trajectory is now clearer than ever and the proverbial ‘floor’ on multichannel video subscribers is far lower than we predicted." LightShed had pegged the subscriber floor of multichannel video subscribers at 40 million-50 million due to the NFL. That’s now closer to 20 million, “as more and more marquee sports content (especially NFL content) becomes available outside the legacy multichannel bundle,” analysts said.

Streaming’s impact was evident in the NFL’s news release, which said that under a new “multi-platform agreement,” CBS retains rights for American Football Conference Sunday afternoon games for TV broadcasts and livestreaming on Paramount+. Disney’s ESPN holds onto Monday Night Football; its ABC broadcast network acquired rights to televise two Super Bowls and exclusive regular season games; and ESPN can simulcast all ABC and ESPN games on ESPN+, said the league. ESPN+ subscribers can stream one international game every season.

Fox renewed its Sunday package of National Football Conference games and expanded its digital rights for the ad-based Tubi streaming service on digital platforms. NBC retained rights for Sunday Night Football, and NBCUniversal’s Peacock streaming service will get an “exclusive feed” of select NFL games over the course of the agreement. NFL Network will continue to televise a select schedule of exclusive NFL games on a yearly basis.

With games on Amazon Prime Video, ESPN+, Paramount+, Peacock and Fox digital platforms -- in addition to NFL Mobile and digital platforms -- NFL games “are now available in more places and on more devices than ever before to meet the evolving consumption habits of NFL fans,” said the league. It said it continues to be “the only sports league that delivers all of its games" on free, over-the-air TV, while noting increased flexibility to watch Sunday and Monday night games.

On changing consumer viewing habits, the NFL said its partners “will now have greater ability to innovate around their productions and provide interactive elements such as stats/data, chat and integrated social feeds as part of their digital presentations.” Viewers will have access to "alternate presentations" of select NFL games in addition to each partner's main production, similar to those that fans viewed during the 2020 postseason with ESPN's MegaCast and CBS Sports' presentation on Nickelodeon, it said.

Every NFL package allows for games to be streamed on digital platforms that don’t require a bundle, said LightShed, noting that rights are for simulcasts, “not the ability to shift the content.” Programmers must broadcast on their primary destination -- either a broadcast or cable network -- and can then simulcast on a subscription streaming service owned by the same parent company. Streaming rights can’t be sublicensed to a third party.

The NFL agreement sets the stage for Fox, the only major network without a subscription VOD service, to launch a subscription tier on Tubi that includes NFL programming, LightShed said. Analysts expect shoulder programming “and/or a limited number of games” to appear on the ad-based VOD Tubi service. DirecTV’s Sunday Ticket agreement is to expire after the 2022 season. Analysts expect a new Sunday Ticket deal to be in place before the start of the fall 2021 season.

The NFL “has protected itself” with a one-time option at its discretion to exit agreements after the 2029 season, said LightShed. “If the NFL’s current partners are struggling and reach is falling, the NFL can look to shift linear TV rights to digital partners,” it said, calling that a “very precarious position” for legacy media.

The agreements enable legacy media to expand their reach through digital simulcasting, “even if it blows up the legacy multichannel bundle eviscerating the margins of its programming partners,” said LightShed. They also create a path to “alternative partners if the current partners become unappealing for 2030."

Citing the acceleration of cord cutting and legacy media’s “urgency to build their own streaming services and connected TV advertising presence,” LightShed expects all the media companies to employ their simulcast streaming rights “sooner than later,” it said. With more and more NFL content available outside the bundle, the legacy multichannel bundle will evaporate even faster than expected, it said. "The ultimate subscriber floor will be lower than anyone thought possible before."

MoffettNathanson analyst Michael Nathanson agrees the distribution deals could accelerate cord cutting, he wrote investors Friday. He said the NFL is likely receiving about $10 billion a year, a sharp step up from the $5.6 billion now for the U.S. rights. Those higher NFL costs will likely mean higher affiliate fees being charged to distributors and local affiliates, leading to higher consumer prices, which in turn will mean more cord cutting, he said.

ACA Connects deems the distribution agreements bad news for cable subscribers, it said Friday. Broadcast networks and TV station owners will use NFL games and the threat of blackouts as leverage to drive up retransmission consent fees, it said, It applauded the reintroduction of the Modern Television Act by Rep. Anna Eshoo, D-Calif., and House Minority Whip Steve Scalise, R-La. (see 2103110064). The bill would repeal parts of the 1992 Cable Act, including retransmission rules.