Did the NFL sack the pay-TV bundle?

In their latest reports, several Wall Street analysts argue that the NFL's new 11-year, $110 billion TV rights deals with a slew of networks deal a crushing blow to the future of sports on linear, multichannel TV.

Alan Breznick, Cable/Video Practice Leader, Light Reading

March 23, 2021

5 Min Read
Did the NFL sack the pay-TV bundle?

Did the traditional pay-TV bundle die an ignominious death last Thursday when the NFL announced a new wave of TV rights deals that boost a slew of streaming video services?

Not exactly. Despite all the hoopla in various press reports about the notable gains made by Amazon Prime Video, Disney's ESPN+, NBCUniversal's Peacock, ViacomCBS' Paramount+ and Fox's Tubi in the $110 billion rights bonanza, pro football games will remain standard fare on the broadcast and basic cable networks for at least another decade. ABC, CBS, NBC, Fox and ESPN will all continue to telecast games on their respective days until the new 11-year agreements conclude in 2033. So nothing all that dramatic will happen when the new contracts take effect for the 2023 season, at least not right away.

But, as several Wall Street analysts stressed in reports to investors late last week, the legacy multi-channel TV bundle's hold on its last remaining big asset, live sports, has been thrown for a huge loss. Although all five networks mostly managed to keep their existing NFL rights deals intact, the football games they carry will also now be simulcast on various streaming services, robbing the linear TV networks of the precious exclusivity they have enjoyed for decades.

"From House of Cards to Monday Night Football, there's no turning back now," LightShed Partners Analyst and General Partner Richard Greenfield declared in his note to investors on Friday. "The overall takeaway is that the NFL is following the path we have seen first in scripted TV, then original films, followed by kids and unscripted content, and increasingly news and now sports."

In perhaps the biggest coup for the streamers, Amazon Prime snagged the exclusive national TV rights to the NFL's Thursday Night Football slate, reportedly paying about $1 billion per year for what the league is calling its first all-digital package. While Amazon Prime has been streaming NFL games since 2017, it has been doing so in a tri-cast model with national broadcast partners like Fox, which will now be shut out on Thursday nights.

"While Amazon Prime has previously streamed NFL games at modest cost, buying Thursday night for $1 billion a year is a historic step which should sack any remaining hopes that broadcasters would always be the best buyer of banner sports rights," wrote Peter Supino, a senior analyst at AB Bernstein.

But Amazon Prime was far from the only streaming service to score big in the latest NFL rights bonanza. As noted earlier, ESPN+, Peacock, Paramount+ and Tubi also secured rights to stream NFL games and/or related programming in the new 11-year contracts, mostly through simulcasts of games running on their broadcast and cable network parents.

"The key theme consistent across the deals is the additional streaming flexibility all broadcasters have secured, paving the way for NFL programming, including games on ESPN+, NBC's Peacock, Paramount+, and Fox's Tubi," wrote Benjamin Swinburne, managing director and head of US media research at Morgan Stanley. "Of course, shifting Thursday Night Football to Amazon Prime Video puts an even more emphatic point on the streaming future."

Of the NFL's four broadcast/cable partners, Disney fared the best, argued the financial analysts at MoffettNathanson. In their report, they noted that Disney added more games overall, gained more scheduling flexibility, picked up ESPN simulcast rights for ABC's two Super Bowl games and, perhaps most importantly, snagged the rights to stream all its ABC and ESPN games on ESPN+.

Of course, Disney will pay dearly for all these benefits, shelling out about $800 million more per year for the new ESPN/ABC package, according to Moffett Nathanson's estimates. But, the analysts noted, a win is still a win and Disney will likely raise network affiliate fees, ad rates and streaming subscription fees to cover its higher costs.

While the linear multi-channel TV bundle will limp on, analysts agree, the cord-cutting trend will only keep accelerating now that football fans will be able to watch all games on streaming services. Greenfield, for one, predicts that the legacy pay-TV customer base could be slashed to less than one-third of what it is now after the new contracts kick in.

"Sure, the bundle will be around for many years to come, but the future trajectory is now clearer than ever and the proverbial 'floor' on multichannel video subscribers is far lower than we predicted," Greenfield wrote. "What we thought was a 40-50 million subscriber floor due to the NFL is probably now closer to 20 million, as more and more marquee sports content (especially NFL content) becomes available outside the legacy multichannel bundle."

Greenfield is far from alone in that assessment. At MoffettNathanson, for instance, the analysts project that the total number of US pay-TV subscribers, including virtual multichannel programming distributor (vMVPD) subs, will fall from 88.8 million at the end of last year to 71.4 million by the close of 2025 and keep dropping after that.

Plus, one more football cleat is yet to drop. Still to be decided is the fate of the NFL's Sunday Ticket package, which has bolstered DirecTV's popularity for more than two decades and also expires at the end of the 2022 season. If that package also shifts from AT&T's satellite TV service to the streamers, cord-cutting could really take off.

"Given the acceleration of cord-cutting and legacy media’s urgency to build their own streaming services and connected TV advertising presence, we suspect all will utilize their simulcast streaming rights sooner than later," Greenfield wrote. "With more and more NFL content available outside the bundle, the legacy multichannel bundle will evaporate even faster than expected (cord-cutting) and the ultimate subscriber floor will be lower than anyone thought possible before."

— Alan Breznick, Cable/Video Practice Leader, Light Reading

About the Author(s)

Alan Breznick

Cable/Video Practice Leader, Light Reading

Alan Breznick is a business editor and research analyst who has tracked the cable, broadband and video markets like an over-bred bloodhound for more than 20 years.

As a senior analyst at Light Reading's research arm, Heavy Reading, for six years, Alan authored numerous reports, columns, white papers and case studies, moderated dozens of webinars, and organized and hosted more than 15 -- count 'em --regional conferences on cable, broadband and IPTV technology topics. And all this while maintaining a summer job as an ostrich wrangler.

Before that, he was the founding editor of Light Reading Cable, transforming a monthly newsletter into a daily website. Prior to joining Light Reading, Alan was a broadband analyst for Kinetic Strategies and a contributing analyst for One Touch Intelligence.

He is based in the Toronto area, though is New York born and bred. Just ask, and he will take you on a power-walking tour of Manhattan, pointing out the tourist hotspots and the places that make up his personal timeline: The bench where he smoked his first pipe; the alley where he won his first fist fight. That kind of thing.

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