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NFL Net Adding Subs at a Fast Clip

Aug 30, 2004  •  Post A Comment

In the Park Avenue office of Steve Bornstein, president and CEO of NFL Network, there’s a sign on the wall that reads, “Anything north of 60 million subscribers will be acceptable.”

That would be a dauntingly high expectation for any new cable network, even one powered by what Mr. Bornstein calls “the platinum standard” of sports programming.

Earlier this month the NFL completed an agreement with Comcast, the nation’s largest cable operator, that will put the network in more than 22 million homes, getting to that level faster than any other new cable network. And fortunately for the people who work at NFL Network, Mr. Bornstein seems satisfied with the performance of the 9-month old channel, so far, even though he can’t get it in his New York apartment, which is served by Time Warner Cable.

“We felt the NFL had a broad enough appeal that it could sustain a 24-hours-a-day, 365-day-a-year network and the good news is we’ve proven it,” Mr. Bornstein told TelevisionWeek. “People like the network. Distributors are lining up to distribute it. E-mails are coming in from places where you can’t get it. Hopefully, it will continue to grow as fast as in the nine months we’ve been on the air.”

With the regular season about to start, Blue Chip advertisers are joining the roster, including Anheuser-Busch, Gatorade, General Motors, Nike and Pepsi. “They recognize that this is a unique franchise,” Mr. Bornstein said.

By signing on early, advertisers get lower base rates. In some cases, they can also freeze out rivals. Anheuser-Busch secured an exclusive deal with ESPN when it was starting out, and its market share jumped. Pepsi had a similar experience with MTV.

Other NFL Network sponsors for this season include Ameriquest, AOL, Bayer and GlaxosmithKline’s Levitra, Campbell’s, Canon, Citgo, Coors, EA Sports, Expedia, FedEx, Gatorade, Geico, Gillette, KFC, Levi’s, L’Oreal, MBNA, Motorola, Norelco, Pfizer, Sony PlayStation, Southwest Airlines, Visa and XBox.

“We are overwhelmed by the positive response we have received from the advertising community,” said Chris Fuller, NFL VP of media sales. “Sponsors cannot believe how quickly NFL Network has established itself. They are excited about partnering with us to deliver their message to the hard-to-reach demographics that the NFL attracts.”

The NFL is not the only sports league creating its own media outlets.

The National Basketball Association launched NBA TV five years ago and it now has carriage agreements with almost all of the major distributors, having signed Comcast earlier this year. It reaches about 10 million subscribers.

“Its out of diapers. This thing has now been around for five years. It’s a living breathing thing that is something we’re really proud of. It has become the model,” said Ed Desser, NBA executive VP, strategic planning and business development. “It’s already become a full-service network devoted to basketball fans. It has no higher calling than what’s going on in the world of basketball.”

Earlier this month Major League Baseball owners agreed to fund a channel dedicated to baseball 24 hours a day. Details about its programming and launch plans have not been released. (The National Hockey League has a cable channel that is distributed in Canada only.)

As a former ESPN executive, Mr. Bornstein remembers when people wondered whether a 24-hour sports network was necessary. Now, “I think all of these channels are going to have their place, to be important to a certain constituency,” he said, adding that the NFL carries more weight. “This one appeals not only to 140 million Americans every week but to advertisers who want to reach them.”

After years of living on money from major broadcast and cable television networks, these big leagues are looking for more control over their product, increased promotional opportunities and possible leverage in future rights negotiations, experts said.

At this point, all of these networks are, “In the early stage, where their primary goal is obtaining exposure,” said John Mansell, senior analyst at Kagan Research. ” After they get that exposure they can begin to increase the affiliate fees and certainly have higher expectations for advertising revenue.”

Mr. Mansell expects the channels to start on digital sports tiers. “Maybe the NFL channel will ultimately be the exception just because it’s the NFL and it’s so much more popular than all the other sports combined,” he said.

Negotiations with other operators have been slow, because the NFL doesn’t want its network on a sports tier. Operators, Mr. Bornstein said, “would love to distribute it on a sports tier. At least someone would buy it.”

The NFL’s deal with Comcast puts it on a digital-plus tier, which costs $14.95 a month. Comcast has a cheaper Digital Classic package that does not include the NFL Network. A Comcast spokesperson said most of its 8 million digital subscribers take the Digital Plus package.

Once they mature, Mr. Mansell said, the services will migrate to more broad-based positions on the cable menu. Not so long ago, he said, regional sports networks were premium services: “Then once everyone realized how much advertising revenue there was to be had, as well as the additional subscription revenue from selling to everybody, instead of just 10 [percent] to 12 percent, things perked up.”

Comcast said the channels help make cable valuable to the sports fans among their subscribers. The NFL and the NBA TV deals include video-on-demand and HDTV services that take advantage of the investment cable operators have made in upgrading their systems.

In addition to the NFL and NBA channels, Comcast has recently added a Dallas Cowboys channel in partnership with the team in Dallas and Falconvision in Atlanta in partnership with the Falcons and WXIA-TV.

“It’s a way to give sports fans access to their favorite teams as never before,” a Comcast spokesperson said. “In general we are always interested in looking at new programming that adds value for our customers. However, I think it’s premature to comment on MLB at this time.”

Right now broadcasters don’t see the league channels as competition. The NFL Network this season is airing preseason games but not when one of its broadcast partners is televising a game of its own. NBA TV shows games in the regular season but not opposite its partners ABC, TNT or ESPN.

“We look at both channels as excellent promotional vehicles for each respective league,” said a Fox Sports spokesperson.

But Mr. Mansell said that at some point those services are going to be competitors. “It’s not just going to be filler, shoulder programming, preseason games and talk shows. There will be live games on,” he said. “It’s going to take a little longer. It delivers a message to the national cable and broadcast network partners that if they don’t continue to increase broadcast rights fees that the leagues will go out and place games on those channels. That’s not a legitimate threat at this point. But at some time in the future, maybe five years from now, it will be.”

“That’s what everybody thought when we launched it,” Mr. Bornstein said. “I think if that makes sense, we’ll do it. But I would think it’s unlikely in the next round of negotiations.” The NBA’s Mr. Desser downplayed the idea of putting more games on the channel: “I think it is a very small part of the overall puzzle, and it is really positioned as a supplement to the coverage proved by ABC in the broadcast arena and ESPN and Turner in the land of basic cable. And at the other extreme, we have the NBA League Pass.”

The NFL is spending more than $100 million to get its channel off the ground and hopes that in four or five years, it will turn a profit, Mr. Bornstein said. “The ownership wanted programming that reflected well on their sport and the athletes that play the game,” he said.

In addition to a nice wad of cash, “We also had the advantage of having without a doubt the greatest sports library in the world, the NFL Films archives,” which includes every game played since 1960.

Can there be too much coverage of football? Mr. Bornstein says no. “There is almost
as much interest in the NFL in the off-season, with the draft and trade and free agency. The draft itself outrated playoff games of other people sports,” he said. “I think we’re going to be as indispensable to the enjoyment of the NFL tomorrow as ESPN, CBS, Fox or ESPN are to the enjoyment of the NFL today.”

In the future, Mr. Bornstein sees the network even having a pre-game show before those already on CBS, Fox and ESPN.

Mr. Bornstein will be in New England for the opening kickoff when the Patriots take on the Indianapolis Colts. Kicking off the season at the home of the Super Bowl winner is an idea he hopes will become a tradition. And the NFL Network will cover all the pageantry and entertainment, including performances by Elton John and the Boston Pops.