‘MNF’s’ $1 Bil Pass to Cable

Apr 18, 2005  •  Post A Comment

After 35 years on free over-the-air broadcast television, the Monday evening broadcast of professional football appears to be headed to basic cable.

Walt Disney Co. executives led by newly designated CEO Bob Iger met last Friday with NFL officials at the league’s New York offices to finalize plans to take the historic “Monday Night Football” franchise off ABC and move it to ESPN, TV executives said.

Disney would pay about $1 billion a year to put the marquee prime-time package on ESPN beginning with the 2006 season, according to executives close to the company.

Currently, ESPN pays about $600 million a year to run “Sunday Night Football” games on cable.

Approached after leaving the NFL offices Friday, Mr. Iger would only say: “I can’t say anything” concerning whether a deal had been struck to move “MNF” from its longtime home on ABC. Also at the meeting were George Bodenheimer, president of ESPN and ABC Sports; and Mark Shapiro, executive VP of programming and production for ESPN.

An NFL spokesman would not comment. An ESPN spokesman would say only that the company has been holding ongoing meetings with the NFL.

But people familiar with Disney’s plans said a deal could be announced as early as this week.

By pulling off the deal, the recently anointed Mr. Iger instantly would be viewed as a hero among shareholders, analysts said, because it would put the ABC Television Network in the black for the first time in years.

“MNF” has been a drain on the network’s finances-the games have been losing $150 million a season.

Since “Who Wants to Be a Millionaire” tanked, taking much of ABC’s prime time with it, the network has been bleeding red ink to the tune of $300 million annually. This year the network was expected to narrow those losses to $200 million, but with the surprise hits of “Desperate Housewives” and “Lost” generating an unanticipated bonanza in ad sales, the current projections are that losses will be closer to $75 million.

The company has said there is a possibility that by September 2005, the end of Disney’s fiscal year, ABC could move into the black.

With one deep pass, $150 million in losses would be removed from ABC’s bottom line, while moving “MNF” would boost the prestige of ESPN, which already commands one of the highest per-subscriber fees from cable operators.

“A positive cash flow would put the icing on the cake,” said Lee Westerfield, managing director and senior research analyst at investment banker Harris Nesvid. “The turnaround at ABC has been proven by ratings, and this would cap a virtuous recovery.”

The NFL would benefit as well from the significant increase in rights payments it would be receiving for “MNF.”

The NFL’s “Sunday Night Football” package would still be up for grabs. The league is said to be asking $600 million a year for the prime-time games.

With “Desperate Housewives” attracting about 25 million viewers a week with original episodes, ABC is unlikely to want to move the hit from its Sunday night time slot, especially when it would appear the Sunday night games would lose about as much money as “MNF” has been losing.

CBS and Fox last year renewed their Sunday NFL football packages with the league. Fox is paying $713 million per season, while CBS is paying $621 million per season. Some observers said Fox is interested in expanding its business with the NFL and might take the Sunday night package. But a source at Fox said the network is “not a player” for the Sunday night games.

CBS executives have said CBS is not interested in additional football.

The Sunday night games could switch cable outlets, with Turner Broadcasting having expressed interest in getting back into business with the league.

If “Monday Night Football” moves to cable, media buyers expect ratings and commercial costs to go down.

Thirty-second commercials on “MNF” cost advertisers from $300,000 to $350,000. ESPN won’t get those prices, but would improve from its current levels for its “Sunday Night Football” games. Those telecasts grab about $175,000 to $180,000 for a 30-second commercial.

While ESPN would generate fewer ad dollars, it has a second revenue stream because cable operators pay more than $2 per subscriber for the sports network. In return, the operators get local spots to sell in the games, which are their highest-priced inventory. The local spots also help ESPN by limiting the number of spots available to national advertisers, reducing supply and thereby elevating costs per thousand.