Securities analysts Michael Nathanson says the $3.3 billion deal for Thursday Night Football “is both offensive and defensive. It is no secret that Fox network has struggled outside of sports. Devoting Thursday nights in the fall to football means one less night of original programming to worry about.”
Media securities analysts Michael Nathanson says he was “shocked” by what Fox had agreed to pay — $3.3 billion — for the right to broadcast NFL’s Thursday Night Football for the next five seasons amid the declining TV ratings for the sport.
The deal breaks down to an average of $660 million per season for 11 games starting next fall, a “substantial” increase over the $460 million CBS and NBC had paid this season in a split of the games, Nathanson says in a note to clients.
“The deal is both offensive and defensive,” he says. “It is no secret that Fox network has struggled outside of sports. Devoting Thursday nights in the fall to football means one less night of original programming to worry about.
“And despite its declining ratings, Thursday Night Football’s reach on an absolute basis towers over all of Fox’s original scripted dramas and comedies and would be strong competition against ABC, CBS and NBC.”
Offsetting the annual costs of rights and production ($120 million), Nathanson figures, will be ad revenue, growing from $330 million in the first year to $450 million in the last and growing retrans revenue.
The retrans is the “X-factor,” he says. “If New Fox is able to grow retrans by an incremental $450 million by the end of this deal, Year 5 could be close to break-even,” he says.
“However, if we also incorporate an estimated loss of $5 million per night from Fox’s current Thursday night programming lineup, the TNF deal could actually generate a $40 million profit by the end of the deal.
“Having said that, we estimate TNF will lead to $280 million in losses’…$225 million net of current programming losses in CY 2018.
“This also excludes any additional benefits from the digital rights, local rights to NFL Network games, and other incremental programming for FS1 (possibly a pregame show and likely more highlights).”
Fox has agreed to sell its studio and cable entertainment assets to Disney. When that deal closes, it will be reduced primarily to the Fox broadcast network and Fox News Channel and heavy reliance on news and sports.
Says Nathanson: “While the price tag on Thursday Night Football seems high, this is a clear indication that [Fox post the Disney closing] is putting its money where its mouth is and sticking to the plan.”