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."
Fox’s Thurs. NFL Price Shocks Nathanson
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.
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“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.”
Comments (4)
Shenee Howard says:
February 1, 2018 at 9:09 am
Still sounds like a desperation move considering both NBC and CBS felt overpaying is not worth it with declining ratings and not so great matchups.
Kim Perrier says:
February 1, 2018 at 10:19 am
Don’t discount the promotional platform Fox will have with TNF. New viewers vs a regular Fox Thursday viewer to see promos about other nights of Fox programming. Also, lead in to local News on their O&Os is going to grow on Thursdays. The new Fox will be more focused and you will probably see promos for their News and Business Channels on Thursday too.I agree its a lot of money, more than has been paid but there is a strategy and it will come out next season. I believe there are many soft benefits that have yet to be seen! Good luck to Fox!
Don Richards says:
February 1, 2018 at 12:46 pm
You are right about the potential promotional platform TNF will offer. The problem is that FOX doesn’t have much in the way of prime programming to promote! If the promotional efforts are successful then viewers will sample the other nights and…unless they fix their prime schedule…not come back to what is being promoted. As far as the lead in to local news, most TNF games run well past 11PM (eastern) which means that the 10PM news on most Fox stations will, at best, be on well past 11PM and, therefore, competing with the Big Three affiliates who will be doing news. FOX’s news advantage has always been the “one hour earlier” claim…which will vanish on Thursday nights. They are probably better off promoting their other channels than trying to get viewers to sample something that has already been rejected.
Snead Hearn says:
February 1, 2018 at 3:23 pm
Way too much for the game(s) but Fox (like them or not) has a plan and evidently this is the start.