U.S. Markets closed

Must-watch NFL has broadcasters buckling to pay up

Pras Subramanian

There's the NFL, and then there's the rest. America's unofficial pastime kicks off tonight and as millions of viewers tune in, networks like NBC (CMCSA) feast on the ad dollars. Not surprisingly, the NFL knows broadcasters need viewers to watch live TV (and the accompanying, unskippable ads), and the leverage it has is enormous.

To wit, the Wall Street Journal reports that CBS paid almost $300 million dollars for the rights to broadcast 16 of the NFL’s Thursday Night Football games. The kicker? The games will be simulcast on the NFL Network, and CBS will have to pay all the production costs for the 16 games.

In total, the NFL is making around $5 billion a year from broadcast rights. Meanwhile, Yahoo Finance’s Jeff Macke notes the NFL is openly, aggressively undercutting the networks with streaming deals and digital initiatives. The big question now is does the fact that Americans watch sports live trump all other factors, or is the NFL playing a dangerous game alienating its high-paying media partners.

“There’s not enough bad press really that’s going to reduce what the [NFL] is going to fetch on the open market,” Yahoo Finance Senior Columnist Mike Santoli says in the attached video. “The conventional wisdom in network TV has been for decades, sports is the one kind of irreplaceable valuable thing that people have to watch in real-time. It’s only become more true.”

The numbers also weigh heavily in the NFL’s favor. According to Jefferies Group, 97% of all sports is watched live. One can only imagine how valuable this is to advertisers who want to reach a captive audience of millions of people without having their ads skipped. In addition, there are only 16 games each team plays each year (17 weeks of regular season NFL games including the bye week), making each game must watch TV for fans.

As for the NFL carving out its own rights for mobile and web video playback, there are two current deals in place. Verizon (VZ) has the exclusive rights to mobile streaming of games, and DirecTV (DTV) has its Sunday Ticket package that’s now getting a beafed up online component as well. In a smaller link-up, Twitter (TWTR) just extended a 1-year deal with the NFL to tweet video highlights of games already in progress.

Santoli surmises that the league likely won’t face any blowback, yet. “The scarcity value of that live TV viewer has only increased and it’s hard to see how that goes away… [NFL games] are still that much bigger than any other live event.”

More from Investing:

Throw market history out the window when trading this September

With rents surging, home ownership growing more attractive

Apple, Facebook and Tesla flashing warning signs