In 1986, SI Declared "Gravy Train" Halted for NFL and Other Sports TV Rights

Sports_Illustrated_43854_19860224-001-2048

In 1986, SI Declared "Gravy Train" Halted for NFL and Other Sports TV Rights

NFL

In 1986, SI Declared "Gravy Train" Halted for NFL and Other Sports TV Rights

Sports_Illustrated_43854_19860224-001-2048Thirty years ago this past February, a Sports Illustrated cover story, which I looked up after noticing Michael Rosenberg’s avatar, forecasted doom and gloom for sports television rights fees. The threats were very similar to what we hear about a sports rights bubble today.

The NFL, MLB, college football and more were facing a reckoning, wrote William Taaffe (who died in 2013), warning direly: “After years of paying ever-increasing millions for the rights to broadcast sports events, the networks now say that the gravy train has ground to a halt. The party’s over.”

The NFL was really in the crosshairs. NBC, CBS, and ABC were said to have cumulatively lost $45 million on the league. Beyond that, a $1.7 billion USFL anti-trust suit about the league’s presence on all three major networks was ongoing. (This would be a bullet dodged; a jury ruled the NFL owed the USFL a grand total of $3.)

“A month ago [NFL commissioner Pete] Rozelle said he expected a modest increase over the average $414 million per year—$65 million per team—the networks now pay the NFL when a new package is negotiated next year,” wrote SI. “Today, he won’t go even that far.”

While there was indeed a short-term haircut, the storm sure passed. This season, the NFL will make over $7 billion from its television and digital streaming rights. This is just what’s on TV:

Screen Shot 2016-08-16 at 8.09.55 PM

Note that this doesn’t even include the Thursday night games they retained the exclusive rights for on NFL Network – NBC and CBS will have five Thursday night games apiece on their new deal – nor the reported $250 million they’ll reportedly receive from Verizon, nor the comparatively modest $10 million they’re getting from Twitter for streaming.

The $65 million per team that SI cited was about the amount each team received in the five-year, $2 billion deal the NFL had signed with the three networks in 1982. Each year of that deal, each team received about $14.2 million. According to the CPI calculator, this would be a bit over $30 million per team today, or about 1/7th what each team, in a league that has expanded from 28 to 32, receives.

Television ratings were, surprisingly, not a reason SI gave for the impending bubble pop in sports television rights. A couple explanations included women having purchasing power for big ticket items like automobiles that they hadn’t previously had, and that beer-drinking men could be reached in new places like MTV.

It was implied that football and basketball were already oversaturated – “the games seem to run together” – and while a cable package was briefly alluded to as a possibility for the NFL in the future, this was the core prognostication: “Cable TV will remain an idea whose time has not yet come. With few exceptions, the networks will still control the major sports events, and cable will still have to make do with the minor ones.”

ESPN, which was only mentioned in the story as an aside of where the Belmont Stakes could go if CBS didn’t meet its price, signed a deal with the NFL for Sunday Night Football the next year. Fox did not exist at the time the SI piece was written and therefore not mentioned; it launched in 1986 and became an NFL rightsholder in 1994. Satellite television was not discussed at all in the SI piece, and transformed the distribution of all sports, but especially the NFL with the advent of Sunday Ticket in 1994. (Previously to this there was something akin to a Wild West of satellite dishes where savvy users could essentially pirate games from outside their local markets.)

To recap, since SI noted that football was already on “wall-to-wall,” the NFL added three new television networks, two additional nights per week in the season, and a satellite package that (almost) literally shows every game. Streaming, which legitimately could not be conceived of then, is the next frontier. While the league presumably would like to receive more than they’ve gotten so far from Yahoo and Twitter, they’re in the dipping-toes-in-the-water phase.

The question now becomes whether we’ve truly reached critical mass. Thursday Night Football never ceases to feel like a chore. The Draft lasts somewhere between four months and all year. ESPN can pay $1.9 billion annually in part because of a threatened business model of charging all cable customers, even ones who don’t watch sports, upwards of $70 a year. Can digital growth make up for television erosion if this model is unsustainable when the league’s deals are up in 2021? What if this coincides with labor unrest?

The NBA remains on just ESPN/ABC, TNT, and NBATV, but it added a new national game on Saturday nights last year, and is expanding to a bunch of Mondays this season. Superteams may be good for playoff ratings, but how much more of an appetite can there be for the inconsequential 82-game slog of a regular season?

Despite a lack of big stars, MLB business is booming. But is its local television structure, exemplified by the Dodgers debacle, a house of cards waiting to collapse? The Olympics have been a cash cow for NBC for decades, but all of a sudden ratings are down, and the network is spinning its streaming growth hard.

As the sports video rights business migrates more and more online, it will be fascinating to see if the doom-and-gloom scenario predicted 30 years ago by Sports Illustrated finally comes to pass.

 

Latest Leads

More NFL
Home