Advertising And Audience Complicate The NFL’s Entry Into Streaming

A week before ViacomCBS rebranded CBS All Access as Paramount Plus on March 4, George Cheeks, president and CEO of CBS Entertainment Group, noted that NFL football in particular will be fundamental to the platform’s growth. 

“It drives more subscriptions than any other program, and significant engagement too,” Cheeks said during the company’s Feb. 24 virtual investor presentation, adding that time spent streaming NFL games grew 88% this season alone.  

Others, like Amazon and Disney, are also looking to leverage the NFL – and other sports programming – to bolster their streaming platforms. Last month’s Super Bowl ratings hit a 15-year low, but streaming viewership surged 68% from last year to an average of 5.7 million viewers.

But just how important is the NFL to the future of streaming, and in turn, linear TV?

As the NFL comes closer to finalizing broadcast rights – which could see Amazon carry many Thursday Night Football games exclusively on Amazon Prime – it will determine just how high a value the NFL places on access to its games, whether through streaming or traditional linear TV, Jeremy Carey, managing director at Omnicom sports marketing agency Optimum Sports, told AdExchanger.

“It’s probably the number one thing that has kept us in somewhat of a legacy environment when it comes to looking at broadcast schedules,” Carey said. 

But he doesn’t anticipate the NFL shifting dramatically to exclusive streaming environments. “Could there very well be a game here and a game there? Yes,” he says.

All About Rights

Broadcast rights for the regular season are spread across several networks, including CBS, ESPN, Fox, NBC, and the NFL Network, and the NFL is reportedly planning to include streaming rights as part of each network package. 

“If you think back to the last contract in 2018 … streaming was nothing,” said Forrester principal analyst Jim Nail. “Can the current contract owners stream the game or can the NFL say, we only sold you broadcast rights? That, I think, has been muddied and will get clarified in this round of contract negotiations.”

According to a March 4 blog by research firm LightShed Partners, Amazon Prime taking over Thursday Night Football “is a watershed moment in TV history that will undoubtedly accelerate the demise of linear TV and the multichannel bundle.”

Nail said the NFL is more important for traditional broadcast because the games generate the highest ratings. 

“And if [linear broadcasters] were to lose that, I don’t know what happens to them,” he said.

The Cost Factor

But Nail and others don’t believe that the NFL entering streaming will be the death knell for traditional broadcast anytime soon.

"I don’t see it devastating linear because I think that there is still a large audience," said Gibbs Haljun, total investment lead at GroupM media agency Mindshare. "I think it is very hard to stitch together a comprehensive streaming package that will replicate the billions of dollars that the linear networks pay for."

Nail added that the NFL doesn’t appear ready to shift entirely to streaming, noting its historic relationship to broadcast. And for the streaming services, it also comes down to costs associated with rights.  

“[The NFL] get billions upon billions for the broadcast rights, and it’s not entirely clear that the streamers are either able to, willing to or interested in spending their content dollars on sports rights versus creating their own original content, which, up until this point in the history of streaming, has been the driver of streaming subscriptions,” Nail said.

Disney, for example, recently indicated it limits costs associated with streaming rights as it looks to potentially make ESPN a direct-to-consumer service.

Asked how ESPN Plus factors into conversations with the NFL during the company’s recent Q1 earnings call, Disney CEO Bob Chapek said, “We’ve had a long relationship with the NFL and if there is a deal that will be accretive to shareholder value, we will certainly entertain and look at that. But our first filter will be to say whether it makes sense for shareholder value going forward.”

Audience Is Key

Haljun said that when it comes to the NFL being a draw for the individual streaming services, it also depends on the consumer.

“It seems to me, from a consumer standpoint, that having my package of content go up from a pricing standpoint significantly because there’s one day a week of NFL, is a little bit of a stretch,” he said. 

As linear ratings decline, Haljun added, streaming platforms are important in order to reach 18- to 34-year-olds.

"But that doesn’t mean they’re into the NFL the way the past generation was,” he said. “I think it partially comes down to choice and about how you make 18- to 34-year-olds engage with your content. And if you’re not doing that, it doesn’t matter whether it's on a streaming platform or linear television.”

Another important factor, Haljun said, depends on how the NFL would divide games between its two conferences, the AFC and NFC. Traditionally, CBS broadcasts games showcasing teams in the AFC, and Fox broadcasts games showcasing NFC teams.

Plus, there’s the additional complexity of how to treat games showing the home team. 

“Part of the current rules is that home teams, or in market games, need to be shown in market over broadcast,” he said. “Are they going to take that away? Because that then potentially creates an issue with a team’s fanbase."

And if things weren’t convoluted enough, the NFL also has different programs. Most games play out on Fox or CBS, from Sunday morning through the afternoon. But other major programs also have games, including Monday Night Football on ESPN and NBC’s Sunday Night Football.

“Each one of those has a different distribution environment, whether that is taking on a linear ad feed or digital ad feed, or some form of a hybrid of the two – in which you’ll have digital ads in the local breaks,” Carey said.

That’s where non-traditional players come in, Carey said, such as games streaming exclusively on Amazon and Twitch, in which linear ad feeds would carry over into the digital environment, but the local breaks would be digitally ad-served. 

“What I do know is that the NFL wants to make sure that they’re maximizing their audience,” Carey said. “And it makes it hard for them to come in and look at a potential bidder that doesn’t have the ability to reach a broadcast audience. And a lot of these players, as large as they are, don’t necessarily have the distribution infrastructure in place on a national level.”

Besides, Carey said that the NFL doesn’t want its content pushed behind a pay wall.

“If and when any of their content does get pushed behind a pay wall, they would tend to control that, and that would be on something like Red Zone or Sunday Ticket,” he said. 

A Transition Period

Nail said that when it comes to advertisers potentially upping their ad spend on streaming services that clinch NFL rights, there are some gray areas, since most live games in streaming include the same ads shown on broadcast. 

“Is the advertising broken up separately from the broadcast advertising?” he said. “It gets to be a real pain if they now have to negotiate one contract with one network to get the inventory they want, but now they have to negotiate a broadcast and a streaming advertising plan – that’s too much work. The advertisers will not want that to happen.”

Nail said he believes that the NFL is going through a transition period when it comes to streaming.

“In five years, it will be much clearer, and it might be an easier decision for the NFL to prioritize streaming services who have grown to a point where they have stabilized their subscriber base and have a better sense of how much they can afford to spend on the rights packages,” he said. 

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