THU, SEP 26, 2024

Alexander Sherman

CNBC MEDIA REPORTER

Good morning, and welcome to the first of many CNBC Sport newsletters!

You can expect this weekly newsletter to touch on all aspects of sports business – ownership, team management, sponsorship, strategy, apparel, valuations, and, of course, media.

Enjoy!

The Kickoff

Why television executives are freaking out over 2029

At $111 billion over 11 years, the NFL’s media rights deal is the biggest in the U.S. That deal has an out clause after the 2028-29 season with all of its media partners except Disney (which can opt out one year later).

Sources tell me the opt-out also affects “Sunday Ticket,” the league’s out-of-market package for which Alphabet’s YouTube paid about $2 billion. That means that after the 2029 Super Bowl, the NFL has the right to completely rejigger the media landscape, if it so chooses.

Five years is a lifetime in the media industry given the rapid pace of change. To put that timeframe in perspective, if you rewind five years from today, Disney+, NBCUniversal’s Peacock, Paramount+ and Max (formerly known as HBO Max) all hadn’t launched. Now they have more than 300 million subscribers combined.

But it’s not too early to start thinking about what 2029 symbolizes. I don’t think it’s hyperbole to say 2029 could be the end of the modern media era. It’s at least plausible that by that time, streaming has become so dominant that the NFL feels comfortable moving some Sunday afternoon packages away from broadcast TV, especially given the superior balance sheets and potential global reach of companies such as Netflix, Google, Apple and Amazon.

Let me be clear: The evidence today suggests the NFL won’t do this. TV ratings for football on CBS, Fox and NBC look great. CBS’s Week 2 Bengals-Chiefs matchup was the most-watched September NFL game since 1998 with nearly 28 million viewers. NFL games last year were 93 of the top 100 most-watched TV broadcasts.

But I also know that some legacy media executives are already thinking about 2029 and brainstorming internally about how they can afford to compete against the tech giants for NFL games. The ideas range from the incremental (a third Sunday afternoon package) to the radical: What if the NFL replaced Sunday Ticket with a college model where every game had a national audience?

It’s not totally absurd. Local market broadcasting rules are simultaneously important to the league and increasingly anachronistic. Technology is no longer the issue. Streaming services can host multiple games at the same time. If there are enough bidders for packages of games, the league could conceivably make more money by selling packages to many media partners than it could by sticking with the Sunday Ticket model, which nearly cost the league $4.7 billion in damages when a jury decided it ran amok of antitrust law. (A judge bailed out the NFL by throwing out that verdict last month.)

On the flip side, having multiple games compete against each other nationally may end up being less lucrative to media companies and the league. YouTube pays about $2 billion per year for Sunday Ticket in its current deal. It’s a very complicated analysis, but it’s almost certainly one the NFL will examine.

“It’s such a good thought exercise,” said MoffettNathanson’s Robert Fishman. “If this is a different way to leverage broadcast networks’ important broader national reach while keeping local availability in place, then it’s worth the analysis.”

The NFL hasn’t been shy about inviting many partners under the tent. Beyond YouTube, the NFL has partnered with Netflix to carry Christmas games for the next three years. Amazon pays the league about $1 billion per year to carry Thursday Night Football.

The league wants tech partners and the league wants broadcast partners. The NBA, in its most recent rights deal, only wanted three media packages to help with consumer confusion and subscription fatigue.

But the NFL doesn’t appear to have the same concerns. The NFL has already put games exclusively on Amazon Prime and NBCUniversal’s Peacock, and ratings have remained strong.

Given how popular NFL games are versus everything else on TV, the architecture of the NFL rights is the single biggest decision in the American media industry. It’ll be a topic that looms over the biggest media and entertainment decisions of the next five years.

A couple of other news & notes …

For the professional wrestling fans in the house, I’m hearing Warner Bros. Discovery is on pace to ink a deal with upstart wrestling league All Elite Wrestling (AEW) by the end of this month. AEW’s current agreement with Warner Bros. Discovery’s Turner Sports ends at year’s end.
This week, Paramount Global formally eliminated a large portion of the 2,000 jobs it announced it’s cutting in August. But, in a nod to the importance of sports to the future of the company, I’m told none of the cuts impacted CBS Sports.

On the Record

Former CNN head Jeff Zucker attends CNN Heroes at American Museum of Natural History on December 8, 2019 in New York City. Credit: Mike Coppola | Getty Images

In an homage to both Passover and Craig Kilborn’s old bit, ‘Five Questions,’ we’re asking the decision makers in sports and media Four Questions.

This week’s guest needs no introduction, but I’ll give him one anyway. He leads RedBird IMI, a private equity joint venture with the United Arab Emirates tasked with investing in media, sports and entertainment properties. He used to run WarnerMedia News and Sports. Before that, he was CEO of NBCUniversal, the parent company of CNBC. Ladies and gentlemen, Jeff Zucker!

1. What is the biggest story in sports business today?

Zucker: The growth of women’s sports is the biggest story. The realignment of college sports is also huge. In women’s sports, we have seen record-setting levels of interest in the WNBA, NWSL, and women’s college basketball, and I expect women’s sports to continue to grow as top female athletes continue to break through culture.

2. You have a broad mandate at RedBird IMI to invest in media, entertainment and sports. Is there a certain niche within sports that excites you or that you see as a particular lucrative path right now?

I am particularly excited by the prospect of owned & operated sports properties. We’ve seen Netflix wade into sports with a golf event, a tennis event, and even a hot dog eating competition. I expect more streamers and other distributors to continue to experiment with live sports rights. But since so many marquee rights are tied up for years, entrepreneurially-minded producers who can capitalize and dream up new sporting events will be rewarded. EverWonder, which we have backed at Redbird IMI, recently launched Players Era, a college basketball tournament we're thrilled to put on. It’ll be distributed by TNT Sports and air on their networks and Max. There’s a massive opportunity to devise more owned and operated sporting events, leagues, and more.

3. One thing we still haven’t seen in big media is a rationalization of cable networks. It seems like year after year, these same big media companies keep holding onto their cable networks instead of selling them to private equity to keep the cash flow. Is that the right move?

I don’t think anyone is particularly long on cable. We’ve seen big media companies write-down their values by billions. Cable has been an extraordinary model whose economics are unlikely to be replicated ever again in media. But until media companies find profitability in streaming, it doesn’t make sense to rid themselves of the networks. They can use those cable profits to invest in their companies’ futures. At a certain point, it’ll make sense to ditch them. We’re not there yet. Cable TV is still a giant business, with tens of millions of monthly customers.

4. This seems to be a super depressing time for media, with sports media being the one exception. Is that your take as well? Or is that too simplistic?

There’s no doubt that the media sector is going through something. And, obviously, with all the cuts and contraction across the board, it can be depressing. But I firmly believe there will always be a need for original, exceptional content across entertainment and news and sports. And that’s our theory of the case. With respect to entertainment, people still watch high-quality shows and movies. And, yes, some of the hours consumers used to spend with traditional media properties have been replaced by different mediums like social media or video games. But it’s still content — with new distribution. So media is still very much an important part of our economy with tons of growth ahead. It’ll just come from pockets that traditional media companies don’t currently control.

CNBC Sport Highlight Reel

The best of CNBC Sport from the past week:

A cool milestone this weekend in the NFL – it marked the first time that two teams faced each other with female presidents. CNBC’s Jessica Golden profiled the growing trend of female leadership in the NFL.
CNBC spoke with Zak Brown, CEO of McLaren Racing, before the Singapore Grand Prix this weekend. “I like our chances,” Brown said. He was right. McLaren’s Lando Norris won, and his teammate Oscar Piastri finished in third.
Flutter, the company that owns sports betting platform FanDuel, projected gambling in North America will be a $70 billion total addressable market when it reaches its mature state around 2030. That's far higher than the $40 billion TAM the company predicted in 2022. That lifted the stock Wednesday. Flutter CEO Peter Jackson spoke with CNBC's Contessa Brewer.
A CNBC exclusive from Michael Ozanian and Jessica Golden: Businessman Paul Viera is increasing his stake in the San Antonio Spurs from 5% to 11%, sources tell CNBC. Viera bought out food service company Aramark’s remaining interest in the Spurs.

The Big Number

$8 million

The most expensive 30-second Super Bowl commercials are currently selling for nearly $8 million a pop, according to people familiar with the matter.

That’s a record high, but then again, almost every year is a record high.

The average cost for a 30-second ad will be lower than $8 million, as almost all commercials have already been sold. But Fox Sports, which owns the rights to the game this year, purposefully holds back a small handful of ads to sell as a gambit to maximize price. And because games are unpredictable, a network never knows how many commercials will actually run.

CBS ended up making about $60 million last year in bonus money because last year’s Super Bowl between the Kansas City Chiefs and the San Francisco 49ers went to overtime. That yielded 10 extra spots – some of which were sold during the game itself.

Quote of the Week

“Elected officials, corporate, private equity … everybody is like, ‘How do I get into the WNBA, and how do I invest? Can I have an expansion team? Or, can I invest in a current team?’”

— Cathy Engelbert, WNBA Commissioner

Engelbert’s quote from CNBC’s mini-documentary on the WNBA, now available on CNBC Sport’s homepage, speaks to one of the hottest questions in sports – and one that this newsletter will follow. Is investing in women’s sports a slam dunk opportunity? Or is there so much exuberance that expectations may be getting too high?

Around the League

The Atlantic published a piece this week declaring “Legalized Sports Gambling Was A Huge Mistake,” detailing various academic papers that illustrate the deleterious effects of online betting on American households. “The rise of sports gambling has caused a wave of financial and familial misery, one that falls disproportionately on the most economically precarious households,” writes author Charles Fain Lehman.
UNLV starting quarterback Matthew Sluka's decision to depart the school after reportedly receiving just $3,000 of the $100,000 he was promised is just the tip of the iceberg for what will certainly be a slew of stories related to NIL compensation in the coming years.
For the golf fans: The President’s Cup kicks off Thursday on NBC and its owned media properties, Golf Channel and Peacock.
A fond farewell to my favorite MLB team, the Oakland A's, who will play the team's final game in Oakland tonight. That means I'm in the market for a new favorite team. I'm taking requests, but the New York Mets are the leader in the clubhouse. I feel like they share some of the A's DNA — scrappy, frequently overlooked and perennially disappointing.
Finally, congrats to the Chicago White Sox, who held back history Wednesday with a win over the Los Angeles Angels. One more defeat will give them the most losses in modern MLB history. The New York Times Magazine had a fun profile of the team’s amazing futility this weekend.

That’s all for this week. Tell your friends to sign up for future editions of the CNBC Sport newsletter.

Go Niners,
Alex

Follow me on Twitter (X) at @sherman4949

Have a tip or feedback for Alex? Email him at Alex.Sherman@nbcuni.com