Will ABC sack 'Monday Night Football'?
Struggling Disney-owned network must decide whether benefits of airing program outweigh financial losses
The 34-year-old sports classic is ABC's most popular and longest-running prime-time program -- a tradition that began in 1970 when ABC's legendary sports producer Roone Arledge put Howard Cosell, Don Meredith and Keith Jackson in the broadcast booth.
In recent years, though, the struggling Disney-owned network has been losing about $150 million annually on "Monday Night Football." ABC pays the National Football League $550 million a year for the rights to air the Monday matchups, but advertising revenue doesn't come close to covering the costs.
Now, with Disney executives under pressure to prove to Wall Street that they can reverse the fortunes of the fourth-place network and turn a profit by next year, they must decide whether the benefits of "Monday Night Football" outweigh the financial losses.
"ABC is between a rock and a hard place," said Brad Adgate, research director for the advertising buying firm Horizon Media. "It's been ABC's highest-rated show, but at some point they have to ask: How much is too much?"
The NFL has been meeting with network executives in recent weeks to start hammering out a new TV rights package that probably will exceed its current eight-year pacts, which total $17.6 billion and expire at the end of the 2005 football season. NFL executives had wanted to negotiate new agreements this fall, before they begin contract talks with the players union, because the network advertising market has been strong.
But Disney told the league it was not ready to deal. Instead, Disney executives want to wait until next year -- closer to the October 2005 deadline -- to renegotiate NFL contracts for ABC and sister network ESPN.
Disney also pays $600 million a year for ESPN's rights to Sunday night games, the Pro Bowl and other NFL-related events. Unlike ABC, Disney's cable sports empire doesn't lose money on football because ESPN is hugely profitable, collecting cable subscriber fees in addition to ad revenue.
"We do not expect formal talks to begin until the end of this upcoming season," said ABC Sports spokesman Mark Mandel. He declined to say whether Disney executives had reached a decision on whether to renew ABC's deal for "Monday Night Football."
Privately, Disney sources concede that the decision could "go either way." Despite being a marquee program with plenty of sentimental value, "Monday Night Football" has tripped up ABC's prime-time programmers, who struggle each year to come up with shows that will work in the show's time slot once the regular NFL season ends in late December.
NFL executives won't say how much of an annual increase they are seeking from the networks. Estimates range from as low as 5 percent to as high as 20 percent.
ABC, which analysts say is losing about $250 million a year, $150 million of that from "Monday Night Football," might be hard-pressed to swallow another gargantuan NFL fee increase -- even though the program has been the network's top-rated show for the last three seasons.
Ratings for "Monday Night Football" have slipped over the last decade, although viewership has stabilized since 2002 with the hiring of John Madden to join play-by-play announcer Al Michaels.
"I don't think [ABC will] continue to absorb the kind of financial losses that 'Monday Night Football' has sustained," said sports marketing consultant Neal Pilson, a former head of CBS Sports.
"The economics of the television marketplace are not strong enough to support the cost of the NFL contract, and it doesn't look like it's going to get any better," Pilson said. "This is a marketplace with no set prices, no rate cards. It's what people will pay for the rights to broadcast these games."
The NFL's two other broadcast partners -- Viacom Inc.'s CBS and News Corp.'s Fox Broadcasting Co. -- are happy to have football and willing to renew their rights packages, network sources say, despite the sometimes lopsided economics of football.
Two years ago, News Corp. took a $387 million charge against its earnings for losses on its eight-year, $4.4 billion NFL contract. But that didn't faze media mogul Rupert Murdoch or his Fox network, which pays the league $550 million a year for its package.
Fox has long had a soft spot for the NFL. The upstart network didn't get much respect in the industry until 1994, when it beat out CBS and grabbed the weekend National Football Conference games and playoffs for $395 million a year. The NFL would become Fox's ticket to the big time, bringing new affiliate stations and higher ad revenue.
"Fox built their business on losing money on the NFL," said Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon. "The thought has been that a network isn't really a major network unless it has major sports as part of its programming package."