Disney’s NFL Deal Is Touchdown for CEO Looking to Control Costs
(Bloomberg) -- Walt Disney Co. Chief Executive Officer Bob Chapek entered the latest round of negotiations with the National Football League in a tough spot.
ESPN, the company’s flagship sports network, had lost 15 million cable subscribers since the last contract with the league began in 2014. And, at $2 billion a year, Disney was already spending more than any broadcaster for its Monday night lineup of games -- and twice what some rivals were paying.
At the same time, Disney was investing heavily in online TV services to compete with Netflix Inc. and some of its most profitable businesses, including theme parks and cruises, were hampered by the global pandemic. The company lost almost $3 billion on sales of $65.4 billion last year.
Yet the deal the company announced with the league Thursday allows both Chapek and the NFL to declare victory. The league can point to about $2.7 billion a year it will get from Disney, a 35% bump from the previous contract. The entertainment giant can say it’s getting a lot more football for its money, including two Super Bowls, six more regular season games and a playoff game. The broadcasts will be spread out among ABC, ESPN and the ESPN+ streaming service.
Other media giants saw larger increases in their costs, including Fox Corp., which is paying roughly double -- at about $2 billion annually.
“This is a massive win,” said Daniel Cohen, who negotiates rights deals at Octagon for sports such as Major League Baseball. “The NFL is going to say, ‘We saw a massive increase in the midst of Covid and all that.’ And Disney is going to say, ‘We retained the king of the jungle with the NFL.’”
Chapek, who stepped into the CEO’s spot one year ago, just as the impact of Covid-19 was beginning to spread across the globe, had signaled his willingness to play hardball.
“We’ve had a long relationship with the NFL,” Chapek said on a conference call with investors last month. “If there’s a deal that will be accretive to shareholder value, we will certainly entertain that and look at that. But our first filter will be to say whether it makes sense for shareholder value going forward.”
The executive, who has worked in Disney’s film, consumer-product and theme-park divisions but hadn’t run one of its TV networks, has parted with businesses that don’t work anymore, such as Radio Disney in the U.S. and the Disney Channel in the U.K.
That left some observers speculating Disney might just walk away from professional football too.
Neal Pilson, who was president of CBS Sports when the network lost an NFL bidding war to Fox three decades ago, thinks ESPN would have suffered greatly without the sport.
“We lost more money losing football than if we had kept football,” Pilson said of his CBS days. “That was the same message spread throughout the industry.”
But Disney went into the negotiations knowing that it needed to get more for its money. That included possibly picking up the Sunday Ticket package, which DirecTV has for another two years.
Jimmy Pitaro, chairman of ESPN and sports content, said on a conference call with reporters that he is still potentially interested in the Sunday Ticket games, which weren’t part of the current round of deals.
The agreement announced Thursday will also help ABC, which has struggled to attract male viewers since Disney moved “Monday Night Football” to ESPN in 2006. That was the year the network last broadcast a Super Bowl. Now, the company will be able to simulcast two new Saturday games on ABC and ESPN as part of the new deal, and potentially the Super Bowls as well.
ESPN+, meanwhile, will get a new international game on Sunday morning, and the company will have the right to ask for better matchups later in the season on Monday nights if the teams originally scheduled aren’t expected to draw many viewers.
Disney is still paying the most of any broadcaster -- and doing so at a time when the viewership of live sports is sliding. But the end of the Covid-19 pandemic should bring a rebound, Pitaro said.
“We were on a very good trajectory pre-pandemic,” he said in the briefing. “We’re excited to get back to some normalcy with next season.”
Rita Ferro, the head of Disney’s global advertising business, said the company is trying to adapt its broadcast operations as streaming changes the way people watch. Disney had great success, she said, running the NFL draft on both ABC and ESPN for the past two years.
“They are unique broadcasts -- they bring in different audiences,” Ferro said in an interview before the deal was announced. “And that’s the goal, to extend the audience reach. It’s how do we make the most out of our partners and our platforms.”
©2021 Bloomberg L.P.