How the league could reach lofty revenue goal

By Daniel Kaplan, Staff Writer

Sports Business Journal – Published January 28, 2013, Page 1

Thirty-five months ago, NFL Commissioner Roger Goodell set a heady goal for team owners: triple the league’s then nearly $8.5 billion of revenue during the next 18 years. It was an aggressive pitch, requiring $917 million of new revenue annually.

Now, three years later, despite the league’s success and record-breaking popularity, the NFL is off the pace necessary to reach the target, with about $1 billion of revenue added since then.

The league stands by the $25-billion-by-2027 goal, though with $9.5 billion of revenue in 2012, sources said, the NFL now must average more than $1 billion annually of new revenue over the next 15 years.

“The financial landscape has been a pretty tough one, it has affected most companies in America. The [2011] CBA [process] set us back,” said Eric Grubman, executive vice president of NFL ventures and business operations. “I think we are doing OK … our fans are still having a tough time [financially].”

The revenue target, introduced during the 2010 annual owners meeting in Orlando, did not come from projecting existing NFL business out to 2027. Instead, Grubman explained, the league intended the figure to convey what scale the NFL needed in order to compete as a global entertainment brand. And compete not just against other sports leagues, such as the English Premier League, but consumer product companies such as Procter & Gamble, Walt Disney and Apple.

“It is aggressive,” Grubman admitted of the $25 billion aspiration, “and I see no reason to change that goal. That is keeping with the DNA of every club we have. There is no one that sets easy goals in the league and we are not about to.”

Clearly, relying on the old bread-and-butter-sports economics of selling tickets, concessions and parking barely moves the needle in a quasi-recessionary environment. Instead, if the NFL is to enjoy 163 percent growth in the next 15 years, it must get even more money out of media, and create new lines of businesses.

“Traditional areas are very tough to grow,” said Jim Steeg, a former NFL and San Diego Chargers executive. “The vast majority of teams over the last five or seven years have remained fairly flat on that multiple.”

The NFL is trying to endow game tickets with more value, adding experiences to the price of premium seats, for example. And the league has succeeded in stemming a growing tide of non-sellouts. But no one is fooling anyone into believing that selling tickets and food gets the NFL very far toward $25 billion.

Mining growth in media

One clear engine for revenue growth is the same as for so many of the past increases: media. The NFL already has some built-in advantages. The new TV contracts in 2014 will generate significantly higher rights fees, while the 2011 CBA not only helped owners keep player costs in check, but secured labor peace through 2021, thereby easing any game-interruption concerns for new and existing partners. New NFL Network distribution deals cut late last year with Cablevision and Time Warner Cable already add to the pie.

But factoring in a few billion dollars more annually from the new TV deals and NFL Network subscription fees, the NFL is still only at the halfway point, or a little more, toward its revenue goal.

The league’s deals with Fox, NBC, CBS and ESPN expire in 2021 or 2022, so the next round of renegotiations should contribute toward the 2027 goal. Unless a major event occurs, like player health and safety dulling the popularity of the game, or an economic or military catastrophe, the NFL seems assured of reaping more in rights fees from traditional outlets on broadcast and cable TV. And the league could always bid out the NFL Network’s package of 13 games, though to do so it would have to weigh what it loses in subscription fees and ad sales, against what might be gained in rights fees. A 13-game Thursday and Saturday package is not sacrosanct, Grubman commented; it could always get bid out to another channel.

The league will need more than that, however, to arrive at the scale Goodell identified as necessary to compete globally against other major entertainment companies.

Clearly in the NFL’s favor is its position as the top-rated entertainment program in a fragmenting media universe. Programmers pay top dollar for shows that capture viewers and are immune from channel surfing and recording devices that skip through ads. Perhaps more than any property on TV, the NFL matches these criteria.

The question then is, seeing as the league likely only gets one more bite at a new broadcast and cable package before 2027, can the NFL begin to capitalize and collect fees for showing its games outside the current platforms?

“Some form of subscription will be out there,” said Tom Spock, a former NFL executive, and co-founder of media consultancy Scalar Media Partners. “This may or may not be the last exclusive for DirecTV.”

DirecTV’s out-of-market package, for which it pays $1 billion annually, expires after 2014. The league could proceed in several directions at that juncture: sell the package to cable companies, a la the other leagues; keep it intact as an exclusive; or even allow some form of selling games directly to fans if the network partners allow it.

Figuring out the future of the DirecTV model underscores that the NFL’s biggest revenue opportunity is cashing in on its tremendous TV popularity, but on a much greater level and through different mediums than today.

“We are cracking the code on how to distribute,” Grubman said. Tablets, laptops, smartphones, each could offer subscriptions services.

Grubman used the phrase “NFL Everywhere” to talk about the possibilities, a turn of the phrase “TV Everywhere,” used by cable companies to describe viewing programming on different devices.

In the past, the broadcasters have largely blocked efforts by the NFL to show games outside traditional mediums. The NFL has proved, Grubman argued, that providing content on different devices doesn’t cannibalize network ratings. NBC’s Sunday night games are streamed on NBCSports.com, for example, and those games are often the highest-rated TV show of the week.

In 2014, the NFL’s deal with Verizon expires, at which point the league can test the mobile market for selling games more widely in that space.

The move to widely sell games and packages on different devices, if it arrives, could also lead to another treasure trove: pressure on Nielsen Media to move away from household TV rating measurements.

“A big potential in revenue will come from a new method and better counting of viewers,” Grubman said. “Our broadcast and cable partners are selling ads based on viewers being counted at home. It undercounts.”

If ESPN and the networks can charge more for ads, then they can afford to pay the NFL even more.

International a question mark

One space that has yet to provide significant revenue is international markets (in fact, during the now defunct NFL Europe days the sector dragged on the league’s bottom line). The league five years ago began playing regular-season games in London, and the city hosts two regular-season games for the first time during the 2013 season.

Longtime observers, however, worry that the league is simply continuing its lengthy, futile efforts outside of America. There are no reliable external estimates for NFL revenue overseas, though the league often talks up growth rates in rights fees.

“I scratch my head why the NFL has struggled so much internationally,” said Frank Vuono, who oversaw the NFL’s merchandise business in the 1990s and now runs the consulting firm 16W Marketing.

And Scalar’s Spock added, “there have been 35 years of really trying hard to make an impact and it is very slow going. There may be some upside there, but it’s not likely to be a major contributing factor.”

The league will try, and not just in London with live games, but selling TV rights in Asia and trying to establish itself on the world stage.

“Roger [Goodell] has a very big mission, and the NFL has a big plan for global expansion,” said David Moross, chairman of private equity firm Falconhead, which has done business with the NFL. “Distribution outside this country is an opportunity.”

There are other obvious areas for revenue growth. Among them:

• Expanding the regular season and the playoffs, which Goodell has so far championed to little success. The players oppose adding games to the regular season, and adding playoff teams has not been well-received in many circles. Grubman insists these are not revenue ideas, and points to the fact that the league even considered shrinking the season by two preseason games, and keeping the regular season at 16, as evidence. Goodell, Grubman added, is motivated not by revenue when it comes to season structure, but to shrink the unappealing preseason.

• A team moving to Los Angeles would create revenue by opening the second-largest market in the country to a team, and presumably subtracting the low revenue market a club relocated from.

There are others with more exotic ideas on how to grow.

• The NFL would profit immensely if it embraced sports gambling, Vuono contended, like the English Premier League. That seems highly unlikely in the conservative NFL, which has vociferously opposed expansion of sports gambling outside Las Vegas.
• Arlen Kantarian, a former NFL executive and top tennis official, said the NFL should create its own apparel and ticketing company, rather than just collect royalties. “They are powerful enough to consider that down the road,” said Kantarian, who operates through his boutique Kantarian Sports Group.
• The NFL could buy another sports league like Major League Soccer, he opined, to run during its offseason.  “They have a lot of legs left,” Kantarian said. “They are probably in the early third quarter of their opportunity to generate revenue.”

The road to $25 billion

Where could the NFL’s growth come from?

By Daniel Kaplan, Staff Writer

Sports Business Journal – Published January 28, 2013, Page 20

Without inside access to the NFL’s books, it’s tough to know exactly how to create a pie chart for the league’s $9.5 billion of revenue in 2012. We do know from the 2011 season that of the year’s nearly $9.4 billion in revenue, $5.5 billion (58.5 percent) came from national money like media, sponsorship and NFL Ventures. That is public because the Green Bay Packers, as the only public NFL team, annually disclose some financial reports. Below is a description of different league business lines and how they are faring.

Ticket sales
Still the bread and butter of most teams’ local business, this revenue has largely been flat for several years for many clubs, if not down. Like other businesses, the NFL has struggled through the financial problems the country has suffered since 2008. While the league has filled most of its stadiums, prices have been restrained, so ticket revenue has been very modest, said the NFL’s Eric Grubman. This area could get a boost with new stadiums in Santa Clara and Minnesota, and would get a big bump if a team relocated from a small market to Los Angeles.

Licensing and merchandise

This segment of business is doing very well, according to Grubman, because of the influx of new partners such as Nike, New Era and VF. “Online merchandising is on fire. Our team stores are on fire,” he said.

Sponsorship
Sponsorship revenue has not dipped in the last few years, which itself is a major accomplishment in a tough economy. The league just sold the quick-service restaurant category to McDonald’s and there may be some opportunities in the new TV contracts, Grubman said, though he declined to elaborate. There also could be more opportunities to sell coveted space on field, including uniform patches.

Stadiums
Stadium building went through a boom in the late 1990s and through much of the first decade of the 21st century. But when the league’s stadium financing plan expired, labor strife doomed any possibility of a quick successor agreement between the union and league. The 2011 CBA allowed for a new stadium plan, and now new projects will come online in Santa Clara, Calif., and Minnesota, with renovations planned at Green Bay, Pittsburgh, Carolina, Buffalo and Miami.

Venture fund
The league two years ago announced plans for a venture capital fund. However, it is more apt to describe the fund today, which has yet to invest, as a private equity fund. The league has switched focus from early-stage startups to more established businesses in which to invest. That moves it away from the province of the venture capital world and into the private equity stage. The league will not be taking control stakes, however.

Media
The jump in new media money in 2014 is no secret, though it is staggered so the initial years will not see a major jump. How the league handles distribution through alternate platforms, like mobile and tablet, could provide the key for the league reaching its $25 billion revenue goal. NFL Network and RedZone also look to be key in getting the league to the revenue target. Grubman talked about new stats products that the league can sell. Tom Spock, a media consultant and former league executive, agreed: “There are data streams they can monetize in gaming, fantasy.”

By Daniel Kaplan, Staff Writer

Sports Business Journal – Published January 28, 2013, Page 23

The NFL has long been knocked for its failure to export its brand overseas anywhere near to the height of the sport’s popularity back home.

But while it is certainly open for debate whether international markets will deliver the revenue the league hopes, foreign lands may still soon play an important role for America’s top league: a test lab for different forms of media distribution.

“If we find out it really works internationally, that is something we could import back into the United States under the right set of circumstances,” said Eric Grubman, executive vice president of NFL ventures and business operations. “There are more and more markets in which we have laboratories.”

Grubman is particularly enthused about NFL Game Pass, an overseas-only offering for $199 annually that allows consumers to stream games to their mobile devices, tablets, laptops and PCs. Currently there are tens of thousands of subscribers, he said, disclosing for the first time a rough figure from the league for this product’s reach. He sees no reason the figure cannot soon grow to more than 1 million.

U.S. broadcast contract restrictions and the league’s Verizon sponsorship prevent a Game Pass or similar product from being offered stateside. However, it is clearly on the league’s radar, though at the moment just for growing the international marketplace.

“We could do a cousin of Game Pass overseas on YouTube, or Netflix,” Grubman said, adding he was just thinking out loud and not disclosing impending deals.

Several sports have turned to YouTube for international distribution, though the video site’s sports offerings are still limited.

The true test will come with the U.S. broadcasters that pay billions of dollars for their NFL rights. Grubman contends that the league has proved that alternate forms of distribution have not hurt broadcast ratings.

For now, though, overseas experiments will have to stay there.

“Technology is running ahead of the rights issue,” said Tom Spock, a former NFL executive, and co-founder of sports media consultancy Scalar Media Partners.

When the DirecTV deal expires in 2014, however, along with the Verizon partnership, the league could then sell out-of-market games at the least via streaming, if it so chooses that path.

Predicted former league and team executive Jim Steeg: “That day is coming.”

Refs, bounties have yet to hit NFL’s business, but image of gold-standard league, commish have been tarnished

By Daniel Kaplan, Staff Writer

Sports Business Journal – Published October 1, 2012, Page 1

In the mid-1980s, when lawsuits from Oakland Raiders owner Al Davis against the NFL dominated league headlines, then-NFL executive Jim Steeg remembers being worried that football’s popularity could suffer as a result. Longtime league operations guru Bill Granholm counseled him, Steeg recounted last week: “As long as we line up 11 on offense and 11 on defense,” Granholm would say, “everything will be fine.”

Those remarks seem prophetic even today.

Despite the public outcry over replacement referees, open calls for Commissioner Roger Goodell’s resignation and predictions of a tarnished NFL brand, none of those issues hurt the league’s economics ahead of the regular officials reaching a deal to return to the field late last week.

“Even the best referees blow calls,” said Tom Spock, a former NFL executive vice president who led negotiations with the referees union in the 1990s. “How are TV ratings? How is attendance?”

As Spock well knows, the league’s popularity by almost any measure — TV ratings, Internet traffic, fantasy football participation or social media mentions — remains strong. In fact, by some measures, the controversy of the replacement referees served to stoke interest in the game: An East Coast midnight showing of “SportsCenter” after the disputed touchdown in last week’s now-infamous “Monday Night Football” game drew a 5.2 rating and the most viewers ever for the show. And the disputed game quickly seeped through the mainstream media. Even the president chimed in.

But is all news good news?

“It’s like negative branding: The more we see it happening, it reflects poorly on the league itself,” said Mike Paul, a crisis PR expert. “This is about branding, and the more we have a negative brand, meaning that people are thinking negatively about the sport and the game, that is bad for everybody.”

But even Paul, president of MGP & Associates, said it likely would have taken a full season of replacement referees, and no early deal in the subsequent offseason, to get sponsors and advertisers questioning investing with the league for 2013.

Still, conversations with industry executives across business lines last week revealed league partners and longtime supporters shocked to see the NFL, the gold standard in sports, mired in such an ugly issue. Many were asking the same questions tumbling around sports talk radio and across Twitter and Facebook: How could the referee situation have been allowed to go so far, and did the league cave a bit in its negotiations with the referees union, showing some rare vulnerability after the tumult that followed the questionable touchdown in the Monday night game?

Sources close to the negotiations said the Tuesday and Wednesday talks that broke the logjam had already been scheduled before the disputed touchdown call was made, but even Atlanta Falcons owner Arthur Blank told NFL Network last week that the call provided some impetus.

Few expect long-term effect to the NFL image, as the league moved quickly to get the regular refs back on the field. But there could be at least one casualty beside the Green Bay Packers. The reputation of Goodell, who had a long public honeymoon period early in his tenure when he described his role as being the commissioner of football, not just the leader of the owners, could pay a price.

“I don’t think anyone thinks of the commissioner as the custodian of the game,” said one former player who requested anonymity because he now does business in sports. Suggesting further that Goodell failed to stand up to those who hired him to prevent the spectacle that was the replacement refs, the former player added, “This has been the owners’ hunt.”

Few industry veterans are willing to publicly criticize, or even question, Goodell. For all the negative headlines he has endured in recent weeks and months, Goodell presides over the unquestioned powerhouse league of U.S. sports. But there’s no doubt that Goodell’s standing among NFL fans clearly took a hit last week, continuing a rough patch for the commissioner now in his seventh season at the helm.

One former league executive said the ongoing bounty scandal involving the New Orleans Saints, in which the league’s professed evidence seems to have emerged perhaps not as iron clad as initially claimed, combined now with the referee controversy, has damaged Goodell. “He wants to be the commissioner of the NFL,” this executive said. “He is the commissioner of the owners.”

In remarks to reporters last week, Goodell confirmed that extracting pension concessions out of the referees was a big demand by the owners and that, in the short term, the league had taken an image hit. “Obviously, this has gotten a lot of attention,” he said of the matter with the referees. “It has not been positive, and it is something you have to fight through and get to the long term — and that is something we have been able to do with an eight-year agreement.”

When Pete Rozelle ran the NFL, Rozelle would not engage in labor talks with the players because he wanted to elevate himself above the internecine struggle, though he would get involved as mediator. That changed under Paul Tagliabue, but Tagliabue’s tight relationship with late union executive director Gene Upshaw mitigated public perceptions that the commissioner only performed the owners’ bidding. With Goodell having been seen in some quarters as placing the integrity of the game at risk while waging a battle for the owners with referees, it could mark another transition in how the league’s commissioner is viewed.

Goodell frequently was the face of the league last year during the bitter lockout of the players, often being the one to take the hits instead of the owners. At the 2011 draft, which fell on a night the league was in court trying to reverse a judge’s order that lifted the lockout, fans loudly booed Goodell’s appearance on stage, leading him to respond that he, too, wanted to see football.

While some of that enmity dissipated when the 2011 season was saved, the league’s constant friction with the NFL Players Association along with the bounty and referee stories appear to have cost Goodell some of that good will. Players now are routinely critical of him on Twitter and through other media, once unheard-of shows of disrespect for the league and its leader. Goodell’s predecessors, of course, never had to deal with the elements of today’s social media age, underscoring that any figure likely would have trouble staying above the fray and enjoying an impartial reputation. Still, there is no telling how quickly Goodell will be able to regain that lost good will given his intense, personal effort in solving the referee crisis.

There is no question that Goodell continues to have strong support among both owners and other industry insiders, and those who know him continue to defend him, contending he will always do what he feels is in the best interests of the sport. John Tatum, who runs sports marketing firm Genesco Sports Enterprises, said the concepts of “commissioner of the owners” and “commissioner of football” are essentially interchangeable titles.

“You can’t really separate the two,” Tatum said, stating that what’s in the best interests of the owners is most commonly also in the best interests of football. “Roger has shown if he has got to do something for the greater good of the sport, he will.”

Sports Business Journal – Published July 30, 2012, Page 20

Robert Kraft got it right. Again.

In London for Wimbledon in June, Kraft, the owner of the New England Patriots and the New England Revolution, was quoted by CNN as saying that he would never invest in an English Premier League team under current economic conditions. “Manchester City won the championship this year and I hear they’re going to lose $156 million. I would rather give that money to charity if I had it. I want every business to stand on its own.”

This would appear to be a rather startling observation, given the glittering list of high-profile investors (including other NFL owners) who have taken controlling interests in EPL clubs. Yet Kraft, one of the NFL’s most powerful and influential figures, who took a moribund football franchise and turned it into the epitome of excellence both on the field and off, knows what he’s talking about.

A little background on the EPL: It is by a wide margin the richest and most popular soccer league in the world, a sport that is by far the world’s most popular. Its domestic TV rights dwarf those of the NFL on a per capita basis — and international rights are enviably large. Six English clubs are among the world’s top dozen in terms of revenue. The EPL attracts the stars of world football, and its trajectory has been admirably steep.

But beneath the surface, the EPL faces significant financial challenges. Specifically, it trails in the three economic underpinnings necessary to ensure the long-term health of any sports league:

• Sufficient revenue sharing among clubs.

• Some form of salary cap.

• An auditable limitation on club debt.

And the heart of the issue lies in the very fact of the incredible, unmatched popularity enjoyed by international football. Soccer is like water — a universal solvent. It reaches everywhere, and touches everything. As a result professional soccer can be thought of as an open system. Clubs playing under the auspices of dozens of different national associations compete with each other in the worldwide market for players, while any team’s popularity and revenue streams are directly correlated with its success on the field of play. Interest is compounded during the regular breaks in the season when players take leave of their clubs to play for their national teams, often against their own club teammates. Consider:

• Kids from anywhere in the world — Brazil, Ghana, Japan, Australia, the U.S. — can, and do, end up playing in England and other European leagues.

• Competition among clubs transcends national and continental boundaries. Even if you win your national league, there are always other champions to take on. Literally hundreds of clubs are in the annual chase to win the European Champions League, the most prestigious club title in the world.

• Top-level soccer is a meritocracy. Poor performance on the field leads to relegation to lower divisions (and much lower revenue), while success leads to promotion and income.

In contrast, American sports like the NFL are closed systems — essentially exhibition leagues where the exact same teams run through the exact same paces year in and year out. Further:

• Their player pool is small, essentially domestic, and self-contained, with no rival employers.

• One of the same 32 teams will always win the Super Bowl.

• There is no “death penalty” for poor performance (i.e. relegation and sharply reduced revenue) — everyone is coming back next year, no matter what.

• The whole operation is tightly controlled by just 32 owners.

The beauty of closed-system sports is that they are much easier to manage as businesses. Critical issues can all be addressed by a fairly small group of people with reasonably well-aligned interests. (Note that the NBA, MLB, and NHL, despite their wider source of players, are so much more economically powerful than their competitors that they can be considered closed as well.)

Top-flight pro soccer, on the other hand, plays out on a worldwide stage that precludes an NFL-style system. National federations vary in terms of wealth, size, and revenue distribution. (In Spain, Barcelona and Real Madrid take home more than half the of all La Liga revenue.) European employment law governs player movement and limits collective bargaining. And wealthy owners who want to compete at the highest level, regardless of cost, are not interested in spending limits.

All of this makes for a dangerous cocktail, with predictable results. Teams overspend wildly in their efforts to compete, and bankruptcies have become increasingly common. Storied names such as Leeds United and Glasgow Rangers have spent themselves into oblivion. Only the very wealthiest clubs — increasingly owned by international industrialists willing to buy championships regardless of cost — can thrive in such an environment. The usual suspects rise to the tops of their domestic leagues year after year.

The European governing body, UEFA, is well aware of these problems and is doing what it can to mitigate them. It has instituted Financial Fair Play rules, essentially mandating that a team spend within its means or risk being banned from playing in the Champions League. But these rules are very difficult to implement and limited in their effect. (Over here, MLS has avoided many of the problems by organizing as a single business entity, but this model may be tough to sustain as the sport’s popularity continues to rise in the U.S.)

As for the EPL, it has done an admirable job of growing revenue, and has transformed itself into a popular, family-friendly entertainment product. It has made significant advances in revenue sharing, and works hard to keep its clubs’ balance sheets stable. But as long as the usual suspects like Manchester United and Arsenal see as their real competition Bayern Munich, AC Milan, and Barcelona, they will have to spend, spend, spend. And no one should blame Robert Kraft for staying out of that game.

Thomas E. Spock (tom@scalarmedia.com), a former NFL and NBC executive, is a founding partner of Scalar Media.

In a seismic event whose reverberations will long be felt throughout the sports and TV ecosystem, Dick Ebersol stepped down as Chairman, NBC Sports Group on May 19th.

Roone Arledge’s protégé and spiritual successor, Dick has been an industry giant for decades. As the world has grown smaller, Dick has had a subtle but unmistakable role in the evolution of our national self-perception: he has been personally responsible for shaping how the Olympic Games – the single highest-profile international gathering of any kind –– have been presented in every broadcast since 2000 (and every Summer Games since 1988). He will be followed as head of NBC Sports by Mark Lazarus, a well-known and admired executive; but like his close friend and fellow legend, the late Brandon Tartikoff, Dick is not replaceable.

I first met Dick when he became president of NBC Sports in 1989, and worked with him on and off until I left the company in 1992. I then had the pleasure of sitting across the table from him periodically over the next ten years as part of the NFL’s broadcast rights negotiating team. I have always had the highest regard for Dick, and it’s led me to consider some of the possible aftershocks of his departure.

1. The future of Olympics broadcasting in the US
The timing of Dick’s resignation couldn’t be much worse from NBC’s perspective. In a couple of weeks in Lausanne, Switzerland, the IOC will auction the rights to the 2014 and 2016 Games (and possibly 2018 and 2020 as well). No one is closer to the Olympic hierarchy than Dick, who would have headed the delegation; NBC is now scrambling to figure out how to re-do its pitch. Further, Dick is famous for his hero-centric, compelling-storyline packaging of the Games, sometimes forgoing live coverage of premier events in favor of post-producing an entertaining show to be aired in primetime. Will Mark Lazarus stick with that plan? ESPN, a rival bidder for the Games, has been vocal about its intention to stay with its traditional live-event coverage, which would make for a very different sort of telecast if they ultimately outbid NBC.

And what about GE? NBC’s former owner (and still 49% investor) has helped sweeten NBC’s bid in past years by stepping in as a worldwide Olympic sponsor. Will their appetite diminish with Dick gone? And just how much does new owner Comcast care about the Olympics anyway?

Dick himself just hosted the sponsor preview of the London 2012 Games in Studio 8H at 30 Rock a couple of weeks ago. His passion and excitement burned as brightly as ever. His departure is a huge loss that will color all aspects of those Games, just over one year away.

2. The future of Versus
Versus, the name-challenged Comcast sports cable channel that began life as the Outdoor Life Network, joined the NBC family when Comcast took control of NBC-Universal earlier this year. It was very publicly combined into Dick’s NBC Sports Group, along with Comcast’s Golf Channel and regional sports networks. The highest-profile programming on Versus (other than the Harvard-Yale game) is arguably the NHL, which recently signed a new broadcast agreement with NBC and Versus.
It is an open secret that NBC is (mercifully) preparing to re-brand Versus, perhaps as NBC Sports Net or some such thing. There is a big opportunity here; a new competitor to the ESPN family would be welcome in the industry, and there is room for real growth in Versus’s distribution and monthly subscription fees. (Right now Versus has something like half the sub fees of ESPN2, and maybe 80% of the distribution.) Dick held the reins, and would have been in a position to dictate all aspects of the switch, from naming to logo to programming. Now that responsibility falls to Mark, who with his background in cable was already overseeing Versus.

3. The future of sports programming at NBC
Beyond the Olympics, some of the most creative deals in sports TV have been done by Dick and his team at NBC. Culling Notre Dame football away from the NCAA herd 20 years ago was a masterstroke. Creating “Football Night in America” was another, particularly for a network known for its spectacular lack of ratings success on Sunday nights. And whether you loved or hated the XFL, you had to give NBC credit for trying.

So what does the future hold? What happens to Ken Schanzer, Dick’s right hand for many years? Or to Jon Miller, head of programming, or Gary Zenkel, who runs the Olympics? One thing seems clear: the new bosses at NBC-Universal aren’t in awe of the “star executives” in NBC’s ranks. No one – not Jeff Zucker, not Dick Ebersol – is considered untouchable. Following how new NBC-U CEO Steve Burke manages in the wake of this earthquake will keep the sports world glued to their sets.

Congratulations to CBS Sports on winning the George Wensel Technical Achievement Award for its 3D coverage of the US Open tennis championships at the 32nd Annual Sports Emmy Awards Monday night.  Panasonic assisted CBS with production costs for the event and was a sponsor of both the 2D and 3D broadcasts as well as the US Open itself.  Scalar Media helped coordinate this complex multi-party arrangement, working with Panasonic, CBS, DirecTV, and the USTA on the execution of the final product.  Led by Ken Aagaard of CBS, the list of honorees included both Eisuke Tsuyuzaki and Jeff Cove of Panasonic, and Frank Hawkins, a partner at Scalar Media.

I have been watching with great interest the progress of Discovery’s new cable channel co-venture with Oprah Winfrey, OWN. For those of you who somehow missed the fanfare around the launch in January, Oprah and Discovery teamed up to convert what had been their moderately unsuccessful (although fully distributed to some 80 million subscribers) Discovery Health Network. While the early ratings returns for OWN were stellar, as could be expected given the pre-launch hype, ratings have recently settled in at a more terrestrial level. In fact, the New York Times reported in a Monday (February 28^th) business section article headlined “Oprah’s New Channel Struggles to Pull In the Viewers” that the ratings were less than Discovery Health’s ratings. Clearly, this was not the idea.

In all fairness, noted the Times, Oprah hasn’t really begun to fight. Her syndicated show doesn’t end until later this year, at which time Oprah will have her own show on OWN three times a week, which (as we all know, and I say this without any irony) is a guaranteed eyeball magnet. Things are bound to get better, ratings wise, but Oprah’s quote in the article caught my eye: “What everyone told me about the cable business is the way you do cable is, you start with a couple of shows, people are used to repeats.” Hmm. She continues: “Oprah viewers were not!” Ahah!

Interesting technical analysis by Oprah, but let me throw in a couple of observations that may be helpful to her in future interviews. But before I get to that, I have to wonder whether Oprah feels suckered into the cable business. Or was she just given the standard line on launching cable television channels that no longer applies (or doesn’t apply in this particular instance).

First: she’s got it right that the traditional route to cable success is low programming volume with high repeats at launch and for the first few years. But one of the reasons this works is that a cable channel historically launched with a small number of subscribers and grew their subscribership through affiliations over some period of time. That means you have an ever growing viewership pool to check in on your limited programming. It’s not new programming, but it’s new to them.

When Oprah says her audience doesn’t like repeats, she’s only three quarters right: nobody likes repeats. But if you’re a channel growing from 10 million subs to 80 million subs over, say, seven years, your subscribers are growing by an average of 10 million new subs (potential viewers) per year. OWN will not be adding viewers this way; viewers initially attracted to the channel will soon tire of the repeats.

Second, hubris comes with a downside. Oprah is the most successful woman in television, entertainment, media, business, and probably the most successful women in the world in lots of categories. All channels launch with great expectations, but Oprah’s channel had the curse of Oprah-guaranteed success attached to it. Viewers checked it out and, predictably, shrugged. The quality bar for cable channels is much higher these days than it was during the 1980’s or even the 90’s. With USA Network, TBS and TNT, and HBO delivering broadcast network quality programming (and beyond), new networks face extremely strong competition for viewership.

The good news for Oprah and her channel is that in the long run she and her programmers and strategists will figure it out, get it right, and build a viable cable channel. But it won’t be shot out of a cannon. Very few channels were instantly and brilliantly successful. Fox News wasn’t, nor was Comedy Central, USA Network, Turner, CNN, or syfy. Fox Business News is still struggling.

In cable television, Oprah, patience is not only a virtue, it’s a necessity.

Just saying.

NFL Labor Negotiations. The NFL’s labor negotiations are taking center stage in the media/sports world as the deadline to reach an agreement is quickly approaching (midnight on March 3^rd).  After a brief meeting in Dallas during the Super Bowl, talks stalled on February 10^th after the League walked out of a negotiation session reportedly because they did not like the Union’s opening revenue split offer (50/50 on total revenue… players currently get ~60% of “total football revenue” which is essentially total revenue less approximately $1 billion that is taken off the top by owners for operating expenses.  In 2009, the Union’s take of total revenue worked out to slightly over 50%, so the 50/50 offer represented no real concession… but then again, it was an opening offer). Things got more heated on February 14^th when the League filed an unfair labor practices charge with the National Labor Relations Board in response to the Union’s reported plan/threat to decertify if locked out and thus enable them to turn around and sue owners for unfair labor practices.  The situation was looking bleak until Thursday when both sides announced that they had agreed to federal mediation for the negotiations. Mediation is different from arbitration (which is legally binding), but still is a step in the right direction. Both parties are working with the Federal Mediation and Conciliation Service, who will serve as a middle man and provide objective opinions and guidance, and perhaps most importantly, force the two sides to sit down and engage in sustained negotiations.  The mediation kicked off on Friday and is supposed to go on every day this week and we assume up until the March 3^rd deadline.

In Brief. The Mets are tied up in the aftermath of Bernie Madoff’s Ponzi scheme. Comcast reports strong earnings. President Obama dines with Silicon Valley elite. Hulu CEO Jason Kilar writes a controversial blog post bashing traditional television.  Apple launches a subscription service that has many publishers up in arms. NBA All-Star weekend featured a pretty entertaining dunk contest, won by Blake Griffin. Follow us on Twitter for more.

Super Bowl Week. Football was in the headlines this week as the championship game between the Packers and Steelers approaches. A record 110,000+ fans are expected to attend the game in (surprisingly chilly) Texas on Sunday.  The NFL’s labor strife remained a key topic of conversation as the deadline to reach an agreement is just weeks away. Both sides are scheduled for a negotiating session Saturday night, however by virtually all indications, an agreement is still quite a ways away.  The situation was highlighted in a lengthy article by Peter King in Sports Illustrated this week that is a great read.

NFL in Los Angeles. Also on the NFL front, AEG, one of two parties vying to bring an NFL team back to Los Angeles, announced a naming rights deal with Farmers Insurance for a ($1.2 billion, yet to be built) football stadium in downtown LA.  The deal is valued at $700 million over 30 years.  Many NFL owners spoke out regarding the deal, saying that it was an encouraging sign however cautioned that several major hurdles still exist, the primary one being securing a labor deal. AEG is competing with a Majestic Realty Company, led by LA real estate mogul Ed Roski, in its bid. Roski is proposing a $800 million stadium built on 600 acres in the City of Industry, about 30 miles east of Hollywood. Interestingly, Roski and AEG were partners on the development of the Staples Center many years ago. Both parties are hoping to have a stadium in place for the 2015/16 season with the goal of also hosting the Super Bowl that year.

iPad Newspaper. NewsCorp and Apple finally launched their long-awaited iPad Newspaper called “The Daily.” It is pretty much what one would expect (articles, news tickers, photos, social media integration, etc.) and costs $0.19 per day. Murdoch noted that it cost $13 million to develop. Many magazine publishing executives are undoubtedly keeping a close eye on The Daily’s progress and reception in the marketplace.

In Brief. Panasonic, Sony, Viacom and News Corp all announced earnings. Comcast and Time Warner signed an online streaming deal. The World Economic Forum wrapped up in Davos.  Follow us on Twitter for more.

Earnings and Shake-ups. Several companies announced earnings last week, starting with huge numbers from Apple on Tuesday.  The company recorded their highest revenue ever in Q1 2011, pulling in $26.7 billion and recording $6 billion in profit. It sold 16.2 million iPhones (a new record, 86 % y-o-y growth), 4.13 million Macs (also a record, 23% y-o-y growth), 7.33 million iPads (3 million more than last quarter), and 19.45 million iPods (a 7% decline y-o-y, which was expected). The stellar results were somewhat overshadowed by sad news the day before that Steve Jobs would be taking another medical leave of absence from the company with COO Tim Cook taking over day to day operations.  We wish Jobs the best for a speedy recovery. Google announced their Q4 2010 results on Thursday, which were also overshadowed by news that CEO Eric Schmidt would be stepping aside to assume the role of Executive Chairman (“focusing externally on deals, partnerships, customers and broader business relationships, government outreach and technology thought leadership”) and that starting April 4^th, Larry Page would become the new CEO. Some speculate that growing tension between the company’s three executives (Schmidt, Page and also co-founder Sergey Brin) was the impetus for the change, while others believe it was always Page’s intent to eventually lead the company (Google hired Schmidt in 2001 under pressure from their venture-capital investors to have an “experienced” CEO at the helm). Google’s Q4 earnings were solid, with $8.44 billion in revenue (26% y-o-y increase) and income of $2.54 billion (compared to $1.97 billion in 2009). Finally, GE also announced earnings on Friday and we got a glimpse of NBCU’s financials in their last quarter under GE ownership. NBCU recorded $4.8 billion revenue and $830 million profit for Q4, up 12% and 38% y-o-y, respectively. This was largely driven by the television businesses with $1.5 billion in cable revenue (up 15% y-o-y) and $1.1 billion in broadcast revenue (up 11% y-o-y).

Comcast/NBCU Deal Approved. The FCC and Justice department approved the Comcast/NBCU deal with a host of conditions. These conditions were generally expected and Comcast has indicated it will accept them. Interestingly, the deal includes an “enforceable voluntary commitment” to net neutrality provisions, even in the event the FCC’s net neutrality rules from December are contested/dismissed in court.

Television Network for Texas. On Wednesday, The University of Texas announced that it had struck a deal with ESPN and IMG College for the creation of a 24-hour cable network to broadcast mostly Texas sports (and also some other college content including arts and music). It is a 20 year, $300 million guaranteed deal, with Texas receiving 82.5% of that $300 million ($247.5 million) and IMG College receiving the remaining $52.5 million. The network is slated to launch this fall with ESPN paying all production costs.

In Brief. Good overview on wireless technology from Engadget. Nintendo is launching its 3-D gaming system 3DS in March. Amazon acquires LOVEFiLM (a European Netflix-type offering). Follow us on Twitter for more.