Analyst: Olympics Price Tag May Bode Well for Broadcasters' NFL Renewals
The "muted inflation" of NBCUniversal's deal through 2020 suggests "that rights fee inflation for major professional sports doesn’t have to be crippling," says Lazard's Barton Crockett.
NEW YORK - NBCUniversal's $4.38 billion Olympics deal may bode well for broadcasters looking for possible NFL deal renewals in 2013 without breaking the bank, according to one analyst.
"A bear fear for major entertainment stocks is that costs for the most popular American sport, the NFL, will balloon in the next deal renewal," Lazard Capital Markets analyst Barton Crockett said in a report Wednesday.
The current deal, which splits games between CBS, Fox, NBC and ESPN, runs from 2006 to 2013, at a combined cost of $24.8 billion, or $3.1 billion per year, he said.
"Bears assume that since entertainment companies are using the NFL to drive up retransmission and affiliate fees, the NFL will understand its leverage and demand all the upside be returned to the league," Crockett explained. "However, the disciplined bidding and low inflation for the Olympics deal argues that it doesn’t necessarily have to work out this way."
The new Olympics deal works out to an average annual cost increase of about 2.2 percent for the Winter Games and 2.3 percent for the Summer Games, according to the analyst. That is "well below the high-single-digit growth in industry affiliate fees and high- single to double-digit growth in ad [prices]," Crockett said.
The "muted inflation" of NBCUniversal's Olympics fees through 2020 suggests "that rights fee inflation for major professional sports doesn’t have to be crippling," Crockett added.
One advantage for the incumbents will be that none of them needs to expand their NFL exposure. "The risk to this discipline is if Time Warner tries to step up with an aggressive bid," Crockett said, but added: "We see this risk as limited."
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