NFL lockout next year a strong possibility
But major TV networks won't hurt financially, says analyst
NEW YORK -- The new NFL season is just kicking off, but one Wall Street observer is already thinking about 2011.
An NFL work stoppage next year is "a strong possibility," but the major TV networks with NFL program rights, and the entertainment companies that own them, won't hurt financially if next season doesn't take place, Barclays Capital analyst Anthony DiClemente said in a report Thursday.
"While a locked-out season may be a major disappointment to fans everywhere, we believe media shareholders need not share in the disappointment," he said, arguing that networks bear few financial risks in case of a player lockout.
"Rights fees will have no profit and loss (statement) impact, profits from advertising could be replaced by higher-margin substitute programming, and NFL broadcast revenues do not represent a substantial portion of the networks' profits to begin with."
DiClemente's report came ahead of Thursday night's NFL season opener between Super Bowl champions New Orleans Saints and the Minnesota Vikings and a day after NFL Players Association chief DeMaurice Smith had warned of the possibility of an NFL work stoppage in March.
A potential lockout is an issue for media giants, such as Walt Disney, which carries football on ABC and ESPN, CBS Corp., Fox owner News Corp. and NBC Universal's NBC. Collectively, they pay the NFL more than $3 billion in annual rights fees under the terms of eight-year rights deals that will need to be renegotiated in 2013 or, in the case of Disney, in 2014, according to DiClemente.
The annual rights fees are recoverable by the networks in future years in the event of a lockout, even though near-term free cash flow would be reduced until they are recouped, he highlighted.
Advertisers will also keep a close eye on a possible lockout as blue-chip marketers from Anheuser-Busch to Sprint have committed an estimated $2.5 billion for spots on regular-season NFL broadcasts. Network chiefs have said they expect record ad revenue for the regular season and playoffs this season. According to Kantar Media, NFL broadcasts last year brought in $2.76 billion in ad revenue.
- Prince Takes Over the 'Arsenio Hall Show,' Debuts New Funky Song
- A Train, a Trestle and 60 Seconds to Escape: How 'Midnight Rider' Victim Sarah Jones Lost Her Life
- 'Divergent' Star Shailene Woodley: The Next Jennifer Lawrence?
- 'Noah' Banned in Several Middle Eastern Countries
- Lindsay Lohan's OWN Series Gets First Official Trailer (Video)
- MOST SHARED
- MOST POPULAR
- William Guarnere Dead: 'Band Of Brothers' Vet Dies At 90
- "Spike In My Veins": Talking with Korn's Jonathan Davis, A Chat with Skaters' Michael Ian Cummings and a Break of Reality Exclusive
- The MovieFilm Podcast: Remembering Ghostbusters, Plus Aaron Paul on Need For Speed
- 'Looking' Season 1 Is Refreshing Despite Some Characterization Flaws