Disney faces likely tough scrimmage on football
By Michael McCarthy, USA TODAY
NEW YORK — Michael Eisner has had a busy year, fending off a hostile takeover from Comcast, a shareholder rebellion led by ex-directors Roy Disney and Stanley Gold, failed talks to renew the Pixar Animation Studios deal and ongoing uncertainty about contract renewals for the founding Weinstein brothers at Disney's Miramax unit.
Now, the Walt Disney (DIS) CEO will have to strap on his helmet for another bruising negotiation.
This time it will be with NFL Commissioner Paul Tagliabue about the magic kingdom's estimated $1.2 billion annual football contract covering Disney's ABC and ESPN networks.
The key question: Will Disney try to keep — and at what price — ABC's Monday Night Football franchise? MNF is the network's top-rated show with more than 17 million weekly viewers last season.
The NFL's eight-year, $17.6 billion TV rights deals with ABC and ESPN, Viacom's CBS and News Corp.'s Fox expire after the 2005 season. The NFL wants to kick off negotiations with the incumbent networks this fall. The powerful league will be asking for 10% to 15% increases, estimates Dean Bonham, CEO of sports consultancy The Bonham Group.
"The NFL and ABC created the longest-running prime-time entertainment series in television history. As we look to the future and our next set of contracts, we have already had in-depth discussions with ABC and our other network partners," Tagliabue said in a statement.
ABC Sports wants to put off contract negotiations until after this season and won't comment on "speculation," spokesman Mark Mandel says.
Eisner and ABC are facing a dilemma. Roone Arledge revolutionized TV sports with the rollout of MNF in 1970, with announcers Howard Cosell and "Dandy" Don Meredith. Over 34 seasons, MNF cast a halo over ABC. The struggling, fourth-ranked network desperately needs prime-time hits, which MNF still is, despite softer ratings in recent years.
But ABC loses about $150 million on the $550 million annual cost of the MNF package, says analyst David Miller at Sanders Morris Harris in Los Angeles. If Eisner wants to make good on his pledge to restore ABC to profitability in fiscal 2005, dropping MNF would be a good place to start, Miller says.
NBC has succeeded with its "small-ball" formula, dropping the NFL and other pro sports for the Olympics and a basket of low-cost sports programming such as NASCAR auto racing and Arena Football.
Eisner, who was stripped of his chairman's post after Disney's heated annual meeting on March 3, is still under the gun going into the start of Disney's next fiscal year in October. Roy Disney and Gold are considering a proxy fight at Disney's 2005 meeting.
"Eisner is under pressure from shareholders to turn ABC around and make it profitable," Miller says. "It will be tough for Eisner to maintain an expensive sports package when MNF's cumulative ratings are declining."
TV ratings for MNF have fallen from the glory days of 1974, when it generated average ratings of 21.2 and was watched by 23 million viewers per week, according to Nielsen Media Research. But the addition of star announcer John Madden has helped MNF stage a comeback: Ratings grew to 11.7 for the 2003 season, vs. a low of 11.0 in the 2001 season.
One option for Disney would be to bow out of MNF — but keep the $650 million ESPN Sunday night NFL package, which makes money. Dropping MNF would also cure a recurring headache for Eisner: ABC affiliates are still unhappy with the network's arm-twisting for them to chip in to defray the high costs of the current deal.
Walking away would require, however, that Eisner and George Bodenheimer, the president of ABC Sports and ESPN who will help lead NFL talks, be willing to risk that a broadcast rival — such as NBC — will decide to change course and pay the price to take over the MNF franchise.
Despite the losses, MNF has been valuable as a venue on which to tout the rest of ABC's programming to a big audience and as a way to target the hard-to-reach 18- to 34-year-old males advertisers covet.
"Monday Night Football is a great drawing card for ABC. It's almost like a loss leader at a supermarket," says Peter Jankovskis, portfolio manager at OakBrook Investments, which owns 800,000 shares in Disney. "What would they fill the time slot with? And if ABC can't use MNF as a springboard, where can they go?"
By Michael McCarthy, USA TODAY
NEW YORK — Michael Eisner has had a busy year, fending off a hostile takeover from Comcast, a shareholder rebellion led by ex-directors Roy Disney and Stanley Gold, failed talks to renew the Pixar Animation Studios deal and ongoing uncertainty about contract renewals for the founding Weinstein brothers at Disney's Miramax unit.
Now, the Walt Disney (DIS) CEO will have to strap on his helmet for another bruising negotiation.
This time it will be with NFL Commissioner Paul Tagliabue about the magic kingdom's estimated $1.2 billion annual football contract covering Disney's ABC and ESPN networks.
The key question: Will Disney try to keep — and at what price — ABC's Monday Night Football franchise? MNF is the network's top-rated show with more than 17 million weekly viewers last season.
The NFL's eight-year, $17.6 billion TV rights deals with ABC and ESPN, Viacom's CBS and News Corp.'s Fox expire after the 2005 season. The NFL wants to kick off negotiations with the incumbent networks this fall. The powerful league will be asking for 10% to 15% increases, estimates Dean Bonham, CEO of sports consultancy The Bonham Group.
"The NFL and ABC created the longest-running prime-time entertainment series in television history. As we look to the future and our next set of contracts, we have already had in-depth discussions with ABC and our other network partners," Tagliabue said in a statement.
ABC Sports wants to put off contract negotiations until after this season and won't comment on "speculation," spokesman Mark Mandel says.
Eisner and ABC are facing a dilemma. Roone Arledge revolutionized TV sports with the rollout of MNF in 1970, with announcers Howard Cosell and "Dandy" Don Meredith. Over 34 seasons, MNF cast a halo over ABC. The struggling, fourth-ranked network desperately needs prime-time hits, which MNF still is, despite softer ratings in recent years.
But ABC loses about $150 million on the $550 million annual cost of the MNF package, says analyst David Miller at Sanders Morris Harris in Los Angeles. If Eisner wants to make good on his pledge to restore ABC to profitability in fiscal 2005, dropping MNF would be a good place to start, Miller says.
NBC has succeeded with its "small-ball" formula, dropping the NFL and other pro sports for the Olympics and a basket of low-cost sports programming such as NASCAR auto racing and Arena Football.
Eisner, who was stripped of his chairman's post after Disney's heated annual meeting on March 3, is still under the gun going into the start of Disney's next fiscal year in October. Roy Disney and Gold are considering a proxy fight at Disney's 2005 meeting.
"Eisner is under pressure from shareholders to turn ABC around and make it profitable," Miller says. "It will be tough for Eisner to maintain an expensive sports package when MNF's cumulative ratings are declining."
TV ratings for MNF have fallen from the glory days of 1974, when it generated average ratings of 21.2 and was watched by 23 million viewers per week, according to Nielsen Media Research. But the addition of star announcer John Madden has helped MNF stage a comeback: Ratings grew to 11.7 for the 2003 season, vs. a low of 11.0 in the 2001 season.
One option for Disney would be to bow out of MNF — but keep the $650 million ESPN Sunday night NFL package, which makes money. Dropping MNF would also cure a recurring headache for Eisner: ABC affiliates are still unhappy with the network's arm-twisting for them to chip in to defray the high costs of the current deal.
Walking away would require, however, that Eisner and George Bodenheimer, the president of ABC Sports and ESPN who will help lead NFL talks, be willing to risk that a broadcast rival — such as NBC — will decide to change course and pay the price to take over the MNF franchise.
Despite the losses, MNF has been valuable as a venue on which to tout the rest of ABC's programming to a big audience and as a way to target the hard-to-reach 18- to 34-year-old males advertisers covet.
"Monday Night Football is a great drawing card for ABC. It's almost like a loss leader at a supermarket," says Peter Jankovskis, portfolio manager at OakBrook Investments, which owns 800,000 shares in Disney. "What would they fill the time slot with? And if ABC can't use MNF as a springboard, where can they go?"