TV networks including ESPN are bracing for a drop in advertising revenue for football games in the coming season, which could drag down sales growth for sports broadcasts overall, advertising and television executives say.
A decline in ratings for National Football League games last season has hurt sales this year, along with a saturated market for college games and spending cuts by drug and auto companies, said the executives, who asked not to be identified discussing private talks. While a few deals have yet to close, some of the biggest sponsors have indicated they’ll be spending less.
While the networks have raised prices for spots during NFL games next season, total ad revenue for the broadcasts is trending a few percentage points below a year ago, the executives said. NFL ad spending totaled $3.5 billion last year, according to Standard Media Index, a researcher.
That’s a blow to media giants that rely on sports for a growing share of their business. Sports were long thought to be a safe haven for TV networks because viewers savored the live viewing experience and were more likely to sit through commercials, but the erosion of the NFL’s audience last season has thrown that assumption into question. ESPN, Fox, NBC, CBS and the NFL Network all carry pro football.
“If advertisers were buying football because they believe it’s always going to grow, what happened this past season proves football is not immune to decline,” said Brian Wieser, an analyst with Pivotal Research.
Still, many of the most-watched shows on TV last year were sports, which accounted for 31 percent of national TV advertising in 2016, up from 22 percent in 2011, according to Kantar Media. ESPN has been a major contributor to Walt Disney Co.’s profit, while 21st Century Fox Inc., parent of the Fox network, has invested heavily in sports. Virtually all of the largest media companies, including CBS Corp., NBC owner Comcast Corp. and Time Warner Inc., have costly long-term contracts to air sports.
Not all of the news is bad. Sponsor interest in daytime talk shows, news and late-night comedy is picking up some slack. Rising rates in those areas allowed CBS to post higher upfront ad sales for the new season. Disney said ad sales at its ABC network as well as cable outlets such as Freeform grew at a high single-digit rate. Those didn’t include sports.
And some advertisers, including women’s brands, are showing more interest in sports, according to Adam Schwartz, an ad buyer with Horizon Media in New York.
But pro football is the most-watched programming in the U.S. and secures the largest ad deals. TV viewership of the NFL fell 8 percent last year, according to Nielsen data, hurt by poor matchups and competition from the presidential election, along with negative publicity surrounding head concussions and player protests during the national anthem.
NFL deals with the four main broadcast networks are mostly wrapped up. NBC typically sets the market with “Sunday Night Football,” the most-watched regularly scheduled prime-time program.
Some ad buyers say NBC accepted smaller rate increases this year to take share from CBS and Fox, where sales declined as a result. All of the broadcasters have complained privately or publicly about the rising number of games and ways to advertise in the NFL. The league created a new Thursday night series a few years ago; this year 18 Thursday games will be available on TV, with 11 streamed at Amazon.com Inc., according to the NFL.
Against that backdrop, auto companies are spending less as sales retreat from record levels, while drug companies pull back due to new generic medicines, according to buyers and TV executives.
Pfizer Inc.’s Viagra hasn’t aired a national TV ad since May 15, and sat out the 2017-18 upfront market, according to a report in Advertising Age. Viagra has been one of the 40 biggest advertisers for the NFL, but will soon face competition from a generic version.
“The bigger pharmaceutical companies are pulling out, and it’s having an impact,” said Schwartz, who works with Geico, Capital One Financial Corp. and Sprint Corp.
The NFL has crammed popular teams into nationally televised night games early in the season, hoping to lift ratings. The New England Patriots, defending champions, play the first regular season game on Thursday, Sept. 7, while the Dallas Cowboys play the first Sunday night game against division rivals the New York Giants. The Green Bay Packers play the Sunday night game in week two.
Aside from the NFL, college football is the biggest sport up for sale at the moment. College ratings were steady last year, but sports networks are offering more games, such as Fox’s Big Ten package, just as advertisers grow more wary. The four broadcast networks -- CBS, NBC, ABC and Fox -- all air college football in the fall, as do more than a dozen cable networks, from ESPN and Fox Sports 1 to the Pac-12 Network.
Competition has forced ESPN, the market leader, to take a more conciliatory approach with its college coverage. With Fox eager to steal viewers and ad sales, ESPN has accepted less than the rate increase it demanded last year, according to people familiar with the matter.
ESPN still has a ways to go in closing deals, and the network is still on course to meet its targets for next season, in part by relying on growth for other broadcasts such as National Basketball Association games, a person familiar with the matter said. A shortfall would mean another headache for parent Disney; the network has lost millions of paying subscribers and has cut staff, including high-profile on-air personalities.
“ESPN is at a crossroads,” Michael Nathanson, an analyst at MoffettNathanson LLC, wrote in a recent report. The audience for ESPN’s “Monday Night Football” shrank 12 percent last season.
ESPN broadcasts only one NFL game a week and has to split some inventory with local affiliates, so it’s not as affected by a drop in prices for the league’s games as others are, the person said. The network expects its college-football broadcasts to draw interest from advertisers buying spots during the season, the person said.
The Disney network is trying to shore up its ad business by selling more spots for viewing that occurs outside the home, such as in bars or hotels. Disney plans to introduce a standalone ESPN streaming service this year.
“They’ve lost a ton of money in subscriber fees and they are trying to get that money back,” Schwartz said. “It’s not just them. The entire marketplace is gravitating toward out of home and ESPN is the leader.”
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