Why NBC Sports Will Lose the Premier League in 2016

Last week during “upfronts,” those giant press conferences where television networks pimp their new programming to advertisers, ESPN president John Skipper was asked whether his network would bid on the next Premier League contract, which would begin in 2016.

“We’ll be interested in it,” Skipper told the press. “We love the English Premier League.”

This quote came just days after Major League Soccer struck a new 8-year rights deal with ESPN and Fox Sports worth an estimated $75 million per year — nearly a four-fold increase over MLS’ previous rights deals, which were worth just $19 million per year. (MLS’ Spanish-language deal with Univision also increased from $8 million per year to $15 million per year.)

That’s not all ESPN and Fox Sports have been teaming up to buy lately. In the last four years, ESPN and Fox Sports have agreed to spend $1.2 billion per year for Major League Baseball, $200 million per year for Big 12 college sports, and $200 million per year for Pac-12 college sports. This alliance seems likely to spend big to take the Premier League away from NBC after 2016.

Why? NBC is owned by Comcast, and ESPN cannot allow Comcast to build a competitive sports network because that would give Comcast leverage over ESPN in carriage fee negotiations.

Right now, ESPN commands a carriage fee of $5.40 per month. That money flows directly from your cable bill to the network. ESPN2 also collects a carriage fee of $0.68 per month. Those numbers are expected to increase by 6.5% sometime this summer. With those two channels in more than 97.3 million homes, ESPN stands to collect more than $7.5 billion in carriage fees over the next 12 months.

This is how ESPN is able to spend $1.9 billion per year on the rights to NFL Monday Night Football and more than $1.3 billion per year on a wide variety of college sports. It is also how, according to Forbes, ESPN has attained an estimated valuation of $50.8 billion. That makes ESPN roughly 36% of the value of The Walt Disney Company.

Because of this, ESPN must ward off any threats to its revenue stream — such as a major cable TV carrier owning a sports network that might ever be considered on par with ESPN. Some have even suggested that ESPN encouraged Fox to create a national sports channel in order to prevent NBCSN from attaining any sort of dominance. After all, any cable package that includes Fox Sports 1 also includes ESPN and ESPN2. You can watch Fox Sports 1 all day, and ESPN will still get its share of your cable bill.

NBCSN, meanwhile, collects only $0.31 per month from each of the 78 million homes it reaches. That brings in only $290 million. Thus, NBC’s strategy with NBCSN has been to focus on sports with smaller, more dedicated fan bases and keep spending low to allow the channel to pay for itself. NBCSN can afford to pay $83.3 million per year for the Premier League and $200 million per year on the National Hockey League, but anything more than that would require some help from the parent company.

Comcast could do it, of course. The cable TV behemoth posted net incomes of $1.87 billion in the last quarter and a $1.91 billion the previous quarter. Plus, NBC just signed a $7.75 billion deal to keep the Olympics through 2032, as well as a 10-year, $4.2 billion deal with NASCAR. Money for those two deals, though, comes from sources other than NBCSN. In order for stave off what would likely be a $200-million-per-year bid from ESPN and Fox for the Premier League, Comcast would have to change course and allow NBCSN to spend more than it makes — and if Comcast really wants to do that, it might as well go big and spend $2 billion per year to take the NBA away from ESPN in 2016.

NBC has attracted lots of praise and impressive ratings for its coverage of the Premier League this season, but unless Comcast loosens its purse strings on NBCSN, the network will have a difficult time keeping the U.S. TV rights to the Premier League when that TV deal is up for renewal next year. ESPN will do whatever it takes to keep Comcast from gaining any leverage in future carriage fee talks, and that includes leaving NBCSN with hockey, auto racing, and very little else.

But on the bright side, we’ll get to hear Ian Darke call Premier League games again in a few years.

Dave Warner writes about the rising cost of sports TV rights at What You Pay For Sports.

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