Ellison’s Playbook & NFL’s $100B Bonanza

0:04Congratulations! You made the varsity of the podcast. My name is John Arand and I am Puck's sports correspondent and host of this pod. And today, my old friend Michael Nathanson joins us. Michael, of course, is one of the founders of Moffitt Nathanson, a boutique equity research company and one of the smartest minds in the media space. Michael and I, by the way, are teaming up for In the Arena, a sports media conference that's going to be held in New York on October 16th. And when I say teaming up, I mean Puck and Moffitt Nathan Center producing the event. We're going to have a stacked lineup on October 16th.

0:42We have Adam Silver, Fanatics Michael Rubin, Redbird Capitals Jerry Cardinal, Fox Sports' Eric Shanks, Liberty's Derek Chang. There's a ton of what we call boldface names that are going to be speaking at this event. It's our first collab, as the kids say, and I really am pretty excited about this one. Before I get to Michael, today is Sunday, September 28th, and here's what I'm watching. It's all about the NFL and the league's next media rights deal. Last week, Roger Goodell told CNBC's Alex Sherman that the league could start negotiating new media deals next year. The key word is could, nothing definitive.

1:20So that got me to call around to see how those comments played in media circles. And you know what? It wasn't a story. Nobody was surprised. In fact, it's the legacy media companies that are the ones agitating to open these deals earlier. As one executive told me, investors need certainty. And figuring out a deal that would lock in NFL rights essentially for a decade certainly would provide that kind of certainty. Now, for the networks, they know they're going to pay more. A lot more. The NFL signed$110 billion worth of deals just five years ago. A crazy amount. But it only took a couple of years for those deals to look like sweetheart deals for the TV networks.

2:04The thing is that traditional media companies know that life without the NFL would cripple their business. That's what happened to CBS in the late 90s, it happened to NBC in the early 2000s, and none of the current players want to face a prospect of living without the NFL. And most importantly, the NFL knows that. So from the league standpoint, it wants to add another package, maybe of international games, that it could sell to a streamer like Netflix or YouTube. Now, one way to create that package is to add an 18th game to its regular season schedule. The only problem, the NFL needs buy-in from the Players Association for that to happen, and that is hardly a certainty, at least not in the short term.

2:50The NFL has vacillated between whether it wanted to work out a deal with the Players Association first and then do a media deal, or maybe they do a media deal first and then do the PA deal. In any event, it looks now like the league wants to focus on media, and if it doesn't expand to 18 games, the league still could create a new package out of some of the Sunday afternoon games that are on Fox and CBS. Think of the types of games that only go to, say, 10 % of the country. That would allow it to create a new package that would sell for, who knows, a billion dollars or so. The long and short of it is that everyone seems to want to go early on this deal.

3:26The NFL, the media companies, the streamers, there are a lot of interested parties and the deal is going to get done. My guess, and this is only a guess, is that agreements will be in place before the start of the 2026 season. So I wouldn't take that to the bank, but that's my guess. Now, let's get to Michael Nathanson. Michael, it's always great to have you on the pod. Since the last time you've come on the pod, there's been a lot of movement among legacy media companies that I haven't found surprising necessarily, but I have noticed. So you have, you know, the Ellison's coming in, David Ellison coming in and taking over Paramount.

4:09And then all of a sudden you have Paramount digging deep into its pockets and paying a lot of money for the UFC. They are about to announce a deal with Zufa Boxing to bring boxing over. A couple of months ago, USGA, the U.S. Golf Association, was up with its right to include the men's and women's U.S. Open. That's sticking with NBC and Golf Channel. Versant actually getting involved with that one. WWE, they're PLEs, you know, the WrestleMania and big events. Heading over to ESPN. I thought 2025, we would see these streaming companies be a lot more aggressive in terms of getting some of these rights.

4:56rights but what we've seen is is the legacy media companies actually paying for rights that are not the nfl nba or you know or college football what do you make of this trend is this a real trend this is a blip what do you make of this good morning john good afternoon it's a great question you know robert covers the day in day outs of media but i sit back and i kind of can pontificate and on this one, I had been flabbergasted. It started with that UFC deal. I know the people at UFC don't really love our firm. That's fine. But I don't understand how Paramount makes that deal to pay double what ESPN was paying.

5:37In the prioritization of what Paramount needs to fix, getting to UFC was not kind of on my list of things they needed to do. So blown away by that deal. But in this country at this point in time, You never know what was the altering unspoken motive to get a deal done, right? Like, was there any kind of wink, wink, nod, nod, or we will take care of friends of the family? So that deal on paper, me, not the analyst Robert, me, it was a massive win for UFC and kind of scratched the head for Paramount. Especially if Paramount wants to buy Warners. I'm like, guys, leave some powder dry. I'm like, look at all the stuff that Warners has that can help you in sports.

6:19Like you really need to get the UFC. So that was kind of nuts. You know, ESPN, again, Robert Carpazone, but like. Actually, can I, let me interrupt you for a quick second. Let's, let's stick with that UFC for a second and, and, and Paramount. The way I viewed it is this is a message that David Ellison, Jeff Schell, David Burson are sending to the sports industry of we're open for business. Does that matter? It is a lot of money, but it's certainly like a real message of like, okay, look, we are open and we're going to pay. Yeah, no, but I think that gets reflected in actual auctions, right? Like, hey, they're still at the table.

6:58Like, these guys are serious because they're still at the table. So you don't need to make that payment. Exactly. Yeah. It's just to me surprising that was the first move out of the box, you know, it really was. First move out of the box. because we had heard if they had to do the NCAA Big Ten deal again for college football, they probably would not have done that. But this is a new regime, a new day. And I think they're really focused, rightly so, on sports, streaming, and studio. And that's their three core drivers. But I would have thought we'd get a little more discipline. But then according to Mark Shapiro, there are multiple bidders at the table who wanted this package.

7:39We'll never know, but that's what they say. On WWE, ESPN constantly amazes me. I would have thought, look, they had been showing really amazing discipline. They walked away from UFC in theory. What's the incremental benefit of WWE? I don't know, but they have enough sports there, you would think, that they would call time out and just see how their new product launches go. And then when it comes to Fox, like the guys who are still tied to legacy, Fox is, you know, I know they're launching, they've launched a streaming service, but I still think the ad market is telling you, the ratings are telling you, the affiliates are telling you that if you have must have sports, you get paid.

8:27And I think if you look at the upfront or look what's happening in Scatter, having these large event-ized sports programming will get you paid. So I think in the legacy world, it's all we have left, John. It really is. It's all we have left. So that makes a ton of sense to me why legacy land, you're going to hold on to whatever you can for as long as you can. You have to. Yeah. And you know what I didn't even bring up is, you know, the NFL or Roger Goodell saying that it's possible for that they might go next year to to open up the outs are in 2020 after the 2029, 2030 season. but is it possible that they could start next year?

9:14And so when I made some calls on that, it's not really being driven as much by Roger Goodell as it is by these legacy media companies that we want certainty. We know that we're still four years out, but if we can make that eight years out, then if we can get that certainty, then we're all in. You know what's funny? Like our investors, this was like 10 years ago, we're worrying about the last NFL deal. you know, which was five years ahead, right? Like, so people on Wall Street are always worrying about like how much longer can these rights stay in legacy land, right? Because the moment they go, you worry about retransmission consent, you worry about the failure fee structure, but it's funny.

9:58I would do the same thing. You know, you look at ratings, they remain up, you know, three weeks in, look at advertising trends, incredibly strong. Like why wouldn't you, this is the most important thing you have to do. You have to re-sign and keep these rights. And you have to do it before, you know, the Amazons, Netflixes, and YouTubes, or even Apple start to get even more aggressive at this point in time. And that's the whole point of the networks wanting to get in early is because if you get in early, you're renewing a package. The NFL can't then take that package from you. So then you see that package through for the next four years, but you get a couple more years and you give up some rights so that the NFL can, you know, create a new package to sell to the streamers and keep them happy.

10:44But it's a fascinating time because the NFL, as you said, is every media company that wants to be in business has to have some sort of tentacle into the NFL. Right. And to your point about hanging on to the package, you know, we've talked about you and I in the future, what the packages could look like. And we thought maybe they'll do an A package, a B package, and not do it by conference, but they'll do it by quality of game, right? You'll have more Chiefs and Bills games in the A package. But if you have the broadcasters, you're like, look, I want the same package. I want NFC. I want AFC. That's where my station footprint is.

11:22Let's not mess up a good thing. So I kind of wonder, do they try to get there before Goodell and Hans recut the packages into something different? Well, it is funny because the packages right now are the exact same packages that they sold in 1960, pretty much. You know, we have a bunch of games. We're going to have overlap on Sunday afternoon. I think they started Monday Night Football in the early 70s, you know, and OK, we'll strip out a couple of primetime games. And when you think of the streamers, like those are packages that are made for TV. hey, when you think of the streamers, there is an entirely new set of packaging and a new set of rights that come out to where they could say, you know, we just, we really do only want the Cowboys games or we only want, you know, we'll get the number one pick every week to come over to us or something, or something like that.

12:14Because you heard Netflix say they want to eventize their sports program, right? So make it, make a Lamar Jackson versus you pick the quarterback and make it a good quarterback every single week, people are going to care about that. Mahomes, Jackson, you know, I think you're right, John. But if I'm the league, if I'm the broadcasters, I feel like my future is somewhat predictable if I keep these rights, right? I know what court cleaning looks like. I know what my viewership looks like and ad numbers keep going up. That's predictable. I don't want to go into a chaotic, more chaotic world if I lose these rights.

12:49Well, so the current NFL contracts go through 2032, right? too. Right. So if they add, let's say another four years to them for 10 years, you're into the NFL for the next 10 years. And who knows what the media world looks like, you know, 10 years from now, who knows? I mean, it's radically different from when it was 10 years ago. I mean, that's a way to keep investors happy. Like we're set with the biggest programming, the most popular programming in media for the next 10 years. Yeah, exactly. That's, it's all I can count on, right? It's the only thing I know for sure is that, right? So that's why that makes sense in linear land.

13:32In streaming land, look, you can dream. You can dream a dream. Until you know what happens, you can dream a dream. And to your point about the Ellisons, they put up a sign saying, look, this is a different Paramount. We are here, pay attention to us, and we're going to do things differently, right? And Paramount for years, the studio, Had been bleeding in terms of like their non-investment in premium content on the studio side. So this is like a wake-up call to everyone in Hollywood, basically. Yeah, and I talk about this all the time. CBS Sports, going back to when they hired Sean McManus back in the late 90s, I think it was like 96 they hired him.

14:12They maintained, they never swooped in and stole rights. They maintain relationships. They've had the masters going back to like 1950 or so. They've had the NFL going way back, a four-year spurt where they didn't have them. All of their rights are long-term. And now it's like, okay, yeah, we're in with the UFC. Yeah, we're in with Zufa. Yeah, we're going to subsume the Warner Brothers discovery. If you're David Burson, your head must be spinning right now with the proverbial kid in a candy store. I agree with you. And if they do acquire Warners, I mean, that's something we've talked about for a long time.

14:50We need consolidation here, but that'd be a huge win on the sports side for all that content to be in one place. Think about that, right? They would rival ESPN in terms of maybe, well, not on college football, but they would have pretty much the second place sports portfolio, I would say to you at this point in time. Yeah. John, do you think that's right, Bobby, or do you think Fox and NBC would challenge that? That Turner plus CBS is number two in terms of sports rights? It all depends on where Fox goes, frankly. I mean, Fox right now is one broadcast network. It's a streaming service. It's essentially like a simulcast of the broadcast network.

15:34And then a cable channel that is being ravaged by cord cutting like every other cable channel that's out there. So if Warner Brothers goes over to Paramount as Paramount wants, and it looks like it's a, I would say it's likely to happen based on what I've been hearing and reading on it. Yeah, I would think that, you know, you have Disney, ESPN, and then a number two certainly would, it's worthy of a conversation. I will say this too, the, uh, Rick Cordella would come out and say, look at what we have, look at all the sports that we have on, on Peacock. I was thinking that in the back of my head, I'm like, well, let's hear from the NBC folks, because if they get football, they get baseball, they will have NBA premium football, premier league golf and, you know, and baseball, right.

16:25You threw that on me and I, I went with it. Yeah. That's why I asked you, cause I needed a timeout, John, cause I thought to myself, that may have been too hot of a take. And I think the NBC folks would push back and say, look what we have in primetime with the NBA, right? Which way they have the NBA or the NHL. That's kind of obvious, right? So it's like they have the NBA and the game of the week. It is kind of obvious, but would you rather have the NBA at the price that NBC is paying, or would you rather have the NHL at the price that ESPN is paying? Yeah. Well, I'm like the only hockey fan in America.

17:01So, you know, but yeah, so, so, so let's come back to that. My hot take, I'll put a pin in it. Well, I know we'll hear from our friends at NBC and Fox, but that was, that was too quick of a take. I need, I need to, to do the work. So let me, let me hold off. I mean, let me, let me, let me bring that back a bit. So we'll see. All right. Yeah. I have them all bunched together. So before like Greg Hughes and, uh, and, uh, Nate smelts and everybody starts calling me on that then. But let me go back before we take a break to my original question. Based on those deals and the activity that we're seeing with legacy media, this seems more than a blip.

17:41It seems like a kind of a 10-year plan of relevance that they're on right now. Yes. If you would have asked myself or dare I speak for Robert Fishman, we would have said, I think we've written, that these mid-tier sports are going to have a hard time getting monetized going forward because logically the 10 polls would go up in value, which we agree. logically the more niche sports would basically find their own path and and things would start to grow from a lower base but the middle in all things in media the middle is where you see the weakness right and i would have thought that'd be the case here but no this time it's different sports is different uh i just think it's the one thing people could bank on in a world of more and more cord cutting and more time shifting, right?

18:33Well, because we have seen, like I'm still shocked that one of the power five conferences in college football, college football is a second only to the NFL in terms of viewership. The Pac-12 basically imploded and had to sort of, you know, rejigger itself on the move. You have F1 gets pretty good numbers for ESPN and it can't find a legacy media company that's going to pay what it wants. And so it has to go to streaming MLS, you know, a couple of years ago, the same thing. So we had seen this sort of trend there. And I've always said my job is to figure out where that line is between the haves and the have nots.

19:12And like, you know, is hockey going to fall on the far side of that line? Is baseball? I don't think so in either case. But UFC, WWE, USGA, which basically is two big tournaments, men's and women's US Opens, they both fell on the right side of that line. Yeah, I think as we said before, credit goes to the guys who run the auction, right? People who ran the auction did a great job getting paid, both Disney and at a paramount. But it surprised us as analysts. It definitely did. Let me take a quick break, come back, and I want to talk about we're 30 days in, basically, with ESPN streaming app and Fox One.

19:58Get your take on that.

20:09All right, so ESPN launched ESPN, the app, its streaming app at the end of August, so about 30 days ago. Fox One launched on the same day. What are your takeaways from a month in? Anything surprise you? Has it been going the way that you expected? Well, the buzz, which we all specialize in the buzz, that feels like it's pretty good. We have no numbers yet, but kind of the commentary feels like, hey, I feel like it's going well. I know Antenna had some early numbers that the signups were strong in the first couple of days. No, we're waiting for earnings. But, you know, one of the things, John, that I think a lot about is, you know, I have YouTube TV.

20:58I've talked about that forever. I'm a big advocate of it. But as more like trauma hits the bundle and the trauma being, we think about what happened with Colbert and Kimmel. if there's just and look at what's happening with versant spinning out of comcast if there's less investment in linear programming not sports but everything else around sports at some point even i and i've had that conversation with my family won't pay a hundred dollars a month for 12 months for the bundle as much as i'm a bundle fan so i i think the use case for both espn and fox will go up as their competitors disinvest in linear content, right?

21:47So like what happens long-term, I know YouTube is fine with NBCU, but if they do drop NBCU and my golf channel becomes just an app I got to peek off, you're just giving me more reason away from sports to not consider content when the NFL season comes to an end, John. So I think, and this is like something that I never thought I'd say this because I always like the bundle, but look, I can't watch news. There's just too much anger in this country. You're cutting Culberry. You're going to cut Kimmel, all the best entertainment content, sitting and streaming. I'm there for sport. I just thought I never would.

22:23I always said, who would take ESPN over the top if you have the bundle? But I just think we're getting to a point where there's such a limited use case for non-sports content. I think all these companies who are reactive or non-reactive, but all these companies that are willingly not putting the best content on linear, you know, and things like late night was always some of that linear, you know, you'd watch local news and you watch late night. But if you could start shutting down day parts, you're going to see probably more core kind than people expected. You know, and so I think the use case long return for these products probably is better than I would have thought even six months ago.

23:05You know, that's, that's what I'm starting to consider because I'm paying a hundred bucks for the best product, YouTube TV. And literally there are nights when there's nothing, there's nothing on a watch, you know? Yeah. I, uh, I did not expect to talk about Jimmy Kimmel on this, but my one takeaway is that I live in, in Washington, DC, uh, the local ABC affiliate is owned by Sinclair. And so nobody in DC was able to see Jimmy Kimmel live unless unless you had a hulu subscription and could see it that way however the uh numbers on youtube uh which i don't know off the top of my head are crazy and what what my worry would be if i'm a legacy media company is that you're teaching people who are paying a lot of money like you said,$100 a month in order to have a cable bundle that, oh, I can go to YouTube essentially for free for a broadband subscription.

24:07And I'd be able to see it within probably five minutes of it airing on ABC. I agree. What stops a Colbert plus Jimmy Fallon plus Jimmy Kimball from coming up with their own YouTube product? We talked forever about YouTube, how it's bigger than Netflix. I think it's the most valuable company in media. Probably worth$500 billion of standalone company,$60 billion of revenue. What stops all of us from going to YouTube at night? And for people like Sinclair, Nextdoor, and I love Perry Sook, you're damaging your own product by limiting what people want to watch, right? So, hey, it's great because you want to get a deal done, but guess what?

24:47In five years' time, maybe no one's going to be watching local affiliates because we've all pivoted. And what stops ABC from saying, okay, guys, you want to shut me down 25 % of the country? Fine. We're going to put Jimmy Kimmel or whatever on Hulu, day and date. So I just think like, you guys are playing with fire. I really think I'm playing with fire. And like this country is so divided, but half the country, they want to watch Jimmy Kimmel. And who are you to tell half the country that Jimmy Kimmel can't be watched in Seattle and Washington DC, right? So I just think the longer they play this game, the more it gives people reason to explore alternative ways.

25:23And my God, you know, Tucker Carlson and Bill O 'Reilly, they've moved off of Fox news, maybe found an audience pretty quickly on YouTube and look at Mr. Beast and look at Joe Rogan. So it's not like the idea has not been proven. So I think it's a very dangerous time for these guys to start being so reactive because, you know, it's not like the business is a hundred million homes growing 5 % a year. It's 65 million homes losing 5 million a year you know what i do find interesting about that is that the the television viewership for say a matt pat mcafee is is not that great but but it works on on youtube he gets a lot of youtube viewers um the barstool uh numbers early numbers anyway on fs1 are terribly low and uh but but they are an undeniable force uh digitally so it's going to be interesting to me so it's it's tough to take these digital first guys and put them on linear TV.

26:23It's going to be interesting to see taking the linear TV guys and putting them on digital and seeing if you can migrate that way. When you look at the use trends on YouTube, they've always had younger viewers, but the latest surge in YouTube on TV set viewing, not YouTube TV, but YouTube on connected TVs, it's coming from older viewers, John. It's not like, yeah, you've always had the McAfee's and the Barstool fans in that audience, but now you're getting people who are older, probably cord users. I'm like, guys, you're playing with freaking fire. And you're finding how easy it is just to click on a video and see it.

27:04And YouTube shares revenues with you. So it's not like, you know, there's not a model there. YouTube, I mean, Mr. Beast has made a fortune on YouTube, right? Dude Perfect is a real business built on YouTube. So again, what stops Jimmy Kimmel, Fallon, and Colbert from forming their own company and do it themselves? That's what I would do when their contracts come to an end. It goes, do it that way, right? And each night rotate like it's your turn to do it, you know? But then on the other side of the coin, you have ESPN's app, which is, you know, you can cut the record and you can subscribe to ESPN's app.

27:40It's still priced pretty high, in my opinion, for somebody to do that. But they also are employing a strategy that's based on the old time cable bundle that you and I grew up with. What did WWE call their, was it Wrestlepalooza or WWEpalooza, their first quote unquote pay-per-view on the ESPN app. If you're a Comcast subscriber, you don't have access to this. And Comcast subscribers were revolting. And if you a YouTube TV subscriber, you don't have free access to this. And so it's a, you know, the, it's almost a sense of like, we have a foot in the direct to consumer world, but we still are really dependent on getting this, almost making it a bigger bundle and, and, and getting, you know, the, the ESPN, ESPN app as part of a multi-channel TV service.