How Much NFL Is Too Much?

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0:43Congratulations! You made the Varsity Podcast. My name is John Miranda and I'm Alex's sports correspondent in the host of this podcast. Today, Mike Florio comes back to the pod. Florio, of course, founded Pro Football Talk, which is a must-read for anyone that does business with the NFL, and we're going to go deep in the biggest issues facing the league these days. But before I get to Mike Florio, today is Wednesday, April 8th, and here's what I'm watching. In my private email this week, I broke a story about pending layoffs coming to ESPN. Around 30 company employees are going to be laid off in the next few weeks.

1:19That's a far cry from the 300 layoffs ESPN had in 2020 or the 400 reductions that it made from 2015 to 2017. But it's still a significant story because of what it says about the overall business. You see, legacy media has to balance its traditional needs, like linear TV channels, with investments in new platforms. And now all too often, that means layoffs. CBS and CNN, they both endured recent layoffs. I wouldn't be surprised if Disney has its own series of layoffs in the coming months. Direct-to-consumer services bring in a fraction of the revenue of linear TV. And linear TV, well, cord cutting is still a thing.

2:00Then there's ESPN's YouTube TV battle from last fall. ESPN, if you remember, went dark on YouTube TV for 15 days. That was an extraordinarily long time. The longest ESPN has ever been dark in this type of dispute. Disney has said that it lost more than$100 million in that dispute, and I have sources that say the layoffs are partly in response to that. Now, business is still pretty good for ESPN. It has seen viewership increases across most of its sports telecasts, and its digital and social numbers are the envy of most. Still, the coming layoffs underscore ESPN's challenges as it attempts to follow Jimmy Batara's vision of making its own streamer the new hub of sports.

2:46The truth is ESPN has no choice but to continue to invest in live sports, particularly football. Unlike the old days, however, it has minimal room for error. Okay, now let's get to Mike Florio. Mike Florio, last time I saw you, we were on Radio Row together, so thank you for joining us, Adidas sweatshirt and all. Oh, it's hoodie with the zip. I've got a full collection of adidas merchandise michael holly and i every friday on pft live we wear competing adidas fits we're trying to get an adidas sponsorship i keep telling him we're giving it away for free why would they pay us we're wearing it anyway did run dmc ever get paid for the song my adidas come on dude like sometimes you just have to do it i think well I mean, they were a walking Adidas commercial, but they did it for free.

3:43I am happy to have you on today because there is no bigger story in media and maybe in business than the NFL media rights that are out right now. From the NFL perspective, actually not from the NFL perspective, from your perspective, how do you see this playing out? Where are we right now in terms of the NFL media rights? That's a really broad, open-ended question. I love it. Look, we've communicated about this. It goes back to May of 2024 when we first saw that the NBA was going to get a new slate of deals and they were going to get a ridiculous increase. My first thought was the NFL is going to want more.

4:31Now, I didn't think the NFL would find a way to get more on existing contracts, but they've used that change of control clause in the CBS deal with the Skydance Paramount merger to go back to the table with CBS to try to get them to pay, what, 50 % more,$2.1 billion per year, reportedly up to$3 billion per year on the existing years that remain, 26 through 29, before the NFL can pull the plug, which we know they will. That was my other takeaway. the moment that we saw what the NBA was going to get on its new deals, the NFL is absolutely going to scrap the final four years of the current long-term broadcast deals.

5:07I mean, I thought from the moment they announced them, they're going to rip them up because the market always goes up. It always improves. It always gets better. And that NBA deal to me was the first big domino that has led us to where we are. So you throw in the ability to go back to the table with CBS, which they've done. And your reporting on this has been excellent. I rely on it pretty much more than anyone else's because you've been at the cutting edge of this. I'm not just sucking up because I'm on your show. It's true. And I think they're just going to start moving, right? CBS to Fox to NBC to ESPN and ABC, which has one extra year, 2030, until that plug can be pulled.

5:47And they're going to get as much as they can. They're going to hold back as much inventory as possible and create more inventory through 18 games to slice off these pieces that will go to streamers four games here, two games there, one game there, whatever, and they're going to maximize beyond any number that we ever would have dreamed possible. And it's going to look ridiculous when we hear the numbers, but it's all going to keep rolling because nothing pulls a lot of the audience together like NFL football. You know, I've noticed, though, Mike, just a unique shift in what's happening. If you talk to traditional broadcast executives, say a month ago, maybe two months ago, they all wanted to do these deals.

6:32They wanted to essentially buy the NFL out of the out clause that they have in their contracts. And they wanted certainty that they could go to 2033, 2034 for, who knows, a couple hundred million dollars. And then all of a sudden, the numbers that started getting floated, you know, and this is all part of the negotiation. You're starting to hear from those same executives, well, maybe we'll just go to 2029 and then we'll renegotiate then and we'll wait for five years. What I've noticed is that it's more than a negotiating stance. Now regulators are getting involved. The FCC is looking into it.

7:14The Department of Justice is being asked to look into, not the deal, of course, but the NFL's antitrust exemption. You've been doing this for a long time as well. How serious do you take some of this noise that's happening in D.C. right now? Well, I don't know how serious to take it because it's never been used before. We've never seen a moment where as the NFL is trying to maximize its TV revenue, and hell, I'm a capitalist, I got no problem with the NFL trying to get as much money as it can for the product that it brings to the table, but we've never seen pushback like this where sabers are being rattled over the antitrust exemption.

7:57And John, we could go all the way back to the first time the NFL sold a package of games to a cable network. It was TNT or TBS back in the 80s, and then ESPN got involved. Remember, they had a split package at one point. But the entire antitrust exemption comes from the Sports Broadcasting Act of 1961. And the trade-off was these games are available on three-letter over-the-air networks. There's a public interest that's at play here. So we're going to wave the magic wand. We're going to exempt the NFL from the same legal requirements that apply to everyone else. Every other business is required to have its competing businesses engage in fair competition.

8:37You can't pool anything, whether it's labor. Now the NFL gets its labor and a trust exemption from a multi-employer bargaining unit through the NFLPA, so that's covered. But as it relates to the revenue side, the ability to go out there and sell its games in a block and not have it fracture into a bunch of Notre Dame packages, although there's only one or two Notre Dame-level packages, and then the others end up being Division III schools, potentially, if that would happen. But the moment they crossed the Rubicon into selling to cable, that's when this should have been an issue. And I know the NFL at least has somewhere on its radar screen and has had on its radar screen the possibility of the exemption never applies any time you're selling rights to something someone has to pay to watch.

9:27cable, satellite, and now streaming. And I think streaming has become the critical mass. And if and when one of the network deals with CBS, Fox, NBC, and sort of ABC, we're seeing a lot of the Monday night games now on ABC, but if one of those ends up on a streamer, then that's when we could see the federal government try to test this. But no one's ever sued the NFL over it. anybody that wants to continue to do business with the NFL is never going to sue the NFL over it. But I think the argument's been out there for nearly 40 years that the instant they sold a package to cable is the instant they gave up their broadcast antitrust exemption.

10:11Does the NFL need that antitrust exemption anymore? I mean, when that antitrust exemption started back in 1961, the NFL was teeny. And that exemption helped a franchise stay in Green Bay, Wisconsin, for goodness sakes, and possibly even Jacksonville and some small markets there. Now the NFL is all powerful. And if you talk to some of the network executives, it is the small station, the small local station in maybe in Green Bay or the small local station in little rural towns that people depend on for news and weather and just general alerts, I suppose. Does the NFL need that antitrust exemption anymore?

11:02And you make a great point about the small stations. That's one way the NFL has staved off any fight on the antitrust exemption side for all the games that are available only on a paid platform, they always make them available over the air still through one of the local three-letter network affiliates in Green Bay in whatever market the two teams involved are playing in. But I think it would be catastrophic if the NFL didn't have the antitrust exemption at this point. Now, you could frame the issue the way the Wall Street Journal did. The NFL should have to prove why it deserves it. But the practical consequence, I think of getting rid of it.

11:41The NFL would potentially fracture in the, the NFL would potentially fracture. Are you there? Yeah, real quick. Who owns a wall street journal? Well, exactly. Yeah. Rupert Murdoch. news or Rupert Murdoch. Right. No, and it's a point you made. And I mean, there was already a sense, as you noted, that the fingerprints of Rupert Murdoch were on this push from the likes of Brandon Carr and the different politicians who've been questioning the antitrust exemption, then comes the Wall Street Journal, which doesn't even include a disclaimer at the bottom that the Wall Street Journal is owned by the guy that owns Fox.

12:18I mean, disclaimers have kind of gone out the window generally in this day and age, I think. But the point is this. If the antitrust exemption goes away, think about what happens. The Cowboys sell their rights to the highest bidder. The Jaguars, all due respect to the Jaguars fans out there are going to say this is another reason why you hate the Jaguars, but let's pick a team, any team that would have far less attractive rights. If they're all selling the rights to their home games independently in competition, you will have widely and wildly varying revenue streams. And I'm not so sure, and I'm no antitrust law expert, but I don't think they could just still maintain this agreement.

13:01we're going to share it all. The Cowboys are going to go grab their$2 billion a year. The Jaguars are going to go get their$20 million a year, and we're going to throw it into a pot and cut it up 32 ways. I don't think that solves the antitrust problem if you do that. So if we get to a point where they are getting different revenues and they can't share them, that's going to completely blow up the whole process. Because in a salary cap system, if you've got a huge disparity between what the teams are making, the cap numbers, the maximum and the minimum, cut more into the profit margins of the teams that are making less.

13:36So it becomes a major problem for the NFL. And I see it playing out if it ever would happen. You're going to end up having multiple different leagues. You're going to have a league full of the teams everybody wants to watch and a league full of the teams that are the Washington Generals to the Harlem Globetrotters. I think that will happen if this ever occurs. And I think the NFL is smart enough to do everything it can to keep that in a trust exemption in place for as long as possible. That sounds like college where you have the Big Ten and the SEC and then a lot of other schools. And you have certain schools like Notre Dame that you said that sort of go on its own.

14:16one of the things about the NFL that I find so unique is that it has so much leverage over these networks, and it always has. And one of the things that I don't have an answer to, certainly the leverage hasn't changed. Certainly the NFL still controls most of the leverage in these negotiations. However, the specter of what's happening in Washington, as as do I want to say mitigated their leverage? Like, how are you? How do you view that? Are the broadcasters sort of have they picked up anything with this in terms of negotiating? It's to be determined. And here's the reality. The current administration is there, we think, for another two and a half years.

14:59And then it's going to change what will happen. Let's say they start some sort of an investigation enforcement action on the question of whether or not the NFL has forfeited its broadcast antitrust exemption if it sells one of the current packages that are on broadcast TV to a streamer because the broadcast network said we're just not going to pay$3 billion a year or whatever the NFL wants. What happens when there's a new administration? I mean, that's the problem with litigation generally. It lasts so long and we see administrations change every four years or every eight years, it may be that the NFL has quiet confidence that it can weather that storm and it can find a way to solve the problem before it ever becomes something that would blow up for the NFL.

15:47Well, one of the, Mike, about this issue, especially in D.C., is that it's a very voter-friendly issue. And it doesn't seem to be a Democrat issue or a liberal issue. It appears to be something that, you know, it's a very voter-friendly one that all sides are on. And it would explain the tenuous relationship the NFL currently has, tiptoeing around the guy who's in charge, because at the end of the day, the guy who's in charge is going to be one who's calling the shots on this, presumably. So if they can find a way to strike a truce with him, name a stadium in D.C. after him, whatever it may take, but we see what seems to be an effort to avoid upsetting the guy who's ultimately got to sign off on whatever would happen.

16:42So I think that the NFL uses its money for lobbyists. It uses its money for strategists. It's going to have a plan for dealing with this if it ever happens. And it could be the NFL just is shrugging at all of this as noise, an effort to exact some leverage. And maybe they'll factor that in to their final ask from the broadcast networks. But, yeah, I think the NFL believes that, you know, if push comes to shove, it's got the money, it's got the power, and it's got the time to wait out whoever it may be that's trying to get the NFL in a very difficult position.

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18:41humming ourselves. Listen to Becoming You wherever you get your podcasts. All right, let me go to you with a quick prediction. Kickoff is in September. Will the NFL have new deals, new media deals by opening kickoff? It sure seems like they want to. Will they with CBS? It seems like that's coming. It's just a matter of time. The question is, is there enough time to go through the various networks and get it done by then? I'll be surprised if all of them are done because the weeks go by quickly. The months are going to fly by. People take vacations. It's going to be hard to get everything buttoned up.

19:25And I think part of this too, John, the NFL wants to be able to sell these packages with a certain date as to when it will move from 17 games with one buy to 18 games with likely two buys and a 20-weekend package of games where you have all those different primetime windows that can be filled. That has greater value. And I know the NFL has been frustrated by the fact that there's been so much turmoil within the NFL Players Association that they haven't been able to get something done. with the NFLPA on 18 games. One source, when I was at the league meetings in Arizona last week, characterized the NFL's business as constipated because of the turmoil with the NFLPA.

20:12And I think they're going to give J.C. Tretter, the new executive director, a grace period, but not much of one. They're going to swoop in with an offer that is calculated to get him to accept it quickly because I believe, and the only way to convince him to do it, is to say, this is the offer right now, and I think they want, if they can, they want to start with an 18-game season by 2027. That's why there isn't a date for the Super Bowl to be played in Atlanta in February of 2028. Under the current schedule, there's no uncertainty. February 13, 28 is the day of the game. Peter O 'Reilly, NFL Executive VP, acknowledged last week that having no date provides for potential scheduling flexibility.

20:52Now, I also tried to downplay it, but it's easy. If we're 17 with one by, February 13 is the day of the game. There's no reason to not lock it in and get the convention center locked up and the hotel rooms reserved. They want 18 games if they can get it by 2027. And I think they're going to move quickly. And the argument's going to be, if you agree to it, effective 2027, here's what you get. If you make us wait until 28, you get less. 29, you get less. And if it goes all the way to a lockout in 2031, which we know will happen, when the players eventually cry, uncle, this is what you're going to get.

21:26So it's in your interest to agree to this now, because we all know that at the end of the day, one side is willing to shut down the sport for a year to get what it wants. The other side, the players aren't willing to miss a game check to get what they want. It's an imbalance that the NFL, I think, plans to take full advantage of to try to get this deal done by next year so that they can have 18 games as soon as 27. Thanks for bringing this up, because this is an issue that I'm totally fascinated by, because it seemed like there was a kumbaya moment a couple of years ago where the NFL wanted it.

22:02The Players Association wasn't going to fight it. Of course, the Players Association had a ton of issues. Now they have a new head over there, and this is now a new bargaining chip. And you don't think the NFL necessarily has to give up anything to force through the 18 game. You think it's just the matter of, look, we're going to get it eventually, either in 2031 or now. You may as well do it now. And I remember when Lloyd Howell, the former executive director, said in an interview, I think with The Athletic, on the prospect of an 18th game, who doesn't want more football? Me included. That's not exactly the way to draw the line in the sand necessary to maximize your leverage on behalf of your constituency.

22:47and see. But look, one of the things that I think people regard as a given is that, hey, this creates a real opportunity for the players to get all kinds of stuff. Now, I had one person on the league side say to me, you know what? The players shouldn't worry about getting anything but money. It should be a financial transaction and nothing more. What are you going to give us financially to agree to an 18th game? And John, I think that the NFL may, and I don't know what they're going to do. But I thought it was stunning when the commissioner was speaking to reporters May of 2025 at the league meetings that always happen March, May, October, December.

23:26He pivoted without a question into the fact that the owners had a long discussion that morning about the salary cap. Is the salary cap working? He mentioned increased expenses. And I think what the league may try to do is tell the union we want to change this formula dramatically. We don't want to give you 50-50 anymore. Splitting the revenue is fine until the revenue, the uncapped potential to split revenue goes through the roof. At some point, people are going to say, why are we paying this much money? So they could posture to try to reduce that percentage dramatically and maybe offer fixed numbers for what the salary cap will be over the next 10 years, regardless of how much revenue goes up.

24:11And then you can just give on that point. So you create a negotiating point that you give up on, and that becomes what the players gain to get 18 games, even though they ultimately aren't gaining anything. They're just staving off the loss of their 50-50 split. I just have a weird feeling that that's going to be part of how the NFL tries to do this. yeah it's uh that Super Bowl that that you reference the Atlanta Super Bowl um is it it sounds like you are relatively certain that there's going to be an 18 game season and they're that's how they're going to schedule that or no no no no no I'm not relative no I'm not certain it's going to happen I am certain that they haven't scheduled it because they're holding out the hope of an 18 game season I know that for a fact we reported the day after the Super Bowl they want 27 to have 18 games i don't know whether or not they're going to get there i think they're going to move quickly with jc treader to try to get there but that's why we don't have a date and the moment that they say it's february 13 is the moment they've given up on 18 games for 2027 it'll be february 20 if they have 18 games and two buys and start labor day weekend it'll be february 27 it'll overshoot president's day weekend if they start the weekend after labor day that's another philosophical question they're going to have to deal with at some point.

25:30They abandoned Labor Day weekend following the 2001 season because they just, they figured not enough people are watching football. They're not home. Well, now, you know, home is wherever the phone is. So they can, they could start Labor Day weekend if they wanted to. But February 13th, February 20th, February 27th, the moment they lock in February 13th, that's when they concede they're not going to get to 18 games. Until that point, they're holding out the hope of getting 18 games by 2027. other. And I've also been fascinated. Every single league is trying to do these tentpole events. And the NFL, now they own Christmas.

26:08Took it away from the NBA. Thanksgiving, of course, you know, with the Lions and the Cowboys at the one and the four o 'clock Eastern, you know, works. Now they're talking about Thanksgiving Eve, the Wednesday before Thanksgiving for a game there. Number one, what's the likelihood of that actually happening moving forward? And two, what else is out there? Is there like a Halloween game? Is there a Veterans Day Monday that you sort of haven't during the day? What else is out there during the NFL season that they could turn into an event like that? Now, the thing we have to remember, the broadcast antitrust exemption comes with a limitation.

26:53They can't play games on Friday night or Saturdays from the second weekend in September until the second weekend in December. But that leaves the other five days free and clear and technically Friday up until six o 'clock Eastern, which is why they play the Black Friday game in the afternoon. It's in that window where they're still prevented from playing Friday night games. Hey, I'm disappointed in myself that I didn't see Thanksgiving Eve coming. It's a perfect night. People are typically home. they've traveled they're relaxing you put the game on and you get 30 million viewers that way I think they're constantly looking for more and more ways to cram cheese into the pizza you know there was a time where every new pizza commercial would come up with some new way to put cheese in it I think that's what the NFL is doing where else in this pizza I'm serious where else in this pizza can we stick more cheese?

27:48And I think the Wednesday, I don't think they accidentally leaked that to their new broadcast media partner that they own 10 % of ESPN. I don't think that was an accident. That was just getting it out there so people can get comfortable with it. So we're not shocked when they announce it in May or whenever the schedule comes out. So I think that's going to happen. The question is, yeah, what else can they do? And I'm surprised it's taking this long for them to get to the point where Tuesdays and Wednesdays are a reality. I remember the year that Christmas was going to land on a Wednesday, the NFL had said, Hans Schroeder had said, we're not going to play on Christmas when it lands on a Tuesday and Wednesday.