The NFL’s Cracked Shield

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0:48Congratulations! You made the varsity of the podcast. My name is John Arand and I am Puck's sports correspondent and the host of this pod. And today, my buddy Michael Nathanson rejoins the pod. Michael, of course, is one of the top equity analysts in the whole media business, and this is a perfect time to have him on. That's because the NFL is in the middle of trying to renegotiate its TV deals, a topic that we talk about just about every week. And now, the Department of Justice has opened an investigation into whether too many NFL games are on streaming services. But before we get to Michael Nathanson, today is Sunday, April 12th, and here's what I'm watching.

1:31And yes, you guessed it, I'm focused on Washington, D.C. Can you think of a time when the sports business has ever been more popular on Capitol Hill? It was way back in 2005 when Mark McGuire, Sammy Sosa, Rafael Palmeiro appeared before a House committee. And a decade before that, former Senator John McCain called mixed martial arts executives to D.C. But now the FCC is looking into the migration of the NFL games to streaming services, and the Department of Justice just opened an investigation this past week. At issue is something called the Sports Broadcasting Act, which was enacted in 1961, of course, well before cable TV or streaming.

2:16The law gave the NFL an antitrust exemption that allows it to negotiate league-wide deals with broadcasters. The key here is broadcasters. The more the NFL moves towards streaming, the more it runs afoul of that law. Now, I find this whole issue fascinating. Really, I do. But what's most interesting to me is how two different camps are seeking two different solutions. One, U.S. Senator Mike Lee seemingly wants to cut the Sports Broadcasting Act for professional leagues like the NFL. And then you have someone like Cody Campbell, who was a previous guest on this pod, and he wants it expanded on the college side.

2:58The billion-dollar question is, will Congress be sophisticated enough to fully understand all of these competing interests? Okay, now let's get to Michael Lathanson.

3:35it's going to take money away from entertainment programming. We've talked to other leagues that are sitting in dread because the NFL is potentially going to take so much money out of the market. Just last week, the Department of Justice opened up. It's going to look into the NFL migration of of games going over to streaming. The FCC has looked into it. At just about every sector, there's chaos. It's all coming from these media rights. Where do things stand? John, we've been doing this a long time, you and I. This is a natural evolution of the industry, right? So you've had court cutting over from 100 million homes down to 65 million.

4:26The bulk of what people want to watch live sports and the majority of live sports I want to watch is the NFL. So the programmers must have the NFL. Distributors have to pay for the NFL. There's no other way around it. The only issue is as the NFL costs go up, the amount of money people have to spend on other things goes down. We've been tracking this for a long time. And Robert Fishman and I keep tracking non-sports content spending. and it's been flattened down the past couple of years, right? So where it stands is they're going to want to increase the NBA deal, as you know, showed much higher increase than we all expected.

5:06And in the UFC deal with Paramount, the NFL wants their fair share. They're going to get it out of Paramount soon. I'm going to see what happens when they go back to everyone else and ask for an early renegotiation, right? But they have their claim to get paid. They just do. And it's the detriment of every other content that is not that important to them or not that important to us consumers. So this is an unanswerable question right now in mid-April. But this DOJ and the Sports Broadcasting Act, as you take a look at what's happening in D.C., how much peril does that put in the NFL in terms – the NFL is fine.

5:49there's no peril but just in terms of redoing their deals right now this uh before the uh the september kickoff i think they feel they have the right and to be fair look john they're the best sport in terms of a consumer experience right as a local fan as a red as i started commanders fan a giants fan i know i'll be able to watch my games over the air whenever i want right i know that the The majority of the content I watch is free, I wanted to watch it free over the air. I know that the salary cap and the revenue share has made it a very competitive league where any franchise, large or small, can win a Super Bowl.

6:34I don't think there's much peril here. I think this administration and current state of DC has become so politicized and it's very hard for us analysts to, you know, to not look away, but I've kind of trained myself not to get caught up in these headlines, right? We had Liberation Day a year ago, you know, that caused a lot of us to make mistakes on over fretting, over worrying about what was going to happen. So yeah, these headlines are pretty bad, John. But as an analyst, I have to see these, these stories become new laws. I don't see why you rip up what's actually working for the consumer and for the league and for the fans.

7:18I totally agree with what you're saying. There isn't sometimes people overreact to certain headlines that come out. The one thing about this, though, is that it is being pushed by the Trump administration, but it is a bipartisan issue. And you want to talk about a voter-friendly issue? We're going to make it cheaper. We're going to keep it free for you to watch your favorite NFL teams. And so that's why I hesitate to say this is a nothing burger. I mean, I think it could potentially result into something, no? I don't want to go there yet. I'm just not. It's too early. You're so much smarter than I am on that.

8:08Yes. Well, you know, we all have PTSD about just overreacting to things. I really do. Yeah. Consumers want things cheaper and better. But like you look at the hierarchy of pain points right now. I'm not sure the NFL is kind of at the top of my list of things that are not working in this country. Right. Try flying from New Orleans to New York. It took me five hours two weeks ago to go through TSA. go drive to any gas station to the price of gas if this is how we spend our time in dc trying to solve problems we're making a huge mistake and pick a picking kind of the hierarchy of problems we have to solve so no john i'm not but you know i'm interested in the fact that seems like fox and paramount have an axe to grind here against the nfl right i'm interested in the fact that you're seeing Wall Street Journal op-ed pieces.

9:03We haven't seen Ellison's fingerprints yet. But I worry that in this administration, you know, they're taking care of friends and family. And what I do worry about is that, look, you know, I may be basing my view on a outdated view of, you know, how public policy should be figured out, right? But it seems to me that two of the big broadcasters are going to be really unhappy in the near term if there's massive inflation in sports rights. And that's such a good point because, you know, Rupert Murdoch's Wall Street Journal came out with an editorial saying, hey, they didn't actually call for the getting rid of the Sports Broadcasting Act, but they said that the NFL should be called in to explain why they still need it um uh and then you have senators that are approaching the department of justice about like maybe you should take a look into the you know whether or not the nfl is running afoul of the sports broadcasting act which by by the way to the letter of the law they are and then and they have been since the mid-1980s and when they first sold to what the espn and to turner about way back then And that leads to my next point, though, which is even before the DOJ and even before the FCC, I started to get a sense that these networks that even two or three months ago really wanted to get back in and renegotiate their deals.

10:37because it made if we can get the nfl until the mid 2030s and then we want to do it that they were starting to think maybe it's worth us just waiting until 20 29 2030 to read and then renegotiate the the deals then including cbs which as you pointed out was um they have a change of control clause that the nfl can exercise so that opened that that opens up their their rights right away they don't have to wait till 29 30 but if i'm cbs i'm looking around what other outlet is going to take all those games especially given the sports broadcasting act and everything that's happening in in dc it would be a a a terrible gamble but it might be worth it if you're the ellisons just to say we're going to gamble that you can't find another entity to take these games and if you do, then we have Congress waiting to get you.

11:35I don't know. Someone's got a call. Larry Tish asked for that. You know, he's passed away. But someone has to go back to back in the day and ask the folks who sat out those negotiations and assumed there was no other bidder how it was going to play out. But you're right. Your point is they have the power of D.C. to really push back hard if they lose, if the NFL takes them off for broadcast by the majority. But, you know, John, it's funny because we've talked for over these years. One of my biggest frustrations was that Chiefs Dolphins playoff game that they put on Peacock. You know, I think it was like two years ago.

12:16Do you remember that game? It was freezing cold in Kansas City. It was a Saturday night. I remember it was January. That just seemed like you make me pay for Peacock, right? It's one thing to be an amazon or netflix but i didn't have peacock and as sure as heck was not giving them even the five bucks that month to get a game and i think it goes to so that we talked about which is like you can't be greedy you know like you can't be overtly greedy and i think those kinds of decisions just piss people off and eventually they lose the goodwill of the fan right and that so i hear what you're saying i would not want to well let me stop you right there whose decision was it the nfl's decision to sell it to peacock or was it nbc's decision to buy it for peacock and put it on peacock like who are the fans of both right yeah probably a little bit of both you know it's like i'm i'm i'm upset the nfl because it was a money grab that probably could have found a better solution someplace else right again amazon prime is ubiquitous i'll watch my masters later on it it's great but you know don't jam consumers when i think that's been the lesson consumers are more in charge now than ever before but to your theory i think it'd be crazy these guys need to raise capital they need to raise debt why do you want to roll the dice at paramount and just you know play you know kind of a game of chicken here i don't know why you would do it you know Well, that leads to my next question.

13:56Okay, go. Well, because you're such a good equity analyst on this, and everybody I talk to points to 1994 or 1993, when CBS ended up losing the NFL rights. That was three decades ago. Cable was still kind of in its infancy then. Or 1998 when NBC lost it. And so sort of applying what happened in the 90s to current day, is there a pot or of course there is. What is the level that you think the TV networks can actually afford to not carry the NFL?

14:53there has to be one right deep pause um the risk would be you take the current retrans rates you're getting today and you look at the retrans rates that the cw gets right if you talk to any network or station owner there's a massive differential for those that carry the nfl right let's just pick up you know, raw numbers, say four bucks a month in difference over time, you have 60 million homes times 12. That'd be$3 billion, John, of retrancy put for rent up for risk. Plus, you make money on advertising. I'm not saying all the retrancy tied to the NFL. But it'd be it'd be a crazy decision to risk that much retran revenues.

15:40And even the ad revenues because look at Discovery now warner brothers without the nba why will advertisers want to buy those networks right the nba was their calling card so i would not want to risk my retran my ad dollars my bundling it doesn't make any sense even though to your point like we can't find an alternative but you know why wouldn't next star and perry silk walk in and say look we have all these affiliates if you lose the nfl cbs or fox great well it gets created a new a new network and put those games on our new network we don't need to pay you reverse retranes right i just think the system is working i know it's incredibly inflationary but the alternative is a lot worse so let me go down that that route a little bit more and let's take at espn and monday night football if espn currently pays 2.7 billion dollars per year to the nfl and that includes the rights to monday night football and includes a lot of highlight rights for the for the shows uh during the day what if uh the espn says you know we're not going to pay you half a billion dollars more per year you know for for the same thing in fact we're going to save that money and we're going to invest it in the big 10 and we're going to own the top four big the big four college conferences.

17:10And so all of that re-trans money, you're not dropping ESPN because we have college football every Thursday, Friday, Saturday in the fall. So the idea of that one added NFL game, it doesn't add up to an off. And if ESPN can save itself$3 billion a year and reinvest that into other rights, wouldn't that make sense for ESPN? Or is the NFL really still that powerful? i'm smiling because we've had this debate about espn for a while as well right and they paid up for the nba they paid a fortune for the nba as everyone else did they've been paying for rights they lost baseball you may be onto something in the sense that they always want to march madness right i forget did they have it it was always been cbs maybe the beginning early early days the earliest games were on ESPN.

18:06But maybe you forego pro football and go at college football and then college basketball and have the entirety. That's not a crazy idea, John, because they have the funds to do it. You know, the question will be is if a broadcaster did it, they don't have nearly the same sports portfolio to then go back and get paid for what you know for a non-nfl portfolio right like play it out for everyone else you don't have the same portfolio if you lose the nfl and to your point i think it makes sense big ten and then to my point marsh mandes would be an amazing portfolio they would own college from you know september to to this week basically right it'd be hard to drop is pantone drop a ball in that world right right and and i i do think that you know that there there is a sense of you know we're not going to pay a billion dollars more you know i mean that that's a especially now that espn their financials are broken away and espn itself has to start showing that that it makes money and it loves the nfl and and those highlight rights you know they probably don't pay enough for i mean that that that's worth a lot it seeds all the uh uh all the programming uh through the day.

19:25So I'm not necessarily advocating for ESPN to do that, but I don't think it would be a terrible business decision if it decided to move forward like that. ESPN has some backup plans. Even the Big Ten, you could argue, will be cheaper. So play this out. If you have a big step up for the NFL, the Big Ten will not be able to get paid as much from NBC and CBS, right? Or Fox. It's really good. But if I'm Disney, sit back, see where the dust settles. And what can we then go in and pick off, you know, at a much more efficient price? Again, we've been waiting for that for a while. But maybe this is the tipping point.

20:05But again, like your primary thesis of rolling the dice and trying to live without the NFL, I think, as an equity analyst, it's just a risk that we would urge people not to take. you uh before we get off this topic you name checked perry sook uh just a a little bit ago um i i've had a blind spot towards the the next stars of the world or the uh in terms of coming in and being a real bidder for nfl rights um uh are they potentially a real bidder or are they potentially somebody that would be there to get if somebody, if one of the big networks sort of falls away? I think they're real bitter as if the NFL can't do a deal with the CBS, why wouldn't I have asked Perry Sook and Mike Baer with all that national footprint, stations everywhere.

21:07They've got top stations in every NFL market for the most part. Well, not true. They have most NFL markets. But yes, I would basically be there saying, look, CBS, you've lost the most important piece of content that you let us license from you or rev share with you. We don't really wanna pay you the same reverse retrans. We could do it ourselves. So I think the scale of what Nextdoor is going to and the deal is closed. Now they're waiting on judicial challenge. But when they're up and running and integrated, they're going to be a local station behemoth. And they know the power of sports and they're smart people.

21:50So I think they're in the background. It's kind of seeing what happens here. And if CBS makes a mistake to roll the dice, why not have a conversation with those guys? You know, Mike Beard spent his career, as you well know, at Fox. and saw pretty much firsthand Fox doing exactly what you said way back in 1994, which is like we have a few stations. We'll get the NFL. We'll add to those stations, and we'll cobble together a national network that is now as powerful as anything else that's out there. Yeah, that's right, John. The other theme is this. If you look at how the networks are spending their money, their prime time programming has gotten less and less, you know, premium scripted, right?

22:37It's become cheaper and cheaper reality. So you ask yourself, what is the network today? And the network, especially you don't have, you know, Stephen Colbert at 1130, the network is essentially sports rights passed on, news programming, and some, you know, still good premium scripted content, but it's shrinking in terms of its contribution to the ecosystem. It really is in terms of non-sports contribution. All right. I'm not going to ask you for predictions because who knows what's going to happen. But as of right now, as of April 12th, 2026,

23:14which one of the networks is most at peril in terms of renewing their NFL deals?

23:25okay it would say it would be nbc in this sense because you've written about this you know this look at what the nbc nbc is paying for the nba right can you imagine what the nba when the nfl want for sunday night which is the game of the week it's the best game and i would think and they'll say no because you know what we say this they'll say no but watch what they do Why wouldn't Netflix, which wants more events, want to get Sunday night's best game for 18 straight weeks? Why wouldn't you want that, right? And they've been a slow start on advertising, we would say. This would just reaccelerate their ability to monetize ads.

24:07So to me, the NBC Sunday night game is probably the most at risk. I don't see the local footprints changing that much. But to me, it's prime time at the price that it's at. Yeah. And how do you feel? Do I turn it to you? Yeah. I think I might ask you that question. I'm the interviewer here. I'm the one asking the questions, Michael. Come on.

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25:56Listen to Becoming You wherever you get your podcasts. Okay, okay. Yeah, I will answer your question, Michael. NBC, certainly. I mean, if you look at what they paid for the NBA, if you look at sort of what they're trying to do with Peacock and some of the struggles that they have there. And also, the thing about Sunday Night Football, to me, it's the premier prime time. It's a premier package right now. And you referenced Netflix. Netflix, of course, wants it. But why wouldn't Amazon want to upgrade? Like they're in Thursday night. Why wouldn't they want the best game and the best game on Sunday night?

26:39And we all know Justin Connolly and YouTube, they've been very aggressive about trying to get in with the NFL. Why wouldn't they want to get in? And this goes back to our opening topic is, would the NFL potentially risk selling the number one package to a streaming service when the DOJ is looking into it and the FCC is looking into it? Murdoch and the Ellisons have Trump's ear. That, to me, would be a risky move. So I think the NBC Sunday Night Football is certainly most at risk, but I still think that they're going to be OK with it for this go around. So you're saying that Trump's DOJ wants to protect Brian Roberts.

27:28And as you're saying, that they really can they're really concerned about Brian Roberts and the damage it does. Now you just threw a monkey wrench into my whole idea right there. I think that's the one casualty. Like, you think they're going to care? I mean, he's he's been so rude about Brian Roberts. The things you've said about him, it's incredible. So. No, I don't see, John, I don't think that's going to be a problem that it goes to Netflix. or Amazon. You know, you got to get that package. All right. So the getaway question here is I really am starting to believe that the networks have gotten really scared by the amount of money that they've seen in some press reports.

28:11Although a lot of the network executives have told me they haven't discussed money at all with the NFL. So they don't actually know how much money is out there. But I am really increasingly getting the sense that the networks could say, we're going to take this to the end of the decade. Do you think there's a well, of course, there's a possibility of that. Do you think it's a good possibility or a remote possibility?

28:45Historically, the networks have done whatever the NFL has asked them to do. Right. The idea that they will basically grow a spine or push back. I just don't see it, John. I mean, I think they'll do what the NFL asks them to do. If you said to me, we want you, Fox, CBS, to produce Amazon's games for them. Like, they don't have, you know, the beginning. These guys don't have a production, or Netflix. They don't have a production team that's credible. You need to help do it in the opening year. I would say never. Why am I doing that to help my competitors get into the game? Yet they did those things.

29:24So I am, whatever the NFL is asking, I'm assuming it's going to happen. We don't know the price, but they would open it up early and trade certainly for more money. That's what's going to happen. That is such a good point that I don't bring up enough. that CBS did Netflix's games. I mean, why would they help a competitor? Of course, they got paid handsomely for it. So they didn't do it out of altruism. But if they didn't have to do it, they wouldn't do it. And NBC helped out Amazon in their early days with their production as well, which is one of the reasons that Amazon Games, from this get-go, looked as professional as they did.

30:13Right. When we would interview NFL executives in public on our stage at a conference, we'd ask them about moving content to streaming. And one of the conditions they were not sure of was the quality of production. Right. That was an issue for them. And it was solved by letting the networks produce these shows for streamers. So, yeah, I don't see how this becomes how they get, you know, how they push back aggressively on what they ask us. And it's interesting that you don't even hurt price because we on Wall Street keep making up prices. We don't know. I remember talking years back with Neil Pilsen, who used to run CBS Sports.

30:56He's like asking about sports bubble. This is like a decade ago. He goes, Michael, there's always going to be a sports bubble that's reported. And as far as we've seen, the sports bubble has never turned out. And even I think people at Fox would say all the fears about we've overpaid have not proven now because the ad monetization has gotten better and better, right? The ratings are fine, and the CPMs keep going up, and they get playoff games, which become national holidays. So it's really interesting, John. It's like taking the under, as we say, sorry, taking the over that people pay too much has not worked, right?