Super Bowl XLVI Most Watched TV Program Ever

Sports television couldn’t have gotten off to a better start to the year than last night’s Super Bowl. NBC had the game, the most-watched event in TV history. A total of 111.3 million viewers tuned in to see the team from the nation’s largest media market win the championship in the nation’s most popular sport. As if anyone needed further proof, the New York Giants’ victory over the New England Patriots is the latest example of how important live sports is to broadcasters and the advertising industry that pays their bills. The leagues and the networks that show them know this better than ever, and watching how each exploits and benefits from this reality will make for a fun spectator sport in 2012 as they go head-to-head with the carriers who are increasingly blanching at the increasingly high fees sports-rich networks can and plan to command. In the middle and up for grabs is the biggest slice of what ZenithOptimedia estimates is $61.9 billion in expected TV ad spend this year, led by anticipation for the London Summer Olympics. Here’s a scorecard of the players to watch:

The NFL
If the Super Bowl isn’t enough, the most powerful sports league flexed its muscle in December by inking a broadcast rights deal with NBC, CBS and Fox for a combined $27.5 billion over nine years — a whopping 63% increase over the previous contract. (ESPN and the NFL Network have a separate contract for cable.) The deal comes just in time for the networks and affiliates’ retransmission consent negotiations with cable and satellite providers and sets up a showdown over those fees – Miller Taback analyst David Joyce crunched the numbers and found that for all media partners to break even on the new contract, the average pay TV subscriber would have to pay an extra $11.23 a month, up $6.87 from the previous contract that ends after next season. It will be a serious fight. “Congress and the Federal Communications Commission need to throw a flag, because rules and regulations shouldn’t force consumers to bear the burden of broadcasters’ profligate spending, which will surely enrich NFL owners and players just as much as it will impoverish all pay-TV subscribers, particularly those who will never watch an NFL game,” American Cable Association CEO Matthew Polka said after the deal was announced. The new contract, struck in December, came after a labor lockout that threatened the start of the season and centered on how owners and players would split its revenue, including lucrative TV rights. In effect, the potential loss of games only proved how valuable the NFL is, much like the NBA’s own labor stoppage, which trimmed the season but it quickly re-upped with key advertisers and sponsors.

The Olympics
NBC bet big on the Olympics in June on the backs of new owner Comcast, blowing out rivals’ bids with a $4.38 billion move for a comprehensive rights deal through the 2020 Games. We’ll begin to figure out how smart that was right away: the network is prepping the London Summer Olympics for July and August. The all-in for Olympics programming is part of a bigger play by Comcast, which is setting itself up to compete with the likes of ESPN and Turner in the sports realm by rebranding its niche Versus channel the NBC Sports Network. Visions of ESPN’s $4.69-per-customer carriage fee are spurring the move — Versus took in $122.6 million in ad revenue last year, according to SNL Kagan, while ESPN took in $1.48 billion in ad sales and $5.27 billion in affiliate revenue. It’s a long-term play for sure, but Olympics coverage will plant NBC Sports Network’s flag in a bunch of new homes this summer, as eventually will new deals signed last year with the NHL (10 years, $2 billion; ESPN and Turner were in the race for that deal) and to a lesser extent Major League Soccer (three years, about $30 million). NBCUniversal and Comcast aren’t the only ones gunning for ESPN. Fox Sports in October beat out the sports giant for English-language rights to the next soccer World Cup contract in 2018 and 2022, in bidding that also saw NBCUniversal-owned Telemundo claim Spanish-language rights from Univision. Fox Sports and cable sibling FX also inked a multiyear deal with UFC, the mixed-martial arts league.

The Dodgers
Yes it’s one team from a league that no longer can claim it is America’s favorite pasttime. But how the ongoing sale of the Major League Baseball franchise plays out could result in a template for how these big sports deals go down in the future. Outgoing Dodgers owner Frank McCourt says his team could sell for as much as $1.5 billion, and the next TV rights deal could be worth $3 billion. In that scenario, why wouldn’t a network buy the team and sell itself the rights? Before the Dodgers auction started, Time Warner Cable and Fox Sports parent News Corp were thought to be thinking the same thing (TWC would want the team to add to its two new regional Lakers networks, and Fox Sports has the current rights deal through next year and its parent already owned the team once before). Neither apparently have advanced or even participated the bidding process, but one intriguing name did: a group led by Leo Hindery, who founded the New York Yankees’ regional sports network YES. YES makes the Yankees tons of money for the same reason ESPN makes tons of money: exclusive live sports content. If Hindery gets the Dodgers (eight groups are left in the auction), expect a Dodgers version of YES as well as other potential partners crunching numbers with other franchises. Otherwise, expect TWC or Fox Sports to strike a deal with any other new owner.

Small Networks vs. Big Cable
If the Dodgers spawn their own version of YES, it will continue a trend already playing out elsewhere. In college sports, the Longhorn Network launched last year with University of Texas football and basketball games, and the seven-network Pac-12 Network is prepping for its debut in August. In wrestling, the WWE channel is launching this year with programming including its marquee, cash-generating pay-per-view events. The question is, will cable providers agree to the higher carriage fees these new networks will demand? Time Warner Cable and Cablevision still refuse to carry NFL Network in a dispute that been in play since the network launched in 2003. In addition, plan on more drag-out fights over how cablers must treat niche sports networks like Tennis Channel (it won the right to be on Comcast’s tier despite alongside similar channels owned by the cabler) and how they can be distributed (New York regional channels MSG and MSG+ recently gave up a fight to keep the Cablevision-owned networks off of rival Verizon FiOS).