Will Verizon win big on its NFL bet?
Are you ready for some football? Verizon Wireless (NYSE:VZ) says you are--and it's putting its money where its mouth is. This week the operator inked a new multi-year agreement with the National Football League to stream all regular season and playoff games to mobile phones, a deal that will kick off in tandem with the 2014 NFL season. Verizon first signed on as the NFL's exclusive mobile media partner and official wireless service sponsor in March 2010, roles previously held by Sprint Nextel (NYSE: S): The current incarnation of Verizon's NFL Mobile application streams NBC's Sunday Night Football telecast, ESPN's Monday Night Football franchise, the NFL Network's Thursday Night Football slate and the NFL RedZone live highlights network, but the expanded partnership will enable the carrier to also stream all other games aired on CBS and Fox, including the Super Bowl.
SportsBusinessDaily reports Verizon has committed to paying $1 billion over the course of the new four-year contract, beginning with a $210 million payment in the first year. The operator currently pays around $50 million annually to offer NFL content, including rights fees, team spending commitments and media spending on league media partners. By comparison, ESPN pays an average of $1.8 billion per year, Fox pays $1.1 billion per year, CBS pays $1.08 billion per year and NBC pays $950 million per year. Sources said that the NFL offered to sell its mobile broadcast rights to its television partners, but none agreed to match Verizon's offer, with network executives expressing some surprise at how much the carrier agreed to pay.
We know football puts butts in seats: Twenty-four of the top 25 highest-rated television programs aired in fall 2012 were NFL matchups, according to Nielsen. But we still don't know if there's strong consumer demand for live NFL action on the go, let alone if subscribers will switch to Verizon to access its exclusive NFL content. Verizon clearly believes that they will, but the evidence suggests otherwise. "Obviously the NFL's appeal is massive, so it will be an ultimate test," former AT&T (NYSE:T) sponsorship chief Tim McGhee, who now heads consultancy MSP Sports, told SportsBusinessDaily. "But we never saw any indicator that content drove choice of carrier when I was at AT&T. It can be a point of differentiation, but we did not see it as a competitive advantage."
The Verizon/NFL deal isn't necessarily only about streaming media content, however. Verizon has confirmed the expanded NFL contract, but isn't saying much more: "This is a multi-year deal, and there are a lot of innovative and exciting things to come as part of the relationship," a carrier spokesperson said in an email to FierceMobileContent. "Other than what is in the [press] release, I don't have any other specifics to share right now." But SportsBusinessDaily reports the agreement also calls on Verizon to work to improve wireless network connectivity at the NFL's 31 stadium sites, and while that's largely about boosting the fan experience by enhancing mobile access to live NFL updates, fantasy football scores and social media, it's fascinating to consider how Verizon might also leverage its prominence inside stadiums to drive other segments of its business: Geofenced mobile marketing campaigns delivered to fans at games, for example, or in-seat souvenir purchases funded via the Isis mobile wallet. The possibilities are basically limitless. It may be some time before we learn exactly what Verizon and the NFL have in mind moving forward, but given the size of the bet the carrier is making on football, it must be banking on a huge payout.--Jason