NBC’s NFL negotiations are about to get much more difficult post-spin

Should Comcast actually go forward with its planned spin of NBCUniversal in about a year’s time, as it announced on Monday, retaining NFL rights is about to become much more difficult for NBC.

As has been discussed at length on this website, the NFL is looking to renegotiate new deals with its current broadcast partners prior to its opt-out options at the end of the decade, which would allow the league to take its game inventory to the open market. The league aims to secure billions of dollars more per year in rights fees from its incumbent broadcasters and, in exchange, plans to remove opt-out clauses present in the current deals and allow broadcasters, at the higher rates, to retain their packages through the formal expiration of the contracts after the 2033-34 season.

NBC, which owns the league’s premier Sunday Night Football package, pays approximately $2 billion per year under its current agreement. Based on the NFL’s ongoing negotiations with CBS parent company Paramount, the league is reportedly looking to double its current rights fees during these talks. Of course, that’s simply a starting point, but the message from the NFL is clear: broadcasters are going to have to pay more now, or pay a lot more later.

And with Comcast preparing to split NBCUniversal into a standalone company, its ability to negotiate with the NFL from a position of strength may take a significant hit.

For one, as highlighted by the analysts at LightShed Partners, NFL rights were never “existential” to Comcast’s overall business in the same way it would be existential to NBC’s business as a standalone entity. Comcast’s business has, at least recently, not relied on its content arm in NBCUniversal, but rather its connectivity business that provides internet service to millions of households across the country. That dynamic theoretically would allow Comcast/NBC to decide NFL rights aren’t worth it, and walk away from the league entirely, with its primary business still in tact. Would such a decision likely have signaled Comcast was ready to exit the linear television business entirely? Yes. But the possibility was there.

With NBCUniversal as a standalone company, there’s no similar threat of exit. NBCUniversal, like every other company relying on the declining linear television business, will view NFL rights as existential, and pay whatever is necessary to retain them, thus maintaining the lucrative retransmission fees distributors and local affiliates are willing to pay for NFL content.

There’s also another reason NBC might find itself with less leverage when entering negotiations with the NFL after its proposed spinoff. It’s possible that, without Comcast as its corporate owner, the spin triggers a change-of-control provision similar to the one Skydance’s purchase of Paramount last year triggered. Such a clause would compel NBC back to the negotiating table early, and the NFL could credibly threaten to take its Sunday Night Football package back to the open market prior to its end-of-decade opt-out option. If such a provision exists, offloading Sunday Night Football to another buyer would be considerably easier for the league, at least from a logistical sense, than selling CBS’s Sunday-afternoon package to another buyer, simply because SNF is one game per week, while CBS’s package can be as many as six or seven.

A simple spinoff would not trigger a change-of-control provision, CNBC’s Alex Sherman reports. However, many analysts are speculating the spinoff announcement itself is a means of putting NBCUniversal on the market for prospective buyers. If that’s the case, and Comcast accepts an offer for NBCUniversal, the change-of-control provision would certainly be triggered, putting the network in the same boat as CBS.

If that happens, NBC would find itself in do-or-die negotiations with the NFL, where the NFL could choose to exit its NBC deal entirely if the network couldn’t meet its demands. That’s not exactly an ideal place to be for a business almost entirely reliant on broadcasting NFL games.

It all spells a severe loss in leverage for NBC at a time when the NFL is trying to exert maximum pressure to juice its rights fees.