CBS Corporation
(
CBS
) recently announced that it has extended its broadcast rights deal
with the National Football League (NFL) for nine more years.
However, the financial terms of the deal were not disclosed.
The newly announced deal will extend CBS Corporation's existing
deal to 2022. The current deal was scheduled to end in 2013.
According to the pact, CBS Sports will remain the broadcaster of
the NFL's American Football Conference (
AFC
). Moreover, CBS will also broadcast games from the National
Football Conference (
NFC
).
As part of NFL's expanded "flexible scheduling", CBS Corporation
for the first time, will broadcast AFC and NFC matches in the same
season.
Is the Deal Financially Viable?
Though the financial terms were not disclosed, we believe that
the new contract, commencing in 2014, will mark a substantial
increase in the cost of broadcasting-rights when compared with the
current deal.
Due to huge viewer demand and surging NFL games ratings, prices
of the sports rights marked a sharp rise in the recent past.
It is evident in the case of
The
Walt Disney Company
(
DIS
), which increased its cost for approximately 73% when it extended
its broadcasting rights for eight more years with NFL. Disney will
shell out $1.9 billion per season over the tenure of the deal, up
from its current $1.1 billion per season starting from 2014.
Further, according to Forbes, broadcasters are expected to pay
approximately 60% more to gain the broadcasting rights.
Competitors in Close Proximity
In addition to CBS Corporation, NFL also announced the extension
of its broadcasting rights for nine more years with
News Corporation
's (
NWSA
) Fox and
Comcast Corporation
's (
CMCSA
) NBC.
According to Associated Press, NFL will mark an annual increase
of approximately 7% in average fees from the above three
broadcasters. Thus, the total cost is expected to reach
approximately $3.1 billion per year in 2022 from its current $1.93
billion per year.
Closing Remarks
We believe that the broadcasters might hike fees for pay-TV
distributors with affiliate fees and advertising providing an
opportunity to hedge against the rising cost.
Currently, we maintain a long-term 'Outperform' recommendationon
the stock. Moreover, CBS Corporation holds a Zacks #2 Rank, which
translates into a short-term 'Buy' rating.
CBS CORP (
CBS
): Free Stock Analysis Report
COMCAST CORP A (
CMCSA
): Free Stock Analysis Report
DISNEY WALT (
DIS
): Free Stock Analysis Report
NEWS CORP INC-A (NWSA): Free Stock Analysis
Report
Zacks Investment
Research