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NBC: Blindsided by Notre Dame


How a terrible year for Fighting Irish football is putting a dent in the network's ad revenue

College football mania will reach a peak during the Bowl Championship Series in the first week of 2008. Tens of millions in ad revenue dollars and a national championship are up for grabs that week when Louisiana State University and Ohio State University knock heads in the title game on Jan. 7. Missing from any BCS action this year, however, will be the University of Notre Dame. Its fabled football program came completely unglued this season.

That's a problem, but not just for Fighting Irish faithful who watched the team swing from 10-2 last season to 3-9 this year. NBC Universal pays $9 million a year to the university for exclusive national broadcasting rights for all the team's home games as part of a five-year contract that ends in 2010.

Spending $45 million for this privilege didn't seem risky in '05, given Notre Dame's competitive squad and cachet. It does now: NBC's television ratings on these games have fallen so precipitously that negotiations for Notre Dame's next TV deal may be affected if the program doesn't rebound.

Already, NBC has had to adjust its advertising pricing strategy. This fall the ratings on Irish games fell 40% from last year and are now half of their 2005 levels. NBC has had to give loads of free ads (known as make-goods) to companies like Allstate (ALL) and Procter & Gamble to justify the $55,000-to-$80,000 rates for a 30-second ad it negotiated before the season started. Media buyers will demand better rates for the 2008-09 season. "Those ratings will be a delicate negotiating point for NBC going forward," says Sam Sussman, sports director at media buying agency Starcom MediaVest (PUBGY).

The fourth-place network is suffering a deeper ratings slump on its overall prime-time schedule than rivals ABC (DIS), CBS (CBS), and Fox (NWS). Top-drawer sports programming can offset a weak prime-time programming lineup. However, NBC's Notre Dame ratings were half those of ABC's college football games.

Ken Schanzer, president of NBC Sports, says the Fighting Irish's lackluster year was "predictable," given the team's high number of freshmen and sophomores. "We think next year will be appreciably better," he adds. NBC may even move to negotiate another five-year deal before the current contract expires in 2010.

RAKING IT IN

Nailing a fresh contract when Notre Dame football is struggling might save NBC some money. Yet more ratings-killing blowouts of the Fighting Irish can't be ruled out. "The good news is that you have a whole lot of freshmen and sophomores who played coming back. But the bad news could be that they are all coming back" after their dismal season, says ESPN analyst and ex-University of Pittsburgh coach Mike Gottfried.

Notre Dame football is still a money machine for the university, and "the value of Irish athletics goes well beyond the bottom line," a university spokesman notes. The program raked in $70 million-plus in 2006 from TV deals, advertising, merchandise, and licensing. Other teams, win or lose, often get a ratings boost from playing the Fighting Irish. Given its financial clout, Penn State head football coach Joe Paterno says Notre Dame has gone from being an "academic institute to a banking institute." It's a storied franchise and will be for some time. But that doesn't help NBC. This year, Notre Dame's "Flailing Irish" cost the network dearly. ~

Kiley is a senior correspondent in BusinessWeek's Detroit bureau.

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