The NFL couldn’t be happier with how the AFC and NFC championship games lined up. The early game features what some have dubbed Brady-Manning XVII and is a matchup of the top two AFC teams with the two most famous quarterbacks in the game. On the NFC side, the top-seeded 15-1 Panthers face the second-seeded Cardinals. The Cardinals played in five nationally televised games this season, and the Panthers have superstar and big-time endorser Cam Newton. Casual fans will definitely have a reason to tune in and watch. Ratings are probably going to get close to or surpass the last few years. Normally in business this would create a premium for advertising because more eyeballs equal more demand. However, due to the structure of TV advertising deals, there is a good chance CBS and FOX won’t be able to benefit above the norm in terms of ad dollars.
Most of the AFC/NFC championship advertising was sold long before the matchups were known. CBS and FOX sell ad time with almost complete uncertainty as to which teams will play in the game. Spots are sold months before the season even starts during upfronts — meetings hosted by television networks, attended by the press and major advertisers — and it allows advertisers to lock in the price of their ad buy. That means if Coca-Cola wants to buy a spot during upfronts –long before the NFL season– for the AFC Championship, the company is taking a risk that the matchup is between two smaller markets. The ad buyers also benefit if it is a big-market game. In this case they bought time during what could be the last Brady-Manning matchup ever.
Upfronts give the television partners some level of certainty in revenue projections. However, they do not allow them to ramp up the price if the game is projected to be a ratings bonanza. It is a bit of a hedge. The same goes for advertising partners: They could have overpaid if the matchup turned out to be something like Jacksonville vs. Buffalo. Any left over inventory is sold at market rate. So companies can wait to purchase ad time if they’d like, but as one ad exec put it, “If companies wait the inventory is probably sold out, and if it isn’t (sold out) the inventory is probably less desirable, like during halftime.”
The problem is that CBS, FOX, and the NFL should benefit if a game is projected to set record ratings. After all, ESPN had to give away free advertising — $20 million worth, according to some reports — after it missed ratings thresholds during the College Football Playoff. In theory it should work both ways. The media companies should be able to write something in that states if certain markets, teams or players make a game outperform ratings then a premium is charged. If the company doesn’t want to spend the extra money they are refunded their original purchase and the spot can go back on the market. It is somewhat similar to an option in finance or a right of first refusal in contract negotiations.
As of now the business isn’t structured that way, so advertisers are probably the bigger winners for Championship Weekend. In reality the NFL is the last beacon of large live TV audiences, so the upfronts probably had the high ratings baked into the price. Still if the AFC and NFC championship games beat ratings, it won’t be FOX and CBS benefiting. At least not until next year when upfronts will be based on this year’s ratings.
Michael Colangelo is Managing Editor of The Fields of Green and Assistant Director at the USC Sports Business Institute.