NFL Network offered stake for broadcast rights

The National Football League, still searching for a broadcast platform for its flagging NFL Network, rejected an offer from Comcast Corp. that would have given the league owners a stake in the cable company and would have shielded them from having to share cable-TV broadcast revenue with the players' union.

The Comcast-NFL feud is now a bitter one, but in early 2006, Brian L. Roberts, the company's chief executive officer and chairman, offered rights fees and a substantial ownership interest in a sports channel, then called Outdoor Life Network, that could be converted into Comcast stock in exchange for broadcast rights to eight live NFL games per season.

Roberts says in a recent government filing he structured the offer this way at the direction of the NFL owners, who said they would not have had to share the equity interest with the players' union as they would rights fees.

Comcast has not disclosed the size of the equity stake the NFL owners were seeking, company spokeswoman Sena Fitzmaurice said yesterday. The package of eight games, based on other contracts, was estimated to be worth about $400 million a year.

An NFL official confirmed yesterday that the league discussed a stake in the sports network, which was later renamed Versus, but said the players' union would ultimately benefit from an equity stake through dividend payments, or a sale of the asset.

How to carve up the multibillion-dollar NFL revenue pie between the football players and NFL owners has been a flashpoint for years in the league. Almost 60 percent of the revenue goes to the players and 40 percent to the owners.

"An equity stake is shared with the players," Frank Hawkins, senior vice president for business affairs with the NFL, said yesterday. "It's just not shared currently."

At the time of the negotiations with the NFL, Roberts was desperate to make a deal for rights to regular-season NFL games to combat the cable-killer Sunday Ticket, a product from rival satellite provider DirecTV. The Sunday Ticket broadcasts more than 200 out-of-market NFL games each season and was draining die-hard pigskin fans from Comcast.

But the NFL owners rejected Roberts' offer in early 2006 and instead used the eight NFL games for its start-up NFL Network, believing the league could profit more handsomely with its own media property.

When then-NFL commissioner Paul Tagliabue told Roberts of the NFL owners' decision, Roberts says he recalls Tagliabue saying: "Perhaps the owners are making a mistake here. Your offer may be better. Sometimes the owners have to learn the hard way."

After Tagliabue informed Comcast that it had lost any chance for an exclusive NFL package, the Philadelphia company relocated the NFL Network from a digital tier on Comcast to an extra-cost sports tier viewed by only two million subscribers.

In defending its move, Comcast said the NFL Network raised per-subscriber fees 350 percent after the NFL Network secured broadcast rights to the eight NFL games. With higher monthly per-subscriber fees spread over a cable base of tens of millions of viewers, the NFL Network could earn what amounted to $50 million per live NFL game. For comparison, Comcast said DirecTV's contract with the NFL amounted to about $3.5 million per live game. The NFL rejects Comcast's comparison as "apples-to-oranges."

The behind-the-scenes negotiations regarding Comcast and the NFL Network are contained in hundreds of pages of documents at the Federal Communications Commission. Comcast filed 243 pages late Friday.

In the FCC documents, Tagliabue says that when he told Roberts of the NFL owners' decision to keep the eight-game package, Roberts responded: "Your relationships with the cable industry are going to get very interesting." Tagliabue said he believed the statement foreshadowed the friction to come between the two organizations.

The NFL hopes to persuade the FCC to force Comcast to move the NFL Network back to a programming tier where millions more would see it. The NFL claims in its complaint that Comcast is taking retaliatory actions against it and that the Philadelphia company misuses its "bottleneck power" as the nation's largest cable company with 24 million pay-TV subscribers.

Comcast treats sports channels that it does not own differently from sports channels it owns, which is illegal, the NFL says. To make its point, the league lists sports channels on Comcast in the Washington area, their channel position, ownership and tiering.

Most non-Comcast sports channels are on the premium sports tier, which costs a subscriber an extra $5 to $7 a month. Comcast-owned ones are on the analog basic tier that just about every Comcast subscriber gets. The Comcast-owned channels on these broad tiers include Golf and Versus.

"If they do a true sports tier, then we can live with that," said the NFL's Hawkins. "But that's not what they're doing."

NFL officials point to the recent Comcast deal to put the Big Ten Network, a 24-hour college sports network, on a broad-interest digital tier as evidence that Comcast is not building a premier sports tier that would attract all sports fans.

Comcast has said the NFL is an enormously powerful sports league that earns about $3.7 billion in rights fees from NBC, CBS, Fox, ESPN and DirecTV and does not need a helping hand from the federal government in this business dispute. It also notes that the NFL Network is available on Comcast to the people who want to pay extra.

Gene Upshaw, executive director of the National Football League Players Association, said he was unaware of the financial details of the negotiations between the NFL owners and Comcast over the NFL Network.

Jeffrey Kessler, a New York lawyer representing the players' association, said the players would have been entitled to some of the value of the NFL Network had the owners accepted Roberts' offer.

With about 36 million subscribers, the NFL Network is struggling to gain viewership. It is reportedly in talks to merge with sports-programming giant ESPN.

With those talks under way, and football season approaching, the NFL Network is likely to attempt to increase pressure on Comcast and other cable companies. An NFL official said yesterday that the league would file a response to Comcast with the FCC.