• by David Goetzl  @dgoetzl, April 26, 2007

NBC Universal might struggle to turn a profit on its "Sunday Night Football" package, but the company at-large is primed for profits as favorable scheduling looks to fill the coffers of its local stations.

This fall, 12 of the 17 scheduled games involve at least one "home team" from a market where NBC has an owned-and-operated station. And when the "home team" is playing, ratings skyrocket, allowing stations to command premium pricing for the local avails they sell. As a rough ballpark estimate, those rates can be twice as high or more, compared to "out-of-market" games with no major local interest.

NBCU owns 10 stations--all with a local team, save Los Angeles. Having so many scheduled games this fall with at least one O&O team is a boon, particularly in September, when "SNF" will have four straight games with teams from O&O markets facing each other. The company will reap sales benefits for the games on NBC nationally, as well as in the two O&O markets, where ratings will soar well into the double digits.

Conventional wisdom holds that media companies such as NBC and News Corp., which pay hundreds of millions each year for rights to NFL games (a reported $600 million in NBC's case), don't make money solely on the game-casts. But the savvy nets can cobble together satisfactory revenue if benefits such as increased O&O sales, promotional opportunities, affiliate body compensation and other factors are part of the mix.

GE CFO Keith Sherin said earlier this year that "the NFL is a key driver" in turnaround efforts at struggling NBC, although no figures were cited. TNS Media Intelligence data shows "SNF" brought in $395 million in ad dollars.

It all begins, however, with the right TV schedule.

The NFL makes its TV schedules after consulting with the networks, which raises the question: Does NBC lobby for games with O&O teams--perhaps at the expense of its affiliate body? Last season, 16 of 17 games involved an NBC O&O team, followed by the scheduled 70% this fall.

"That stat was noticed at the recent affiliate meeting, but there was really no grumbling," says Marci Burdick, chairman of the NBC affiliate board and senior vice president at Schurz Communications. "The games seem to work on behalf of affiliates." An NBC representative for the O&Os referred a request for comment to the NBC Sports division, which did not respond to multiple requests.

An NFL official said the "networks make their recommendations" for games they prefer, but declined comment on what influence the requests may have. The NFL has veto power over all scheduling. Still, if NBC nudged the NFL to schedule games with national appeal that also feature teams in O&O markets it would be understandable, given their appeal in local markets. "It's somewhat of a mini-Super Bowl," says Peter Gusmano, U.S. director of client services for local broadcast at MindShare.

One buyer said a spot might cost $250,000 nationally to reach all 210 DMAs, but run $100,000 on WMAQ, NBC's owned Chicago station, if the Bears are playing--almost half the national price. Advertising Age pegs the cost of a national "SNF" spot at $342,000.

Further, if the Bears are scheduled to make multiple appearances on "SNF" for the season, WMAQ might be able to negotiate higher rates for all 17 games as part of a package deal, using the "home" games as leverage. Other advertisers are simply hungry for just the Bears games and ready to spend heavily.

"Some people would forfeit an entire season of non-regional games in order to make a huge splash in one regional game," explains MindShare's Gusmano.

Another buyer said: "There's always a benefit [for stations] at the local level, but it varies wildly." The reason: the dynamics of the fan base and the resulting ratings. In the case of NBC O&O areas, fans in Philadelphia and Dallas are generally considered rabid, but less so in Miami and San Diego--unless their teams are winning.

After NBCU signed its deal in 2005, CEO Bob Wright said it "will be a profitable transaction," according to The Washington Post, partly because parent GE has a related "bond with the NFL," where it sells it a slew of security and health-care services. This year, NBC Sports chief Dick Ebersol told Mediaweek the first season of "SNF" "more than met corporate goals," given the successful launch of boffo hit "Heroes" can be attributed "more than anything else" to promo spots that ran in "SNF."

NBC had hopes for a similar win with the Winter Olympics last year, promising $900 million in ad revenue with sales from the O&Os tossed in. Instead, revenue was $700 million, and NBC took a $70 million loss. It has higher hopes for next summer's Beijing games, for reasons ranging from more live events to a stronger link with GE services.

"SNF" finished its run as a top-six show in the key adult 18-to-49 demo (one reason affiliates appear to be satisfied), although its 6.4 rating trailed competitor "Desperate Housewives" by 34% in the 9 p.m. hour. Since the end of football, however, NBC's ratings have dropped precipitously.

To be sure, strong national ratings for "SNF" that propel sales of spots in the estimated $400,000 range help NBCU's revenues more than sales at its O&Os, especially since in-game local spots are limited to only a few minutes an hour. But the strong performance in the local markets is a coveted bonus. Not only does it drive in-game revenues, but creates a key side effect: It bolsters tune-in for the local news following the games--along with the Sunday night post-game sports recap shows.

And while NBC is scheduled for seven games that yield windfalls when O&O teams play each other--New York Giants at Dallas on Sept. 9 is an example, Dallas at Chicago on Sept. 23 is another--the figure could climb even higher.

Under NBC's deal with the NFL, it can benefit from so-called "flexible scheduling," in which an unimpressive scheduled game can be replaced by a more compelling one over the last seven weeks of the season. And if scheduled games with non-O&O teams, such as Tampa Bay or Cincinnati are replaced by ones with an O&O presence, that could benefit NBCU even more.

A year ago, 16 of 17 NBC games involved an O&O team. Under "flex scheduling," three lackluster games scheduled were replaced; the new games included an NBC O&O team--albeit the new match-ups were more attractive nationally, and one game switched out featured two NBC O&O teams.

The NFL official said networks are in "constant communication" with the league on scheduling matters, including game-swapping. But Bill Carroll, vice president and director of programming for sales firm Katz Communications, says pressing for O&O games isn't likely to be NBC's top priority, but "a nice side benefit" and a frequent outcome. "It would be unlikely that they would go in and say, 'Here's where we have O&O stations,' and that would be the primary driver," he said. "I think they'd say, 'Let's get the largest markets and most attractive games.' "

NBC stands to benefit in that scenario, with stations in seven of the top-eight DMAs, all with a team and two markets with more than one (New York has the Giants and Jets, the Bay Area has the San Francisco 49ers and Oakland Raiders). Helping NBC is that its O&O teams have been performing well--making up seven of the 12 playoff teams a year ago--meaning they'll draw strong national ratings and encourage the NFL to schedule them. NBC markets include 11 teams out of the 32 NFL franchises.

Besides NBCU, station groups with NBC affiliates no doubt want as many "SNF" games featuring teams in their markets as possible. Its two largest affiliate groups, Gannett (12 stations) and Hearst-Argyle (10), have eight and three "home teams" directly in their DMAs, respectively. Gannett has only one "home team" game on "SNF" this season, while Hearst-Argyle has four. With teams such as Denver, Atlanta and Baltimore, both could make the case that they deserve more. Representatives for Gannett and Hearst-Argyle declined comment.

"Would everybody like their home teams? Absolutely," says the NBC affiliate board head Burdick, but she added station groups realize that's not realistic. While NBC arguably benefits the most from "flex scheduling," CBS and Fox have options to move games scheduled for 1 p.m. to the later 4 p.m. window, where ratings could be higher and the games would serve as strong lead-ins to prime time.

A CBS representative said any movements are based primarily on showing the most compelling games to the widest audience, although consideration of the impact on an O&O could play a secondary role. "On occasion it might, but it wouldn't be the prevailing reason to do it," she said. CBS Corp. owns 16 CBS stations, and seven have "home teams" directly in their DMAs, which play in the AFC conference, the network's focus.

Fox has 25 O&Os--11 where "home teams" play directly in the respective DMAs and the NFC, the network's focus. Fox did not immediately provide comment. Separately, each network CBS and Fox can "protect" five games apiece from NBC, picking them up during the latter part of the season.

A related issue that affects NBC, CBS and Fox is the NFL not having a team in the L.A. market, the second-largest DMA with some 6 million TV homes. All three networks have O&Os there and are missing a potentially lucrative opportunity to "double-dip" with national and local dollars. "Not having a team in Los Angeles has got to impact everybody," Carroll said.