By Yinka Adegoke and Liana B. Baker
NEW YORK (Reuters) - Media companies are bracing for a big revenue hit from a possible lockout by the National Football League but hold out hope that college football and other prime-time shows could pick up the slack for lost advertising dollars.
Team owners are currently in collective bargaining negotiations with the NFL Players Association over salary caps and a range of related issues to replace a contract that expires at midnight on Thursday. It could potentially shut down the NFL for some or all of the 2011 season.
It is difficult to overstate the importance of the NFL to the revenue and profits of broadcasters like CBS Corp, Walt Disney Co's ESPN, Comcast Corp's NBC and News Corp's Fox. It's also been a key driver behind the success of satellite TV operator DirecTV Group, the one pay-TV provider that has consistently added subscribers even while rival cable and satellite companies have shrunk.
"In an era of multichannels and multiscreen, viewing of NFL games continue to defy gravity," said Brad Adgate, an analyst at Horizon Media.
He said the audience on the networks that carry the NFL grew by 7.4 percent in 2010 with NBC's Sunday Night Football and ESPN's Monday Night Football being the top-rated programs on TV with adults 18-49 the most coveted demographic for many advertisers.
So what will advertisers of say, cars or financial products aimed at that key demographic do to reach the most viewers?
Media executives, who spoke on background because plans are not finalized, said they see college football games and post-season baseball playing an important role for pulling in advertisers.
They also think some prime-time shows could benefit if a lockout extends into the crucial May Upfronts advertising sales season.
"When there's no pro football to push, advertisers will still need to reach eyeballs so this might create a higher demand for prime-time programming," said one of the executives who asked not to be named.
But executives said privately it will be difficult to even come close to the marketing power of the NFL juggernaut. The revenues generated by the NFL are impressive.
This year's Super Bowl brought in a record audience of 111 million and raked in $3 million for a 30-second spot.
Nomura analysts estimate the NFL could generate $4.2 billion in revenue from television next season or nearly half the total dollars spent on national sports rights in the U.S. Regular season NFL games generate around $200,000 on average for a 30-second spot.
"A strike would risk over $3 billion in gross national advertising dollars generated by the NFL," said Nomura analyst Michael Nathanson in a client report.
Analysts said that while revenue is at serious risk with the absence of football on TV, the broadcasters' cost structure will be protected because their contracts with NFL mean they'll be 'made whole' if some games are missing.
ESPN currently pays the highest annual rights fee with an estimated $1.15 billion for the season followed by Fox with $780 million. CBS and NBC have paid around $650 million each.
TV executives are understandably very nervous but have generally tried to play it down.
"I hope and pray fervently that it doesn't happen," said Fox Sports Media Group Chairman David Hill. "We know what happens to sports after a strike or a lockout: people turn away and it takes a while for them to come back. It would be a great tragedy if both sides weren't able to reach an agreement."
CBS CEO Les Moonves said on a conference call last month that its agreement with the NFL would see the company part with some money but the contract would be extended if any games are missed.
"So ultimately, at the end of the day, we do not anticipate losing any revenue," said Moonves. "We think we will get the games back in some way, shape, or form. So, there will be an immediate hit."
Analysts said DirecTV, which has grown strongly in the last decade in part thanks to its $1 billion a year Sunday Ticket partnership with the NFL, could lose some of the estimated 2.2 million football fans who pay $300 a year for Sunday Ticket. The deal allows fans to see NFL games outside of their local markets.
DirecTV has said that if a full season of play is lost, it is required to make payments to the NFL but the satellite provider gets to add on an extra season at the end of its contract. If only a couple of games are missed, their payments to the NFL are also reduced, the company said.
The wider football economy is expected to be hurt by the walkout with everything from shirt sales to hot dog concessions at stadiums. Even video games -- which might have been expected to benefit as an alternative to the real thing -- are expected to suffer, according to the maker of the most popular football game.
John Riccitiello, Electronic Arts Inc's chief executive, said on Tuesday at an investor conference that it would sell 30 percent to 45 percent fewer Madden games if a full season is missed, because no football on TV "consequently reduces interest in the sport," he said.
But based on EA's new contract with the NFL, Riccitiello said, "in the event of a lockout, we are largely insulated from the financial hurt."
The company could not elaborate on any more details on the contract.
(Editing by Phil Berlowitz)