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Will the NFL's ratings drop throw media companies for a loss?

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As the media landscape becomes ever more fractured, viewership for traditional TV shows have been steadily falling. But the National Football League has stood out as the exception to that rule -- until this season.

If the NFL’s TV ratings keep declining as they have so far in the 2016-2017 season, it could put the corporate behemoths that own the broadcast and cable networks in a bind. After all, they’ve spent tens of billions on rights for the NFL and other sporting events in recent years, betting that they’ll turn a profit from selling ad time.

However, most TV commercials are sold to advertisers in advance based on audience guarantees that the networks provide. And when actual viewership falls short of those projections, media companies may have to provide the advertisers with “make-goods,” essentially free commercial time.

NFL games also give a platform to promote programming for NBC parent Comcast (CMSCA); ESPN owner Walt Disney (DIS); CBS (CBS), whose properties include CBS News.com; and 21st Century Fox’s (FOXA) Fox Sports. Officials with those companies and the NFL didn’t immediately respond to a request for comment for this story.

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“I am not surprised to see the NFL’s ratings drop,” said Robert Thompson, director of the Bleier Center for Television & Popular Culture at Syracuse University. “I am surprised that they didn’t drop a long time ago, and I am surprised that they have dropped so precipitously in one season.”

According to Nielsen data, more than 16.2 million people watched NFL games between Sept. 8 and Oct. 9.  That’s down more than 13 percent from the same period a year earlier, and it’s the league’s smallest audience since 2012.

Theories abound regarding the decrease, ranging from viewers being “distracted” by the nastiest presidential campaign in recent memory to oversaturation as pro football games have expanded from a Sunday-only affair to Monday nights and more recently Thursday nights.  

“This is certainly a negative for the television ecosystem as a whole and media companies specifically,” said Brett Harriss, an analyst with Gabelli & Co., which is a shareholder in many media companies. “So far, media companies aren’t screaming that the sky is falling just quite yet.”

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Sports economist John Vrooman of Vanderbilt University noted that fans are being turned off by negative publicity surrounding injuries such as concussions and allegations of spousal abuse by players. A recent poll by Seton Hall University found that 56 percent of respondents cited antiracism protests by players including San Francisco Giant quarterback Colin Kaepernick as a reason for the audience decline.   

“In the name of competitive balance, the quality of the NFL game itself has also deteriorated into the random mediocrity of equally bad teams beating each other,” wrote Vrooman in an email. “Traditional media fan bases have suddenly shifted from devoted fans of traditional football to newer, less traditional fantasy fans who could care less about the quality of the games themselves, or the performance of any team other than their own fragmented fantasy squads.”

In an interview with NFL.com, Commissioner Roger Goodell pointed out that “everyone’s got theories” about the decline in viewership, though he noted that fan interest remains strong in pro football.

Indeed, the NFL continues to be the most popular sports league in the U.S. by far. Three of the top 10 rated shows from the week ending Oct. 17 were related to pro-football, which is typical. Advertisers are willing to pay premium rates for commercials on NFL games because they attract young male viewers who are becoming increasingly difficult to find on broadcast TV. And the Super Bowl usually is the among the most-watched shows of the year.

However, the game is changing in ways that fans don’t like. According to The Big Lead, offensive holding and defensive pass interference penalties have surged more than 40 percent since 2011. The length of time between plays also is on the rise, according to Mike Redlick, a former NFL executive who’s now director of external affairs and partnership relations for the DeVos Sports Business Management Program at the University of Central Florida. 

“If you look at a typical NFL football game either on TV or in person, how much action is there truly?” Redlick said. “There’s 15 minutes of actual action and playing time during the game. Otherwise, it becomes one big commercial.” 

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