How the NBA Plans to Remake Its TV Deals and Score Billions for Its Stars
League aims for jump in fees by luring streamers, from Amazon to Apple, and offering games in local markets
The stars of the National Basketball Association are taking to the court as a new season begins next week. Behind the scenes, the league has started talks to secure the billions of dollars in media-rights fees that will help pay their huge salaries.
As the NBA enters its first media negotiations in a decade, its biggest partners, Disney’s DIS -0.23%decrease; red down pointing triangle ESPN and Warner Bros. Discovery’s WBD -1.83%decrease; red down pointing triangle TNT—which together pay about $2.6 billion a year— aren’t looking to pony up big spending increases.
Each company is under investor pressure to trim costs, with cable TV’s decline and hefty mergers weighing on their balance sheets. Meanwhile, the largest sports broadcaster in local markets is in bankruptcy and on the brink of liquidation.
The solution: The league is looking to bring additional parties to the negotiating table as it plots out its new deals, which would go into effect after the 2024-2025 season. For consumers, those deals could change significantly where games are broadcast.
ESPN and TNT, which carry roughly 165 nationally televised games combined, are exploring signing up for smaller packages, said people familiar with the situation. That arrangement would help them hang onto a premier asset in American media without breaking the bank. Those companies already are in renewal talks with the NBA, with an exclusive negotiation period set to expire in April.
If ESPN and TNT buy fewer games, that would allow the league to create a package for a streaming video player. Amazon AMZN -1.21%decrease; red down pointing triangle and Apple AAPL -0.24%decrease; red down pointing triangle already have expressed interest—and are looking for much more than a small slice of NBA games.
“They’re benefitting from the fact that there are new entrants who look to want to play,” said Jonathan Miller, former NBA executive and chief executive of Integrated Media, which specializes in digital media investments.
Amazon and others have indicated they would find it even more appealing if the NBA could package national TV rights with local-market rights—so they can show people in Indiana the games of the hometown Pacers, for example, and the same in other cities around the country, according to people familiar with the discussions.
The league is looking at doing just that, some of the people said, and the bankruptcy of Diamond Sports —parent of the Bally Sports branded regional channels that once operated under the Fox Sports Net brand—is expected to accelerate those efforts.
In the American sports landscape, the National Football League towers above all else. But the NBA is number two, given its appeal with younger audiences, and is in a strong position to demand a tripling of fees, as it did last time around, said David Levy, who negotiated TNT’s last deal with the NBA in 2014.
“Pop culture, fashion, relevancy—why wouldn’t the number 2 get a 3x increase?” Levy said.
The NBA hasn’t said publicly what fee increase it is seeking. Tripling the last agreement would mean a deal worth about $78 billion over a decade. Media rights make up a big chunk of league revenues, along with ticket and merchandise sales.
“You have to recognize that the marketplace has gone through some change in the last few years and so that does temper what is possible,” said Ed Desser, president of sports-media consulting firm Desser Sports Media and a former NBA media executive. “But on the other hand, the NBA hasn’t had a reset in almost a decade.”
CNBC and Bloomberg earlier reported on elements of the NBA’s media-rights negotiations and interest from potential bidders, including streamers.
In the most recent season, NBA games on TNT, ESPN and ABC averaged 1.6 million viewers. The playoffs attracted more than five million viewers, according to Nielsen data, and were nearly always the most popular programming across all of television for audiences under 50.
The total viewership is far smaller than the NFL’s, which averaged about 17 million viewers per game last season. But the NBA will be the last major sports-media property to come up for bidding for a long time, said Lee Berke, president and chief executive of LHB Sports, Entertainment and Media, a sports media consulting firm. “This is the last train to jump on,” he said.
TV networks have a strong incentive to carry sports because it is among the only content people tune into in large numbers on cable nowadays. In addition to ESPN and TNT, NBC’s sports unit is also interested in NBA rights, a person familiar with the situation said. But networks are getting choosy. ESPN chose to pass on renewing rights to the Big Ten college football conference, for example, and took a smaller MLB package in the most recent negotiations.
Streamers, meanwhile, see sports as a subscriber magnet. YouTube and Amazon each have major NFL packages, while Apple has a deal with Major League Soccer.
In the local arena, Diamond is fighting for survival and may lose the rights to broadcast games in markets where it owns a team’s rights. As of last week, it owed payments to the NBA and National Hockey League for their new seasons, and was in talks with Comcast CMCSA 0.06%increase; green up pointing triangle to ensure continued carriage of its TV channels.
If Diamond is forced into Chapter 7 liquidation, the NBA would take back the media rights in 15 markets. In the short term, the league would have to broadcast and distribute those games itself, with the NBA app serving as a platform for teams’ own streaming services.
Under the league’s strategy, individual teams would stream games and, potentially, put them on over-the-air broadcast channels, as the Phoenix Suns and Utah Jazz have already done, a person familiar with the league’s planning said.
The NBA has offered Diamond and its creditors a variety of options to keep its channels broadcasting games, including extensions lasting one year or several years, with slightly discounted fees, according to a person familiar with the situation.
No matter what, the league intends to have control of Diamond’s local-market rights in time to offer them along with its national rights packages. Diamond doesn’t control rights to several big markets, such as Boston and Philadelphia.
The league could find other blocks of games to sell. The NBA this year is launching an in-season tournament, with a winner to be awarded on Dec. 9 in Las Vegas. ESPN will be the broadcaster this year, but the league could separate out the tournament as another package in future seasons.
As ESPN separately hunts for a strategic partner to help with its transition to streaming, the NBA has discussed offering its League Pass package—a subscription service that lets fans watch games outside their home markets—to ESPN in exchange for a small equity stake, The Wall Street Journal reported. The NBA is unlikely to move forward with such a conversation until discussions with ESPN on a larger media-rights deal are completed.