ESPN, NBC, Amazon Are About To Overpay By Billions For NBA Rights | Bobby Burack
The NFL signed an 11-year, $110 billion rights deal with Disney, Comcast, Fox, CBS, and Amazon in 2021. The agreement was a win for all parties. The NFL is one of the last entertainment entities that's still objectively monocultural. Every broadcast/streaming partner is stronger when airing the NFL. And, of course, the NFL roughly doubled its annual broadcast fees.
We can't cover the NBA's impending television deal with the same level of confidence.
On Wednesday, the Wall Street Journal confirmed month-long rumors that the NBA is "close" to finalizing a rights agreement with Disney ($2.6 billion a year), Comcast ($2.5 billion), and Amazon ($1.8 billion) for 11 years and $76 billion in total revenue.
At this point, it's more likely than not that longtime NBA partner TNT is left out of the mix.
Still, Warner Bros. Discovery has the contractual right to match a rival package – though industry insiders dispute which packages WBD can and cannot match.
Either way, the NBA will nearly triple its annual media revenue with a deal worth $7 billion a year. That's a thrilling win for the NBA. But questions surround whether the investment is wise for its incoming partners – particularly Comcast.
For background, at $2.5 billion a year, Comcast would air around 100 games per season, split between NBC and its Peacock streaming service. Games would air on NBC on Tuesdays and Sundays, when there isn’t a conflict with NBC’s "Sunday Night Football."
According to the Wall Street Journal report, "Executives inside NBCUniversal differ over the wisdom of the deal, with some saying spending so much on the NBA is a bad idea and others saying it will supercharge NBC’s streaming business. The long-term value of NBA rights will hinge partly on how many subscribers Peacock is able to sign up."
"Pricing is also a factor: NBC would likely raise prices for Peacock once it has the NBA, a person familiar with the planning said, to boost revenue as sports costs grow."
Per WSJ.
Unlike the NFL, the NBA continues to shed viewers. It has for over a decade. The league has lost around 45% of its audience since 2012.
Through three rounds, the NBA playoffs are down 11% from a season ago. Most recently, the Western Conference Finals, between the Mavs and Timberwolves, drew 15% lower ratings than the conference finals last year.
Comcast and Amazon are betting on the NBA driving subscribers to Peacock and Prime Video, respectively, for the NBA. CNN also banked on consumers to pay for a brand they didn't watch for free on cable – remember CNN+?
R.I.P., CNN+ (3.29.2022–4.28.2022).
The NBA also lacks that one signature star it did 10 years ago when it last negotiated its media rights. LeBron James, who is still the face of the league, turns 40 this December. LeBron, likely, won't be around for the duration of the new contract.
The NBA media hopes Anthony Edwards can succeed LeBron in that role. Edwards is American-born, he's black, and his style of play reminds some viewers of Kobe Bryant. But we will see.
So far, Edwards is a non-factor in television ratings.
"Yes, there’s risk at these fee levels given [the NBA's] recent ratings, but they are also looking at the downside of the games being on competing services. Which is worse?" Brent Magid, CEO of media consulting firm Magid, told the Wall Street Journal.
As for ESPN, the NBA is important. ESPN also needs to retain NBA regular season games to avoid a decrease in the sub-fees it charges cable providers, a reality TNT soon faces with the likely departure of the NBA.
However, $2.6 billion annually is equivalent to what Disney pays for the NFL.
Even if ESPN's investment is less of a gamble than NBC or Amazon's, all three partners are on the verge of overpaying for a product clearly in decline.