Tug-of-war over NBA rights offers a glimpse into the future of media
The National Basketball Association season kicked off Tuesday with stars like LeBron James and Nikola Jokic beginning the long quest for a title. But the action that will have longer-term implications for the league and the media and entertainment landscape is taking place off the pitch.
The companies that hold the rights to show NBA games – Disney, which owns ESPN and ABC, and Warner Bros. Discovery, TNT’s parent company – will pay the league a combined $24 billion over nine years for that privilege. But their contracts expire after next season, and the NBA hopes to more than double the money it receives for rights in the next deal, according to several people familiar with the league’s expectations who spoke on condition of anonymity to discuss the to discuss ongoing negotiations.
That cannot be done without a struggle. After decades of sports leagues raking in bigger and bigger wads of cash for the rights to show their games, there are signs that media and technology companies are under increasing pressure to justify the exorbitant amounts they spend on broadcast rights. Interest rates are high, Wall Street demands profitability over growth, and streaming has reshaped the entertainment industry.
The outcome of the NBA’s negotiations will say a lot about the future of broadcast networks, the cable bundle, streaming services and the sports media ambitions of tech companies.
“I think this is the last big deal in this era that we’re coming out of,” said John Kosner, who advises sports media and tech startups after a 20-year career as an executive at ESPN.
The National Football League, the most valuable sports league in the world, didn’t quite double its rights fees when it signed new deals in 2021. And that was before the stock market fell, interest rates rose and wars started in Europe and the Middle East. .
Disney and Warner Bros. Discovery, who have been televising NBA games for more than two decades, aren’t necessarily in a position to spend a lot of money either.
Disney has made extreme cost cuts and layoffs this year, and CEO Robert A. Iger has said the company is considering “strategic options” to sell shares in ESPN. Warner Bros. Discovery has also been cutting costs, saying in August that it had nearly $50 billion in debt after the two companies merged last year.
The most likely scenario, according to people familiar with the negotiations, is that Disney and Warner Bros. Discovery will enter into new agreements with the NBA to televise fewer games. The NBA declined to comment for this article.
The two companies together show approximately 160 regular season games each year, as well as the playoffs and NBA Finals. Most games are shown on cable (ESPN and TNT), a handful on ABC.
For both companies, NBA broadcast rights remain a valuable bargaining chip in negotiations with their largest customers: cable and satellite companies. These distributors pay billions of dollars to Disney and Warner Bros. Discovery for the rights to air its cable channels, including TNT and ESPN, based in part on the expectation that those channels will air sports like NBA basketball.
An NBA package would also help both companies transition into a streaming future. Warner Bros. Discovery recently added a live sports package to its streaming service Max, while ESPN has been vocal about having a standalone streaming offering for its flagship channel in the near future.
Disney and Warner Bros. However, Discovery likely aren’t the only companies offering NBA games. If these companies end up showing fewer games in the new deal, the league could create a third rights package, perhaps even a fourth, of the games no longer included in the first two packages, as well as the league’s new season tournament.
The most likely buyers for those games packages are Amazon and NBC, people familiar with the negotiations said.
Top executives Fox, CBS and owned by Google YouTube have said they are unlikely to make serious bids for broadcast rights. Netflix and Apple’s intentions are less clear, but Netflix has long said it isn’t interested in paying the kind of prices the NBA is looking for. Apple has largely committed to a sports strategy that involves purchasing all of a league’s domestic and international rights, as in the league recent deal with Major League Soccer. That’s not possible in the NBA
Amazon and NBC are attractive partners for the NBA for very different reasons.
For a generation, most NBA games could only be viewed with a cable package. But the collapse of the cable bundle — from about 100 million households with a cable package a decade ago to about 70 million today — has made old-fashioned broadcast networks, the most widely distributed television channels, more attractive. With CBS and Fox as unlikely bidders, the league would like games to be shown on NBC’s broadcast channel.
As for Amazon, it is considered highly unlikely that the NBA — a league that prides itself on being progressive in technology — would sign a new rights deal with only traditional media companies, according to some people familiar with the negotiations. Amazon has long been interested in broadcasting the NBA, according to a person familiar with the league’s negotiating history, and it has received rave reviews for the way it has handled Thursday night NFL games.
The media and technology companies declined to comment for this article. CNBC, Bloomberg And The Wall Street Journal have all previously reported on parts of the NBA’s media rights negotiations.
The league has a number of other media assets it could leverage. Most NBA games are not shown nationally. Instead, they air in their local markets, with individual teams controlling the rights to sell those games. Traditionally, teams have sold these rights to regional sports networks, but those are collapsing, leaving teams looking for alternatives.
If Diamond Sports, which is in bankruptcy proceedings, goes bankrupt, the NBA could suddenly regain control of local rights for about half the league’s teams. If that happens, it could sell some of those rights to a national partner. But that would require the league to work with its team owners — and with current rights holders — on the complicated task of navigating roughly 30 different local agreements.
It would also leave out some high-profile teams, such as the New York Knicks and the Los Angeles Lakers, which have long-standing local rights deals with successful regional sports networks.
The NBA could also sell some international rights. The rights to show NBA games in some basketball-crazy countries like China could be extremely valuable, especially as domestic streaming companies seek new markets. But the league – unique in American sports in that it sells all its international rights directly rather than working with third parties – is expected to sell those rights country by country to the highest bidder.
The real wild card if the NBA wants to do something groundbreaking could be its old powerhouse: ESPN.
Disney and ESPN executives have spent the past few months talking to private equity firms, technology and mobile companies and sports leagues, and have concluded that if they want to give up stock, it must do so in a league, or leagues, as part of a long-term strategy. term partnership, according to two people familiar with ESPN’s plans.
Analysts have valued ESPN at $25 billion to $50 billion, meaning a potential partner would have to trade billions in value for even a small stake. While a partner could pay Disney for a stake in ESPN, the company is actually looking for exclusive content, some involved in the negotiations said.
Disney executives have spoken with a number of sports leagues, including the NBA, about selling shares in ESPN and what the company would want from such an arrangement. According to one of the people, the benefits ESPN is pursuing in a partnership could include more closely integrating a league’s social media operations with the network’s, content such as documentary rights and more in-game audio from players , distributing games whose broadcast is not available. rights within its apps and collaborate in the field of marketing.