NBA's new TV deal, maybe not smooth sailing

[ForeverTFC]

Now Amazon is supposedly negotiating to make a streaming version of ESPN.

Someone is floating the idea of $20-35 a month just for that.

What are they smoking?

Well ESPN will have the Super Bowl, for the first time in 2027. Also in 2031.

But when NFL and NBA are not playing, there's nothing to watch. They can yak about NFL on First Take and other talk shows during the offseason but nobody is paying $20 or more a month for that and Little League World Series.

Any company investing in ESPN is probably going to pay whatever it takes to secure the NBA deal, because it provides bulk in filling up live sports programming. Probably means they seek to recover their investment by raising revenues, meaning higher prices.

But they're going to have the most expensive streaming service?

I don't think it's that high too be honest. I pay yearly for league pass (works to $15 a month during the season) and I have Hulu live ($60 a month) for national NBA games, football, and the world cup/euros every other year. I turn off hulu live during the summer and turn it back on when football comes back.

If I could get the turner games and the NFL somehow along with ESPN at ~$60 a month, wouldn't make a difference to me. The problem for me isn't the money necessarily because at the end of the day I'd pay what I'm paying now, what will suck is the experience of having to maintain so many more apps and subs when I get all sports content I need with league pass + hulu live.

[VanWest82]

Ben Thompson wrote a very good article earlier this week detailing the rise and fall of ESPN's leverage over cable companies: https://stratechery.com/2023/the-rise-and-fall-of-espns-leverage/

Charter vs. Disney

Over the last decade the story of ESPN specifically, Disney more broadly, and cable as a whole has been the slow but steady disintegration of that flywheel, culminating in the current standoff between Charter and Disney.

Channels going dark in the midst of an affiliate fee dispute aren’t new: indeed, they were how ESPN managed to extract per-subscriber fees in the first place. And, for 40 years, ESPN usually won, including a standoff with YouTube TV in late 2021...When Disney went dark on Charter last week, I initially assumed a similar outcome; then came the Charter investor call the next morning, and this slide:

The most important sentence is in the light blue box on the far right: “The video product is no longer a key driver of financial performance.” This is the culmination of a 25-year shift in business model for the cable companies: those initial investments in wires in the ground to provide small communities access to big city TV broadcasts turned out to be very well suited to providing broadband Internet access. Remember the lesson of RCA and ESPN’s founding: the digital transmission of information is inherently indifferent to the data being distributed. In the case of cable the initial use case was digital TV signals, but the exact same cable could also carry packets running the TCP/IP protocol.

There's much more in the link, but the gist of it is ISPs don't need ESPN anymore. If broadcast companies like ESPN (or Turner) can no longer hold ISPs over the barrel on subscriber fees, basically forcing them to take on channels nobody watches in order to get the premium channels with premium content, then how can they justify escalating content rights from the NBAs and UFCs of the world?

NBA could always go to big tech but their leverage there isn't the same. Big tech doesn't need NBA like ESPN and Turner did. They're probably not getting double the current rights deal from Apple or Amazon. And they're not getting that deal from ESPN or Turner either given what Ben described above.

Why do we care? Teams have been spending way over the tax as a result of ever increasing franchise valuations. That is about to end, and it won't just be about the new more prohibitive CBA. We are likely entering a period of NBA austerity which isn't something I would have predicted even a month ago.

[Jadoogar]

Live sports is basically the only that cable has going for it anymore. Most people under 35 do not have cable anymore. I think cable companies will need to spend big money to keep sports to maintain any sort of relevance.

[ForeverTFC]

Haven't read the article but did listen to the pod (search his name on Spotify for those interested).

Charter is saying they don't need ESPN (some posturing I'm sure). That doesn't negate the fact that ESPN/Disney and Turner/Warner Media need the NBA. Without the NBA, those franchises go to ****. It may not be the 3x that was leaked last year, but the rights will go up in price. Iger has talked about ESPN going OTT at some point, and they'll need the NBA rights if there is any chance of success there.

[VanWest82]

Live sports is basically the only that cable has going for it anymore. Most people under 35 do not have cable anymore. I think cable companies will need to spend big money to keep sports to maintain any sort of relevance.

Did you read the article? Companies like Charter no longer need ESPN. They make enough just selling the internet + vMVPDs, and you can get ESPN over the internet now anyways.

ESPN made billions because they could charge $9 per sub plus force all the crappy ESPN affiliate channels on companies like Charter. That's going away. Up until now, the threat has been chord cutting. Now it's chord cutting + lower sub fees. At some point, there's a hard line number that ESPN can't cross bidding on rights, and that's bad news for content providers like NBA who had been leveraging ESPN to overpay for its rights.

[Jadoogar]

Live sports is basically the only that cable has going for it anymore. Most people under 35 do not have cable anymore. I think cable companies will need to spend big money to keep sports to maintain any sort of relevance.

Did you read the article? Companies like Charter no longer need ESPN. They make enough just selling the internet + vMVPDs, and you can get ESPN over the internet now anyways.

ESPN made billions because they could charge $9 per sub plus force all the crappy ESPN affiliate channels on companies like Charter. That's going away. Up until now, the threat has been chord cutting. Now it's chord cutting + lower sub fees. At some point, there's a hard line number that ESPN can't cross bidding on rights, and that's bad news for content providers like NBA who had been leveraging ESPN to overpay for its rights.

It's just going to change. Instead of paying for ESPN on your TV, you'll be forced to pay for ESPN+ or whatever. Even for their online service, ESPN is going to need content.

[VanWest82]

Live sports is basically the only that cable has going for it anymore. Most people under 35 do not have cable anymore. I think cable companies will need to spend big money to keep sports to maintain any sort of relevance.

Did you read the article? Companies like Charter no longer need ESPN. They make enough just selling the internet + vMVPDs, and you can get ESPN over the internet now anyways.

ESPN made billions because they could charge $9 per sub plus force all the crappy ESPN affiliate channels on companies like Charter. That's going away. Up until now, the threat has been chord cutting. Now it's chord cutting + lower sub fees. At some point, there's a hard line number that ESPN can't cross bidding on rights, and that's bad news for content providers like NBA who had been leveraging ESPN to overpay for its rights.

It's just going to change. Instead of paying for ESPN on your TV, you'll be forced to pay for ESPN+ or whatever. Even for their online service, ESPN is going to need content.

Yes, it's going to change. No, it's not going to change in a way that's at all good for ESPN.

The beauty of the old cable model (from ESPN's POV) was that they could charge $9 per sub regardless. They had that kind of negotiating power. This led to a system where a bunch of non-sports fans were paying $9 for ESPN (and had no idea that's what the price was) and not watching a min of it. Think mom who mostly watches sitcomes or reality tv or whatever. They lose out on all those people who pay for a product they don't watch with ESPN+.

And now, because the ISPs/cable co's are finding they have enough margin on internet and enough demand with vMVPDs, they can afford to walk away from ESPN. Streaming is not likely to offset less subs + less fees per sub. ESPN+ or whatever streaming product looks like in the future would have to drastically increase their price to make up the difference, and that's just to make the current financials work let alone what new rights deals might look like.

[JonFromVA]

if i'm network i'm gonna choke the nba on this load management stuff

Or the networks could just give the NBA a % of the ad-revenue their games generate like the NBA gives the players a % of their revenue. That would tie all their profitability together in a nice bow.

Alas, that would actually swing power to the players in future CBA negotiations as the league leans hard on the fact they get money from their TV deal regardless of whether there are games being aired.

Seems like a genius move if ESPN/TNT/ABC/etc were willing to risk losing the rights to someone more willing to offer a guaranteed deal.

[ForeverTFC]

Did you read the article? Companies like Charter no longer need ESPN. They make enough just selling the internet + vMVPDs, and you can get ESPN over the internet now anyways.

ESPN made billions because they could charge $9 per sub plus force all the crappy ESPN affiliate channels on companies like Charter. That's going away. Up until now, the threat has been chord cutting. Now it's chord cutting + lower sub fees. At some point, there's a hard line number that ESPN can't cross bidding on rights, and that's bad news for content providers like NBA who had been leveraging ESPN to overpay for its rights.

It's just going to change. Instead of paying for ESPN on your TV, you'll be forced to pay for ESPN+ or whatever. Even for their online service, ESPN is going to need content.

Yes, it's going to change. No, it's not going to change in a way that's at all good for ESPN.

The beauty of the old cable model (from ESPN's POV) was that they could charge $9 per sub regardless. They had that kind of negotiating power. This led to a system where a bunch of non-sports fans were paying $9 for ESPN (and had no idea that's what the price was) and not watching a min of it. Think mom who mostly watches sitcomes or reality tv or whatever. They lose out on all those people who pay for a product they don't watch with ESPN+.

And now, because the ISPs/cable co's are finding they have enough margin on internet and enough demand with vMVPDs, they can afford to walk away from ESPN. Streaming is not likely to offset less subs + less fees per sub. ESPN+ or whatever streaming product looks like in the future would have to drastically increase their price to make up the difference, and that's just to make the current financials work let alone what new rights deals might look like.

Sorry if I missed some previous context on this. I think in the short to mid-term, yes this could have ramifications for ESPN. But OP is extending it to the NBA. And that's where the thesis falls apart.

We don't need to go far to see why the logic doesn't work. Cable companies have been losing on revenue and margin for some time now. During this same time, ESPN has actually been able to grow its revenues. They did it because of pricing power provided to them by value of live sports as pointed out. In short, ESPN scaled P at a higher rate than Q was declining in the P*Q=R equation.

Now, the cable companies may not need ESPN to the same degree anymore because cable viewers are 50+ news watchers. But ESPN still needs live sports. So even if this stagnates or decreases ESPN's revenue and unit economics, the live sports rights are still valuable because ESPN needs them. And so the NBA will get a raise because it still has that leverage. The economic rents may be shifting away from ESPN, but they're not disappearing. That's the point.

[wco81]

Live sports is basically the only that cable has going for it anymore. Most people under 35 do not have cable anymore. I think cable companies will need to spend big money to keep sports to maintain any sort of relevance.

Did you read the article? Companies like Charter no longer need ESPN. They make enough just selling the internet + vMVPDs, and you can get ESPN over the internet now anyways.

ESPN made billions because they could charge $9 per sub plus force all the crappy ESPN affiliate channels on companies like Charter. That's going away. Up until now, the threat has been chord cutting. Now it's chord cutting + lower sub fees. At some point, there's a hard line number that ESPN can't cross bidding on rights, and that's bad news for content providers like NBA who had been leveraging ESPN to overpay for its rights.

Ben was on with Bill Simmons and they discussed this a little bit.

Charter may play hard ball but the NFL season just started. That's a lot of NFL games and other NFL content that Charter subscribers will be clamoring for.

As far as what happens with sports rights, we kind of saw it with the disintegration of the Pac 12. The schools there didn't care about the money, they didn't want their games only on Apple TV + because a lot of people, especially older people, can't or won't deal with streaming apps. They like to turn on certain channels and leave TV on in the background.

Disney may see the ultimate future of ESPN as mainly a streaming outlet and they have to acquire viewers directly instead of through cable TV. But that likely isn't going to happen overnight.

In fact, the next NBA TV deal will be for 5 or 10 years. So 10 years from now will ESPN still be mainly viewed through cable TV or as a separate streaming service?

For people under 50, they could probably deal with just subscribing to a streaming package. That is if the people under 40 watch ESPN or sports as much as older generations.

But for older people who grew up with cable TV? It's not hard to open an ESPN + app. However, it's much easier to tune to the ESPN channel and have it on in the background for most of the day.

[Chuck Everett]

This is worth monitoring. I believe the fact that Marc Lasry sold out of the Bucks and Michael Jordan sold out of the Hornets makes for interesting commentary.

As someone who [sometimes] works in Hollywood, when Rupert Murdoch sold FOX to Disney that should have been seen as a canary in a coalmine. How long is this high-interest rate environment going to last? What happens if Charter-Spectrum isn't the only cable provider who feels the same way about just being an internet service provider and leaves the video business to companies like YouTubeTV, Sling, Fubo and HuluLive? That would not bode well for the NBA or the other non-NFL leagues, since NFL makes all of that money from free OTA networks.

NBA fans keep overlooking the Diamond Sports/Bally Sports bankruptcy case. The fact that the NBA is talking about taking over local production should be concerning to everyone. Where is this extra money going to come from?

[wco81]

NBA is going to start its penultimate season under the current TV deal.

ESPN and TNT retain their exclusive negotiation windows until April.

After that, other networks or streamers like Amazon and Apple can bid for part of the NBA TV rights for the US.


We've had all these stories about how Disney is seeing it's ESPN money dry up as cord-cutting accelerates. In additional media companies like Warner Brothers Discovery which owns TNT are reporting huge losses from streaming.

We also hear of poor ratings for NBA games in the last few years.

Yet the NBA is expected to attract a lot of interest because sports still attract live audiences, willing to sit through ads, not to mention major sports packages come up for bid only once a decade:

Every media rights renewal for the NBA is an important event because it only happens about once a decade. The last rights deal was announced in 2014. The NBA's current rights deal ends after the 2024-25 season.

All expressions of interest between media partners and the NBA have been preliminary because league officials can't officially negotiate with interested partners until April, when the league's exclusive negotiating window with incumbent media rights partners Disney and Warner Bros. Discovery ends.

But with the National Football League's media rights locked up until 2033, the NBA has a unique opportunity to play media kingmaker. Live sports have continuously increased in value for decades as advertisers clamor for live events where commercials can't be skipped. The NBA will likely get a significant increase on its new media deal. Former ESPN head John Skipper predicted earlier this year the league could get between 200% and 350% more in its new agreement.

Read in CNBC: https://apple.news/AwvB5tv8YTq2WRlwwQ-Dw2g

What is intriguing is that Netflix, which had expressed disinterest in sports rights in the past, may be interested because they want more subscribers who watch ads, because they ultimately make more money from the ad-tier than the higher-priced ad-free subscriptions.

NBA may be interested in Netflix's global reach.

Meanwhile there are differences of opinions on how much NBA could get for TV rights, even with streaming companies involved in the bidding. Ratings have been down but some argue that online engagement involving younger fans may make NBA rights more attractive:

This is despite data that NBA’s ratings have taken a tumble in recent years. The last four NBA regular seasons rank among the six least watched seasons of the past 30 years, according to Nielsen, though the covid-interrupted seasons are considered here and viewership numbers were down across most sports during that period.

A big reason for the dip is simply the decline in linear viewership overall. SportsMediaWatch highlighted that the 2022-23 NBA season saw its linear viewership audience nearly cut in half compared to its linear audience a decade prior.

But those who were still on linear television were watching the NBA. According to another report by SportsMediaWatch, the NBA averaged about 10% of all linear viewership during the 2023 playoffs, the highest share its had since 1998.

Even with the contentious analysis of the NBA’s television ratings, several experts told TheStreet that these rights deal negotiations go far beyond television ratings. Veteran sports media consultant and Columbia University sports management professor Joe Favorito referred to these ratings as an “archaic” way to look at rights negotiations.

“It's not really reflective of fandom today,” Favorito told TheStreet. “You can't just say, who's sitting in front of a piece of glass in their living room watching with a beer. Now it's: ‘Who is engaged, how long have they engaged, how are they interacting with each other, how are they reacting to what's going on, what products are they buying?'”

National Research Group’s executive vice president Jay Kaufman, who worked with the NBA for over two decades and helped in the internal analysis of the last two media rights deals, said that when he was with the NBA, he helped the league tell its monetization story by going beyond Nielsen ratings.

“We thought about this idea of Total Audience Measurement,” Kaufman told TheStreet. “In essence, taking the amount of time people were spending on live games on linear TV and then looking at digital engagement and social and highlights and thinking about it in terms of one big pie … If ratings or viewership or data is down a couple percent but the pie is expanded 10%, that's probably a good thing.”

The NBA hit a record of over 32 billion views across social media last season, and 50% of its total social media audience were 25 years old or younger. Its ability to secure a young and diverse demographic is another major reason why the league's rights remain so valuable.

“I think with a property like the NBA, the sort of audience they are delivering is pretty incredible: young, diverse, tech savvy audience that's a global audience,” Steve Herbst, vice president for client engagement at K2 Integrity, told TheStreet.

Read in TheStreet: https://apple.news/ALWAYh0RrSAC4FZV63IxdAw

[wco81]

NBA has to negotiate a new TV deal before the fall.

They probably wanted a deal in place by now but Disney has seen it's ESPN business crater and now the latest rumors are that the NFL will take an equity position in ESPN.

WBD, which has NBA rights through TNT, is struggling itself.

This season though, the NFL is messing with the NBA. First they put on a couple of big games for Christmas Day, which is traditionally a big TV day for the NBA.

Now, MLK Day, another big TV day with two national NBA games scheduled and some other games as well but the NBA will have TWO Playoffs games on today.

NBA is trying to maximize ratings this season, with the IST, to try to make their best case for bigger TV contracts and the NFL is trying to screw them.

[Ruma85]

NBA is going to start its penultimate season under the current TV deal.

ESPN and TNT retain their exclusive negotiation windows until April.

After that, other networks or streamers like Amazon and Apple can bid for part of the NBA TV rights for the US.


We've had all these stories about how Disney is seeing it's ESPN money dry up as cord-cutting accelerates. In additional media companies like Warner Brothers Discovery which owns TNT are reporting huge losses from streaming.

We also hear of poor ratings for NBA games in the last few years.

Yet the NBA is expected to attract a lot of interest because sports still attract live audiences, willing to sit through ads, not to mention major sports packages come up for bid only once a decade:

Every media rights renewal for the NBA is an important event because it only happens about once a decade. The last rights deal was announced in 2014. The NBA's current rights deal ends after the 2024-25 season.

All expressions of interest between media partners and the NBA have been preliminary because league officials can't officially negotiate with interested partners until April, when the league's exclusive negotiating window with incumbent media rights partners Disney and Warner Bros. Discovery ends.

But with the National Football League's media rights locked up until 2033, the NBA has a unique opportunity to play media kingmaker. Live sports have continuously increased in value for decades as advertisers clamor for live events where commercials can't be skipped. The NBA will likely get a significant increase on its new media deal. Former ESPN head John Skipper predicted earlier this year the league could get between 200% and 350% more in its new agreement.

Read in CNBC: https://apple.news/AwvB5tv8YTq2WRlwwQ-Dw2g

What is intriguing is that Netflix, which had expressed disinterest in sports rights in the past, may be interested because they want more subscribers who watch ads, because they ultimately make more money from the ad-tier than the higher-priced ad-free subscriptions.

NBA may be interested in Netflix's global reach.

Meanwhile there are differences of opinions on how much NBA could get for TV rights, even with streaming companies involved in the bidding. Ratings have been down but some argue that online engagement involving younger fans may make NBA rights more attractive:

This is despite data that NBA’s ratings have taken a tumble in recent years. The last four NBA regular seasons rank among the six least watched seasons of the past 30 years, according to Nielsen, though the covid-interrupted seasons are considered here and viewership numbers were down across most sports during that period.

A big reason for the dip is simply the decline in linear viewership overall. SportsMediaWatch highlighted that the 2022-23 NBA season saw its linear viewership audience nearly cut in half compared to its linear audience a decade prior.

But those who were still on linear television were watching the NBA. According to another report by SportsMediaWatch, the NBA averaged about 10% of all linear viewership during the 2023 playoffs, the highest share its had since 1998.

Even with the contentious analysis of the NBA’s television ratings, several experts told TheStreet that these rights deal negotiations go far beyond television ratings. Veteran sports media consultant and Columbia University sports management professor Joe Favorito referred to these ratings as an “archaic” way to look at rights negotiations.

“It's not really reflective of fandom today,” Favorito told TheStreet. “You can't just say, who's sitting in front of a piece of glass in their living room watching with a beer. Now it's: ‘Who is engaged, how long have they engaged, how are they interacting with each other, how are they reacting to what's going on, what products are they buying?'”

National Research Group’s executive vice president Jay Kaufman, who worked with the NBA for over two decades and helped in the internal analysis of the last two media rights deals, said that when he was with the NBA, he helped the league tell its monetization story by going beyond Nielsen ratings.

“We thought about this idea of Total Audience Measurement,” Kaufman told TheStreet. “In essence, taking the amount of time people were spending on live games on linear TV and then looking at digital engagement and social and highlights and thinking about it in terms of one big pie … If ratings or viewership or data is down a couple percent but the pie is expanded 10%, that's probably a good thing.”

The NBA hit a record of over 32 billion views across social media last season, and 50% of its total social media audience were 25 years old or younger. Its ability to secure a young and diverse demographic is another major reason why the league's rights remain so valuable.

“I think with a property like the NBA, the sort of audience they are delivering is pretty incredible: young, diverse, tech savvy audience that's a global audience,” Steve Herbst, vice president for client engagement at K2 Integrity, told TheStreet.

Read in TheStreet: https://apple.news/ALWAYh0RrSAC4FZV63IxdAw

Not that I care a lot about the ratings, but if I was in charge I think netflix is a great reach for more viewers, as avid league pass subscriber, I think it would work better on Netflix then the games work on league pass.

[wco81]

Netflix may not be interested in bidding.


They already make the most money in streaming.

[Apz]

Problems with NBA, and most sports in america, is that its very difficult to break thru in europe. While stuff like Premier league is in the mornings in the US and can be watched, only us bball nerds will sit up watching games starting at 0100-0430 in the night. So the prospects to grow in such an economical area is very limited.

The money need to come from somewhere, and atm its basicly the US fans that pays for it.

[sp6r=underrated]

The model needs to steer towards pay per view/subscription. For past 30+ years, consumers have been subsidizing all kinds of crappy product on cable/satellite indirectly. Technology has permitted consumers to bypass the traditional business structure. Now its on them to adjust. Today, its much easier to execute a product sale to the end user directly. The resistance is because they got addicted to ripping people off for so long.

Sports leagues are hesitant to embrace the PPV model for a varitey of reasons but the biggest is that it will shrink the fanbase. Sports fandom exists via 3 mechanisms: parents to children; community interest and routine.

When you go to PPV you're disrupting all 3. Poor people are by definition poor and they won't be able to afford all the streaming packages. Second, some people are cheap and won't want to pay for sports if they're used to getting it as a part of a broader package. And finally some will only buy for big events and that will disrupt the routine of watching sports.

I'm not saying PPV will do to basketball what it did boxing. There are a lot of reasons that sport became so niche over a couple of generations. But if the NBA moved to PPV the fanbase would contract.

And that is why owners and players alike are nervous about it. Superstars make a ton of money in endorsements. Endorsement contracts depend on name recognition.

[Tim Lehrbach]

But if the NBA moved to basketball the fanbase would contract.

sp6r=adamsilver

[Ruma85]

Netflix may not be interested in bidding.


They already make the most money in streaming.

If there was a way to subscrib to league pass through some type of package without blackouts, there's potential to make money, blackouts are not a problem, overseas. When nba app moved to Microsoft it was a downgrade. Granted I don't have problems as much because I don't live in the us so no need to worry about blackouts.

[wco81]

NFL has announced that they will have 2 games on Christmas Day this year, which falls on a Wednesday.

So they're going out of their way to encroach on NBA's territory because NFL doesn't have games on Wednesdays. The teams who have to play on a Wednesday are even more screwed than having to play on Thursdays.

But not as much as the NBA, which may have as many as 5 games on Xmas day, meaning some games will be broadcast at the same time as the NFL games?

When NBA is trying to get a new TV contract too.