Competitors Vie for Next NBA Rights Contract – League Primed for Huge Payday

The NBA’s eight year, $7.5 billion media rights deal does not expire until the start of the 2016-17 season, but its looming presence is already having a significant effect on franchise values and speculation about how vast the dollar figure for the next deal will be.

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The NBA finds itself in superb negotiating position. Since 2013, both Fox and NBC have launched 24-hour sports networks which are both eager to add premium properties to their lineups. With the NFL and MLB locked into long-term deals that run through 2021, the NBA offers Fox and NBC the best opportunity to do so.

The league is also more popular now than it was when the previous deal was negotiated in 2007. In that year the Spurs’ sweep of the Cavaliers was the lowest rated NBA Finals of all time. Current rights holders Turner and ESPN essentially ran unopposed, as there was little demand from other networks.

Ratings for the NBA finals and nationally televised regular season games have steadily increased since then. The league is also in the midst of an off-season full of headlines, including the publicly popular homecoming of LeBron James. This popularity, combined with the large number of bidders and the degree to which networks value live sports programming in the DVR era puts the NBA in an ideal position. The two key questions are which networks (or even potentially outsiders like Google or Apple TV) obtain the rights and just how big will the next media contract will be.

The answer to the first question likely starts with the incumbents: ESPN and Turner. Tuner has a 30-year relationship with the NBA and operates its digital properties. It also shares its NBA studio in Atlanta with NBA TV.

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ESPN will also likely maintain rights to the league. Its executives have been public about their desire to do so and the network has no shortage of cash. However, if bids from Fox, NBC or other networks far exceed what ESPN views as a fair price, the network may not be afraid to stay away. President of ESPN John Skipper is an avid soccer fan and highly values ESPN’s role in popularizing soccer in the United States. But when Fox offered a massive $425 million bid ESPN balked.

While it’s possible the same could happen with the NBA, it seems unlikely. Losing the NBA would create a significant programming hole from the end of football season through the spring without rights to March Madness, the NHL or the NBA. That’s not a position in which the ‘world wide leader’ would like to find itself.

One possible change to the arrangement is that the Finals could be shared between ESPN and Turner in the next deal. Currently ESPN broadcasts the series on ABC. However, with the recent trend of major events like the Final Four, College Football Playoff and Stanley Cup Finals playing at least some games on cable, there’s a good chance Turner will make a pitch for at least part of the Finals. The model would likely be similar to how CBS and Turner share the Final Four.

It also seems likely that the NBA will add at least one broadcast partner – there’s simply too much potential money to be made. Currently, games are nationally televised on ESPN or ABC on Wednesday, Fridays and Sundays, (after the football season) while TNT has a doubleheader each Thursday. It’s possible that a third broadcast partner could own Tuesday nights, or even Saturdays or Mondays once football season ends. The two most likely candidates for this type of package are Fox and NBC.

Fox has been more aggressive in its bidding – the World Cup is a prime example. Network executives have been vocal about Fox Sports 1’s desire to compete with ESPN. Landing the NBA would be a major step toward this goal, even if it doesn’t result in ESPN losing rights to the league.

NBC has utilized a different approach since its launch of the NBC Sports Network in Jan. 2013, but it will also be a player at the negotiating table. Hockey, English Premier League soccer and the Olympics are the lynchpins of NBC Sports Network’s live programming. While the network has received praise from avid fans of these sports and recognition from industry insiders, hockey and soccer (other than during the World Cup) have niche followings. In contrast to Fox, NBC executives have talked publicly about prudence and developing the brands of its current properties.

Still, NBC has a strong history with the league – the intro to the Jordan era Bulls is still the best sports jingle of all time – and has shown the ability to do great broadcasts and studio coverage of its properties. During a recent podcast Bill Simmons said he thought NBC’s quality coverage of the EPL and NHL made them the favorites to be a third partner. While Simmons is known as a super-fan and blogger, he’s become more of an NBA insider in recent years. His early prediction of the Clippers’ $2 billion price tag was higher than most experts had predicted but proved prophetic.

In terms of the actual amount of the deal, most insiders predict the number will about double the previous contract, which averages about $930 million per year. It’s hard to peg a specific number, but given all the advantages working in the NBA’s favor, I’d bet the number comes in higher than consensus – perhaps greater than $2 billion per year. 2014 has seen both the Clippers and Bucks sell for significantly more than their Forbes estimated value. In 2013 the small market Sacramento Kings sold for a then-record $535 million and could’ve gone for more if Chris Hansen’s group had been allowed to move the team to Seattle.

This looming increase in TV revenue will have a dramatic effect on the salary cap. It’s the reason LeBron James signed just a two year contract –  he wants to take advantage of the increase in the maximum salary once the new TV deal is signed.

ESPN and Turner both desperately want to keep the NBA. Fox Sports 1 desperately wants to compete with ESPN. Acquiring the NBA could be a game changer for the growth of NBC Sports Network. Google and Apple have billions of dollars and revolution-minded executives who could approach the league with forward thinking, enormous offers. All that’s certain is intense negotiations and a massive financial windfall for the NBA.

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