The media world has its eyes on the NBA right now.
The league is the next major sports property with its media rights up for grabs as its deal with Disney’s ABC/ESPN and Warner Bros. Discovery’s TNT expires after the 2024-25 NBA season.
There will be a gaggle of suitors for the NBA — which tips off its penultimate season under its current deal on Oct. 24. Joining the two incumbents in the bid will be Amazon, Apple, Comcast (CMCSA) -) through NBCUniversal, Google through YouTubeTV, and even Netflix (NFLX) -), according to CNBC.
Many other sports leagues have secured significant raises in their last media rights deals, and the NBA is also expected to see an increase from the approximately $2.7 billion per year it’s receiving from Disney (DIS) -) and Warner Bros. Discovery (WBD) -). As a barometer, the NFL in 2020 signed its deal worth $10 billion annually for 11 years and saw increases of at least 35% across its five different partners (Fox, NBC, CBS, ESPN, and Amazon).
In 2021, it was reported that the NBA would be seeking a $75 billion deal or somewhere in the ballpark of about $7 billion to $8 billion per season. That’s an annual increase of over 250% from its current number.
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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.
Is the $7 to $8 billion target figure possible?
Beyond the NBA’s audience, Kaufman believes the media rights deal of the NBA is valuable in part because it’s “the next one” available in the market, and Favorito stressed that rights values lie in that scarcity.
“I think TV sports rights are the same for the elite properties: They don't come up all the time,” Favorito said. “They appreciate it because everybody knows what it is that you have. It’s like driving a Ferrari.”
But despite its value, experts are mixed on whether they think the league will hit its reported target deal with what will reportedly be only two or three media partners.
John Rowady, president and founder of sports marketing agency rEvolution, thinks that the global value of the NBA makes the $7 billion to $8 billion number possible.
“This valuation could be light,” Rowady told TheStreet. “Given the league's international appeal and the digital opportunities it presents, this figure isn't beyond the realms of possibility in today's evolving media rights marketplace.”
Favorito doesn’t want to make any direct predictions, but he pointed at the rising franchise valuations as an example for anybody that may doubt NBA's massive target figure.
“The market will bear,” Favorito said. “If you go back to look at franchise values, there were people who said that Steve Ballmer was crazy for spending $2 billion on the LA Clippers. Now it's a bargain.”
Ballmer, the former Microsoft (MSFT) -) CEO, purchased the NBA’s Los Angeles Clippers in May 2014 for $2 billion in what many at the time viewed as an overpay. Sportico valued the Clippers at $3.6 billion in 2022, and that number is much higher now given that the Phoenix Suns were then valued at $3 billion but were sold in February for $4 billion.
Related: Steve Ballmer nearly revived the Seattle Supersonics by moving another NBA team
Kaufman isn’t as bullish on the media rights target number, but said he wouldn’t be surprised at whatever outcome might happen.
“I imagine the league would be very happy with 3x, I imagine the rights holders probably wouldn't be super happy with 3x,” Kaufman said. “I think all sides accept the fact that there will be some significant growth. [But] I think people were throwing out the 3x numbers, and I don’t know if those are realistic.”
Can ESPN fend off the tech companies?
Disney has held a huge chunk of the NBA’s media rights throughout this century, but the company is in turmoil. In July, Disney CEO Bob Iger announced that the company was looking for “strategic partners” to help with content and distribution.
Reports have come out since then that sports leagues like the NBA and NFL could be potential partners that would receive a stake in the network. There were also reports that companies like Amazon (AMZN) -), with its Prime service, would be interested in partnering with Disney.
Related: Why Amazon would choose to purchase ESPN according to an investment firm CEO
Despite the struggles of ESPN and the deeper pockets of threats like Apple (AAPL) -) and Amazon, experts still expect that ESPN’s ability to offer linear television while also its commitment to a direct-to-consumer service in the coming years will make it difficult for the NBA to not stick with The Worldwide Leader.
“I think you have to look at reach and relevance, which are really important,” Favorito said. “I think the one thing that we've learned from a property like the NBA over the years is access is really key and access is very important and making their highlights available on platforms like YouTube in the past.”
The NFL’s “Thursday Night Football” viewership averaged just 9.6 million viewers behind Amazon Prime’s paywall last season, which Insider reported was 25% less than its preseason estimates. But the 2023 NFL season started out strong for TNF, an important sign for the NBA as experts are certain the NBA’s next package will have several elements incorporating digital and direct-to-consumer rights.
“My guess is that while they may not look exactly like they did the last time around, I also would be surprised if they were so dramatically different. I would be a little surprised if it went kind of the MLS Apple route,” Kaufman said, referring to Apple’s $250 million per year deal to gain exclusive rights on Apple TV+. “I think the NBA gets the benefit of kind of having that broader reach while also being in a space where they know that their fans are engaging in a little bit more on that techy, streaming side.”
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