The Future of NBA Rights Deals: Uncertainty and Changing Priorities

Introduction

Former ESPN President John Skipper believes that incumbents Disney and Warner Bros. Discovery have no choice but to renew their NBA rights deals. In an episode of the podcast Pablo Torre Finds Out, Skipper emphasized the importance of the NBA for ESPN and TNT.

The Current Deals

The 9-year pacts between Turner and ESPN, which amount to $2.6 billion per year, are set to expire at the end of the 2024-25 season. As streaming becomes more prevalent, large tech firms like Amazon and Apple are considering entering the rights bidding process. NBCUniversal, with its Peacock streaming service, has also expressed interest. The addition of a digital component could bring in significant revenue for the NBA, especially as traditional media companies face financial challenges due to cord-cutting.

The Value of Live Sports

Live sports viewership is crucial for maintaining the traditional pay-TV bundle. While ESPN has experienced a decline in household penetration over the past decade, NBA games still hold value. Although NBA ratings are lower than those of the NFL, the league's rights deals include video clips that circulate on social media, providing additional exposure.

Ratings and Negotiations

Contrary to speculation, Skipper and David Samson, a former MLB executive and podcast host, believe that ratings are not a major factor in rights negotiations. Skipper stated that ratings do not affect distribution fees, and Samson added that ratings are not a significant consideration in determining the value of rights deals.

The Negotiation Approach

Skipper, known for his successful rights acquisitions during his tenure at ESPN, emphasized his approach of prioritizing winning and securing rights to maintain ESPN's status as the leader in sports. While financial calculations were not his primary focus, Skipper acknowledged the involvement of a CFO in budgeting and projections.

Uncertain Future

ESPN has recently allowed properties like Big Ten football to leave, and the company has undergone significant job cuts. Warner Bros. Discovery's chief, David Zaslav, has indicated a willingness to pass on the NBA if the price becomes too high. Additionally, Disney's announcement of seeking a minority partner for ESPN has raised speculation about the company's intentions.

Conclusion

The future of NBA rights deals is uncertain, with streaming platforms and tech firms entering the bidding process. While the NBA holds value for traditional media companies, financial challenges and changing priorities may impact the outcome of negotiations. The importance of live sports viewership and the need to secure rights to maintain market position remain key considerations for ESPN and Turner.