Much is left to be determined about the NBA’s looming media rights deal (which per John Ourand of Puck will not be determined until next month at the earliest), but one aspect that does not seem likely to change is that the league is on the verge of a historic windfall.
Between an “A” package of $2.6-$2.8 billion for Disney, a “B” package that Comcast inflated to $2.5 billion and a “C” package worth $1.8 billion for Amazon, the NBA is looking at a combined $6.9 billion per year for more than a decade — more than double the $2.7 billion per year the league has averaged over the past nine years. At a deal term of 11 years, the league would thus earn $76 billion over the course of the deal, exceeding the lofty bar of $75 billion first reported by Jabari Young of CNBC three years ago.
Considering the perception of the NBA’s popularity over the past five years, the coming bonanza has been met in some corners with disbelief. For those under the misconception that NBA ratings have tanked — not merely declined — the prospect of such a massive rights deal must seem incongruous. (Those who spent years promising that the NBA would go ‘broke’ will have to adjust their prognostications.) The league set a seemingly unrealistic bar with that $75 billion figure, and is in line to get everything it wanted — and more — despite a ratings slump that has lasted long enough to constitute a new status quo. How could this be?
The sports ratings hierarchy
Often, the perception of a league’s health as a television property is based on the ratings of its championship series. An NBA Finals (or World Series, or Stanley Cup) constitutes a mere seven games maximum, but those are often the most-watched games of the entire year, and the sports hierarchy is for the general public a measure of each league’s ceiling. On that front, the NBA has lost position.
This year’s NBA Finals averaged 11.3 million viewers on ABC, a respectable figure, if down 3 percent from last year’s unheralded Nuggets-Heat series (11.6M) and the least-watched non-COVID Finals since 2007. That figure comfortably surpasses last year’s record-low World Series (9.1M), but is just as comfortably behind this year’s NCAA Final Four and National Championship — both the men (13.5M) and the women (13.8M). Nor is it in the same stratosphere as football, which goes without saying.
The NBA maxed out this year at 12.3 million for Game 2 of the NBA Finals, which outside of the 2020 “bubble” was its lowest ceiling since 2007. Not since the pre-COVID year of 2019 has the league gotten to the 14 million mark, a figure that even the World Series has reached more recently (Game 6 in 2021). As far as basketball audiences go, the top NBA audience this year placed fifth, barely eking out Iowa-LSU in the Women’s Elite Eight game for that spot (12.31M to 12.30M).
From such a vantage point, one is hard-pressed to see why the NBA should generate potentially $7 billion per year, compared to a combined $1.2 billion for the college basketball tournaments ($1.1 billion for the men, with the women’s tournament part of a $115 million per year bundle of the remaining NCAA championships). Even the gap between the NBA and Major League Baseball, which is earning just shy of $2 billion per year for its various deals, is confounding from that perspective.
What the NBA has to offer
To explain the seeming incongruity, begin with the fact that the $7 billion/year figure is not for the NBA Finals, but for all the NBA has to offer — nine months of regular season and playoff games, plus an offseason that includes the Draft, Summer League and WNBA (which in the Caitlin Clark era is a significantly stronger draw than before). There were 239 NBA games with at least one million viewers during the 2023-24 season, more than any other sport except for college football (251). (Including the WNBA and NBA Summer League, which as noted are bundled with NBA rights, that total rises to 249 as of Sunday.) The NFL, it should be noted, had 141 telecast windows total across its 2023-24 regular season and playoffs.
Inventory is the most important factor in sports television, which is why the NFL added an 18th week, the NBA added the In-Season Tournament, and the NCAA is weighing expansion of its basketball tournaments. For all the complaints about the length of the NBA season, having 1,231 regular season/In-Season Tournament games and as many as 105 playoff games that span the entire television season is a significant advantage. (The league is likely to add more inventory through expansion; two additional teams raises the number of games to 1,313.) The NBA’s ceiling may not be what it used to be, but seven figures is a considerable floor given the volume of telecasts. It is reasonable to imagine the league made said volume a point of emphasis in negotiations.
Yet the league’s strong position cannot be explained by volume alone. It also benefits from having those games spread out over most of the year, culminating in a postseason that fully occupies the Q2 months of April, May and June. The broad decline in television viewing that has helped shrink NBA ratings has conversely made it more valuable to advertisers, clearing the field of competition and leaving the league as the primary driver of Q2 ad sales. Over 43 nights of playoff games, the NBA was the most-watched programming 20 times and topped the charts nearly every night in the key adult demographics of 18-34 (41 times), 18-49 (42) and 25-54 (42).
While some have questioned the importance of demographics, it is the case that adults under 35 are simply not watching linear television to any significant degree. Game 4 of this year’s Finals, a historic dud on the court and in the ratings, averaged 47 percent of the viewers in the demographic watching television that night. To be clear, not many of them were. Yet if one wanted to reach adults 18-34 on a Friday night in June, there was only one easily-measured, ad-supported place where they were congregating en masse, and it was not YouTube or Twitch.
If the NBA is the only show in town in Q2 and among young adults, it should be no surprise that advertisers continue to pay a premium regardless of the ratings. Citing data from the analytics company EDO, MediaPost reported this month that NBA Finals ad revenue had increased 40 percent through Game 3, even coming off of a middling performance for last year’s Nuggets-Heat series.
Right place, right time
Timing and opportunity are also significant factors. The NBA came to market as the last big fish available for the next four-to-five years, not exactly an eternity, but enough time for the industry to change significantly. The league was perfectly positioned to capitalize on a transition period between cable and streaming, wherein cable is trying to stave off its death throes and streaming is trying to establish itself as a sufficient alternative.
Cable, with its burdensome contracts, equipment and fees, succeeded for years because there was no alternative. For generations, people who never watched sports still paid for ESPN because they needed their HGTV. Streaming ended that era by offering those viewers the opportunity to watch their favorite shows — none of which were time-sensitive — via cheaper options like Netflix and Hulu. (Add to that the generational change wrought by young people who prefer YouTube to any linear programming.) Even so, the cable business model was so strong that even today, it remains a better financial play than streaming. Licensing one’s programming at a premium to cable operators is far more lucrative, and less involved, than creating and selling one’s own streaming platform — and doing so without the benefit of a bundle that includes all the programming a viewer would conceivably want.
Both cable and streaming are in a vulnerable position in which sports programming is important, if to varying degrees. Sporting events are the only time-sensitive, exclusive programming in all of television and thus are the final pillars keeping the cable bundle from total collapse, a dependency that does not yet exist on the streaming side. Sports are not the sole reason why viewers subscribe to streaming services — which may explain why streamers have been relatively circ*mspect in their pursuit of live rights — but they are a key defense against one of streaming’s greatest weaknesses: churn.
Per The Wall Street Journal, Comcast plans to split about half of what would be a 100-game NBA package between the NBC broadcast network and Peaco*ck. A 50-game Peaco*ck schedule, assuming once-a-week doubleheaders, would constitute 25 weeks of programming — or the span of the entire regular season. Assuming exclusivity, fans of the league’s glamour teams would need to have Peaco*ck at any point between October and April in order not to miss a game. Churn is one of the biggest problems in streaming, as it is no problem whatsoever to sign up for a service and quickly drop it. A two-week YouTube TV free trial covers nearly the entirety of March Madness. Not only is Peaco*ck set for an influx of NBA fans who have not subscribed to the service previously, but it is in line to keep them as subscribers throughout most of the year.
The same goes for Amazon, though churn is not nearly as significant an issue for a company that bundles its Prime Video service with its much more popular online shipping business. For Amazon, simply getting the great mass of Prime subscribers to even recognize that they have Prime Video is half the battle. NFL rights are of course the big differentiator, but it cannot hurt to have a full year of the NBA on the side.
Now and later
The NBA entered negotiations as a have-to-have for ESPN and Warner Bros. Discovery — even if David Zaslav did not realize it — and a good-to-have for Comcast and Amazon. All four bidders were motivated (or in the case of WBD, should have been) to either keep or secure rights to the only major sports programming up for bid in the medium term.
ESPN is not going to get the NCAA Men’s Final Four and National Championship, which are locked up until 2032. It is not going to get the World Series (if one wanted to argue that it is a better value), as that is locked up until 2028. It is finally in the Super Bowl rotation, but just once every four years. There are a select few major championships that are decided annually on the ESPN networks. Losing — or even just sharing — one of them was not an option for Disney, which made keeping exclusive rights to the Finals a priority in its negotiations.
For Amazon and Comcast — which it bears noting are set to pay nearly two-thirds of the NBA’s reported rights fee without any Finals rights at all – missing out on the NBA would mean going potentially four or five years before the next opportunity to bulk up their sports offerings. While Amazon would not suffer too harshly, given its weekly NFL game, Peaco*ck needs more than the occasional Big Ten or NFL exclusive. By the time the next opportunity rolls around, there is no guarantee the service will even exist. (Beyond the need to overpay in order to beat incumbent Warner Bros. Discovery’s bid, the relative needs of Peaco*ck and Prime Video may explain the $700 million/year difference in their offers.)
It may seem a bit galling that the NBA’s rights fees will be far closer to those of the NFL than to Major League Baseball, even as its ratings are far closer to the latter than the former. So be it. There is nothing else soon on the market with the league’s combination of inventory and viewership, and the state of the industry is such that these opportunities are not easy to pass up.
Tags: NBA Media Rights
