New NBA TV deal to provide players a big windfall

A new TV deal has just been hammered out between the NBA and broadcast networks ESPN and TNT, and it’s a deal that’s remarkable in many ways.  

First, it shows beyond a shadow of doubt the breadth and depth of the NBA market now, which rivals that of any sport, at least as far as America is concerned.  

Second, it demonstrates how marketable and commercially viable the league has become. Still remember those delayed telecasts? Seem like eons away now.  

Third, it bespeaks of the universal appeal of the league, no matter if the deal primarily covers American television only. And fourth, it sets a number of records, and could very well do the same for player salaries.  

This is because based on a provision in the collective bargaining agreement between the players’ union and the league that has been in place since the ‘90s, a certain percentage of basketball-related income the league earns is guaranteed to go to the players in salaries. The higher this income goes, the higher the amount is that also goes to the players. Of course, TV revenue is the most lucrative part of the BRI that the league earns.

How lucrative is the new deal for the league?

It goes to the tune of $24 billion spread over nine years, or an average of $2.66 billion per year. Compare that with the previous deal of $7.5 billion for eight years, which roughly translates to $937 million annually, and you have an increase of 186 percent, the biggest such increase among all the four major professional sports in America.

For the record, the National Hockey League recently negotiated a TV deal for the US and Canada that provided a raise of 167 percent, Major League Baseball wangled a 105 percent increase from its TV contract, and the National Football League got a 28 percent markup from its broadcast rights when it negotiated its own deal three years ago. The commonality in all these contracts is that all of them are part of the elite portfolio of deals ESPN has cornered through the years.

The latest deal is actually part of the ESPN blitzkrieg that has seen it secure a monopoly of broadcast rights over the NBA as well as the NFL, Major League Baseball, the college football playoffs and four of the NCAA’s five prime conferences through at least 2021.

But the NBA got the biggest increase among all the leagues when a new contract was reached simply because it is “truly the only major American sport with worldwide appeal,” according to ESPN sports business reporter Darren Rovell.

Rovell says the NBA deal was also negotiated most recently even as sports rights, unlike the TV world outside sports, have become even more valuable. This is because sports programming is one of the few remaining sectors where watching live is crucial for most audiences. This is attested to by the fact that more than 99 percent of ESPN’s content is consumed live, and nothing has changed even as other platforms like tablets and mobile phones have become available.

The new NBA deal actually starts in the 2016-17 season, thus lasting up to 2024-25. But both ESPN and TNT preempted whatever potential competition it could face, particularly from Fox Network and possibly NBC Sports, by locking up the NBA contract even before their current deal, which started in 2008, could expire two years from now.  

ESPN actually began broadcasting NBA games in 2002, when the network won the rights from previous NBA broadcaster NBC. TNT goes even further back in 1988. The two networks feel that with broadcast rights costs having soared considerably, it is worth the investment to keep their rights over the world’s premier basketball league.

“The NBA has never been more popular and it continues to grow under Adam’s (commissioner Silver) leadership,” ESPN president John Skipper said during the press conference announcing the deal early yesterday (Manila time). “By acquiring significantly more NBA content for both existing and yet-to-be created platforms, we will establish a vibrant, year-round NBA presence for fans. For ESPN, this agreement continues our fruitful, longstanding relationship with the NBA and bolsters what is already the sports industry’s most impressive and impactful collection of media rights… We believe at the end of the deal it will feel inexpensive. It’s hard to imagine.”

“With these new agreements our passionate fans will continue to benefit from the exceptional coverage provided by our partners,” Silver for his part said while acknowledging that the new deal will have a big impact on the league’s salary cap and therefore the players’ paychecks.  “It will have a profound effect (on the salary cap) and I’m sure the union has already begun studying it just as we’ve begun studying it.”

Under the terms of the agreement, ABC, ESPN’s broadcast partner, will continue to be the exclusive broadcaster of the NBA Finals, and both ESPN and ABC will combine for up to 44 playoff games, including the conference finals. ESPN will also continue to air the draft, draft combine and draft lottery.

Turner Sports, on the other hand, will add 12 games to its regular-season schedule, bringing its total to 64, while continuing with its Thursday night doubleheaders, the opening night games and the All-Star Game and airing a new postseason awards show.  

The network also received additional multimedia rights.  TNT has actually been managing the league’s digital properties, which include NBA TV and NBA.com, but it will now also have expanded digital rights to Bleacher Report, the sports website acquired by Turner, TNT’s parent company.

The networks also secured a number of enhanced rights in the new deal, including

• An established  framework for ESPN and the league to negotiate the launch of a new “over-the-top” content offering on the mobile platform;
• An additional 10 regular-season games for ESPN or ABC, bringing the regular-season total to 100;
• An additional exclusive regular-season window of 10 games;
• Increased team appearances to showcase the most popular teams and most compelling matchups more times throughout the season;
• Live, national rights to summer league and D-League games across ESPN entities;
• A substantial increase in ESPN’s NBA-focused programming with 750 new hours of NBA content on linear and digital platforms, which is expected to create a significant year-round presence for the league; and
• Significantly more exclusive regular-season and playoff games on ESPN platforms for ESPN International in Latin America, the Caribbean, Australia and New Zealand, including expanded weekend windows during the regular season, increased coverage for first- and second-round playoff games as well as the conference finals and NBA Finals (including exclusivity in Australia and New Zealand)
• Rovell says that though the increased hours of coverage and live game broadcastsre part of the elite portfolio of deals ESPN has cornered through the y are big, none could be bigger than the rights that ESPN/ABC is getting to create a digital channel in partnership with the league. The NBA League Pass has existed through Turner for decades now, but Washington Wizards owner Ted Leonsis says the digital channel that he envisions and which the new deal has made sure is part of the contract’s provisions is aimed at the worldwide mobile audience. It’s the first of its kind to be included in such a deal.

“There are hundreds of millions of people that pay for pay television,” Leonsis says. “(But) there are billions of people paying for the mobile experience.”

The idea, as Leonsis explains it, is for ESPN and the NBA to be able to sell digital packages to mobile customers around the world with a wide choice of payment schemes. This why such plans as buying a season’s worth of a particular team’s games for one’s phone, or getting just highlight packages or just a quarter of live action on the spot while following the game on Twitter, for instance, would now be possible.

As an added feature in the agreement, ESPN’s WNBA rights have also been extended through 2025, with increased in-progress highlights on linear and digital platforms being included.

“There’s never been a better time to be an owner of an NBA franchise – or, frankly, any professional sports team,” says Leonsis, who is also chairman of the league’s media committee.

“The new television and media deals are good news for all of the stakeholders in the business of the NBA,” union executive director Michele Roberts, who took over from the discredited Billy Hunter this year, concurs. “Although we have seen strong revenue growth and significant increases in franchise values over the past three years, it is clear that the league is now entering a period of unprecedented revenue growth. Our job will be to ensure that the players receive their fair share of the results of their efforts and that we do everything possible to maintain the growth and popularity of the game.”

Silver acknowledges that the new TV deal would lead to a “substantial increase” in team salary caps. He, however, has no clear idea yet on how to go about implementing the increase, although he suggests that the league and the NBA Players Association might look into “smoothing” such an increase, which means spreading it over several years.

Some players, particularly LeBron James, have signed shorter contracts in anticipation of more TV money that would give them more lucrative deals down the road. James, for example, limited his new $42.1 million agreement with Cleveland to two years to let him negotiate a much better deal when the new TV pact kicks in during the 2016-17 season, thus boosting contract values.  Reigning league MVP Kevin Durant will also see his current contract expire in 2016 in time for the new TV deal.

The current CBA, which was hammered out in 2011 after a lockout over revenue sharing and has a lifespan of 10 years, has an opt-out clause for either the players or the league in 2017, and this will likely be invoked when that time comes. It may be remembered that owners during the last negotiations insisted they needed a new financial structure and came out with a deal that was favorable to them. This was because the agreement reduced the players’ guarantee of basketball revenues.

This time, however, any such similar line will never fly in the face of the lucrative TV deal as well as the skyrocketing value of NBA teams, which is partly dictated by the profitability of the league’s franchises. James has fired the first salvo as he made it clear the players will hear no more of the owners’ financial issues.

“The whole thing that went on with the last negotiation process was the owners were telling us they were losing money. There’s no way they can sit in front of us and tell us that right now,” James declares. “After we continue to see teams selling for billions of dollars, being purchased for $200 million, signing for $550, $750 and $2 billion and now (Mikhail) Prokhorov is possibly selling his majority stake in the Nets for over $1 billion. That will not fly with us this time.”

There’s even talk that James and Chris Paul, the president of the players’ union, will move to abolish the cap on the maximum contract that players are given now to control spending by teams.

Will this ploy work? Who will blink first if ever?

That’s something indeed that bears watching.

(Next week – The effects of the new TV deal) 

SHORTSHOTS: The Denver Nuggets and Team USA standout Kenneth Faried have reached an agreement on a five-year contract extension worth $60 million… Paul Pierce, who signed with Washington for two years (player option on the second) and $11 million, said he expected Brooklyn, to whom he was traded last year by Boston along with Kevin Garnett as part of the Celtics’ rebuilding plan, to offer him a contract. The Nets, however, wanted to cut cost and did not. It will be recalled that Pierce clinched the Nets’ first-round victory over Toronto last season with a last-second block of Kyle Lowry. Pierce, incidentally, was involved in an altercation with Joakim Noah in yesterday’s preseason game between the Wizards and the Chicago Bulls. The Wizards beat the Bulls 85-81 as Glen Rice Jr., a summer-league standout, had 18 points and Marcin Gortat had 13 and 10 rebounds. Rookie Nikola Mirotic led Chicago with 17 points… In other preseason games, Boston dumped Philadelphia 98-78, the LA Lakers beat Denver 98-95, and Atlanta defeated New Orleans 93-87. Earlier the other day, Cleveland had an easy time handling coach David Blatt’s former team Maccabi Tel Aviv 107-80… All-Rookie Team member Victor Oladipo and free-agent acquisition Channing Frye are out indefinitely for Orlando after suffering medial collateral ligament sprains in practice. Oladipo hurt his right knee while Frye hurt his left… Did you know that Jordan Clarkson, the 46^th pick in this year’s draft by Washington whose rights were traded to the Lakers, is the third player with Filipino blood to be drafted in the NBA? The 6-foot-5 guard follows Raymond Townsend who was drafted by Golden State in 1978 and Ricardo Brown who was picked by Houston in 1979. “Hoping to inspire others especially the youth back there in the Philippines and from where I am from in Chicago. I am going to do great things and try to make you guys proud,” says Clarkson, who led the Lakers with 14 points in their win against Denver although he shot just 3-for-13 from the floor. He is the 3rd Filipino after Raymond Townsend,1978 Golden State Warriors) and Ricardo Brown of the 1979 Houston Rockets to be drafted in the NBA. – Rappler.com