While the NBA may begin its on-court play next week, discussions are taking place behind the scenes regarding the structure of its next media rights deal.
The league’s existing deal, which was negotiated over a decade ago, provides a collective $2.6 billion annually from ESPN and Warner Bros. Discovery. With record levels of cord-cutting pervading the sports media ecosystem throughout the fiscal year, both companies are reportedly considering renewing their deals, but taking on smaller rights packages, according to a new report by The Wall Street Journal.
Amid turbulence related to the Ch. 11 bankruptcy of Diamond Sports Group, which is responsible for carrying regional games for 15 NBA teams, along with layoffs from major media companies, the next rights contract could look fundamentally different. The Walt Disney Company (ABC/ESPN/ESPN+) and Warner Bros. Discovery (TNT/TBS/Max) carry about 165 nationally televised games, and both entities are in discussions with the league ahead of a 45-day exclusive negotiating window, set to commence on March 9, 2024.
Both Apple and Amazon have expressed interest in the NBA, but the report emphasizes that both companies want more than just a small amount of NBA games. Amazon in particular has expressed that the rights package would be more compelling if the league found a way to implement regional rights, something that is reportedly being considered by the league. The NBA could aim to triple earnings in its next media rights deal – which would bring it to nearly $78 billion in compensation over a decade – fueled by a generation of captivating young superstars and international expansion.
Last season, NBA games across the national properties averaged 1.6 million viewers, and the NBA Playoffs were responsible for an average of 5 million viewers. While the viewership does not equate to that of the NFL, media insiders recognize the value proposition the NBA presents and the importance of televising live sports, especially amid Hollywood strikes.
With Diamond Sports Group trying to avoid Ch. 7 liquidation, the NBA recognizes that it may have to take back the regional rights and broadcast and distribute games itself, similar to what MLB did through a newly established local media department. According to a person familiar with the matter, the NBA has offered the Sinclair subsidiary and its creditors several options to continue broadcasts, including one-year extensions with discounted fees.
Diamond has accumulated over $8 billion in debt, and recent court records outline a decline of nearly 90% of cash on hand, which equates to under $22 million. MLB recently requested the bankruptcy court handling the case to deny a request for an extension of the 120-day exclusivity period granted to Diamond under the Ch. 11 protections. Nonetheless, the NBA is positioning itself to have control over these local market rights so it will be able to offer them with national rights packages, although several larger market teams are broadcast through separate regional sports networks.
As Disney looks for a strategic business partner to purchase an equity stake in ESPN, reportedly up to 10%, the league has considered offering its subscription-based League Pass package to the “Worldwide Leader.” In exchange, the league would want a stake in ESPN; however, a conversation along these lines is not expected to occur until the larger media rights deal is completed.
