The National Basketball Association is rolling toward a new multiyear deal for rights to its games – and with growing interest from a lot of new streaming entrants into the sports world, the league is looking for a substantial new payday.
That probably means a doubling – or tripling – of its current package, which is heading toward an end date in 2024-25, BofA analyst Jessica Reif Ehrlich suggests. The league is in a sweet spot: It’s a highly attractive sports package with global appeal and a lengthy, game-filled six-month-plus season, she says.
Meanwhile, the increasing live-sports ambitions of Apple (NASDAQ:AAPL) and Amazon Prime Video (NASDAQ:AMZN) are likely to put some pressure on the NBA’s deal incumbents: ESPN (NYSE:DIS) and Turner (NASDAQ:WBD). Even Meta Platforms (META) recently expanded its NBA/WNBA deal to offer more than 50 games in virtual reality.
And Turner (WBD) and ESPN (DIS) aren’t likely to pony up sufficiently for the NBA’s liking to remain the only two in the deal. Warner Bros. Discovery chief David Zaslav notably said (at a time when the company was laying off part of its Sports department) “I like the NBA … but we’re going to be very disciplined. We don’t have to have the NBA.” WBD is also looking to hand regional media rights back to the Portland Trail Blazers, Utah Jazz and Houston Rockets as it bails out of the regional sports net business.
For its part, the NBA is reportedly looking for a total contract value of $50B-$75B, which implies an annual average value (AAV) of $5.6B to $8.3B – an increase of 114%-221% over the current AAV of about $2.6B. ESPN and Turner value the sport, but they’re unlikely to pay that kind of increase – which points to a new entrant making up a “big three” of rightsholders, Reif Ehrlich said.
“If we assume both ESPN and Turner’s respective rights packages increase by $1B in AAV, this would equate to a $271M step-up for DIS and a $349M for WBD from the last year of the existing deal to Year 1 of the new deal, which we view as manageable,” she said. “To then reach the reported increases the NBA is seeking would require a new entrant with a $956M to $3.7B AAV contract.”
Cue John Tesh and Roundball Rock. That new entrant might be Comcast/NBC (CMCSA), which has the means and is reportedly planning a very serious push to reclaim NBA rights after more than 20 years away.
But Reif Ehrlich points the way to a technology entrant like Apple (AAPL) or Amazon (AMZN), which could serve as a large platform as part of a rights package split up into multiple pieces, including linear and streaming, in order to maximize the sport’s reach.
“We anticipate the demand for sports rights will remain robust for the foreseeable future,” Reif Ehrlich said. “Sports programming continues to deliver strong viewership, despite continued cord-cutting, and has been a critical driver of linear advertising.”
As the media industry continues through an evolution to balance linear and streaming, the NBA contract will mark a critical strategic step for the companies involved; it’s the last of the big sports in this rights cycle to get a deal locked up toward 2030 and beyond.