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The National Basketball Association is moving toward a new multi-year deal for the rights to its games, and with growing interest from many new entrants to the sports world, the league is looking a new substantial payday.
That likely means doubling, or tripling, its current package, which is heading towards a 2024-25 completion date, suggests BofA analyst Jessica Reif Ehrlich. The league is in a sweet spot: It’s a very attractive sports package with global appeal and a long, game-packed season of more than six months, she says.
Meanwhile, Apple’s growing live sports ambitions (NASDAQ:AAPL) and Amazon Prime Video (NASDAQ:AMZN) are likely to put some pressure on the NBA deal holders: ESPN (New York Stock Exchange: DIS) and Turner (NASDAQ:WBD). Even Meta Platforms (META) recently expanded their NBA/WNBA agreement to offer more than 50 games in virtual reality.
And Turner (WBD) and ESPN (DIS) are unlikely to put in enough for the NBA to remain the only two in the deal. Warner Bros. Discovery chief David Zaslav said in particular (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 than having the NBA.” WBD is also seeking to return regional media rights to the Portland Trail Blazers, Utah Jazz and Houston Rockets as it withdraws from the regional sports network business.
For its part, the NBA is reportedly seeking a total contract value of $50B-$75B, implying an average annual value (AAV) of $5.6B to $8.3B, an increase of 114%-221% over the current AAV of about $2.6 billion. ESPN and Turner value the sport but are unlikely to pay that kind of increase, suggesting a new entrant to the “big three” of rights holders, Reif Ehrlich said.
“Assuming ESPN’s and Turner’s respective rights packages increase by $1 billion in AAV, this would equate to an increase of $271 million for DIS and $349 million for WBD from the last year of the existing deal to year 1. of the new agreement, which we consider manageable,” he said. “To reach the reported increases the NBA is seeking, a new entrant with an AAV contract of $956 million to $3.7 billion would be required.”
Cue John Tesh and round rock. That new entrant could 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.
But Reif Ehrlich points the way to a tech player like Apple (AAPL) or Amazon (AMZN), which could serve as a great platform as part of a multi-part rights package, including linear and streaming, to maximize reach. of sport.
“We anticipate that demand for sports rights will remain strong for the foreseeable future,” Reif Ehrlich said. “Sports programming continues to generate a large audience, despite continued cable outages, and has been a key 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 is the last of the big sports in this rights cycle to close a deal for 2030 and beyond.