The NBA’s current TV deals expire after the 2024-25 season and, by all accounts, they expect a significant rise in annual payouts from broadcasting partners, with a 2021 report saying that they are looking to triple their rights fees from $2.6 billion annually to between $7 and $8 billion annually.
ESPN/ABC is likely to remain a major player, though speculation around who else will be part of the negotiations has been pretty rampant. NBC has reportedly thrown its hat in the ring while Warner Bros. Discovery may or may not back away from its current arrangement. To say nothing of interest from streamers like Amazon.
Former ESPN head honcho and current Meadowlark Media CEO John Skipper knows a thing or two about negotiating with the NBA over media rights. During this week’s episode of his Sports Business podcast with former Miami Marlins President David Samson, Skipper shared his thoughts on why these massive sums of money being thrown around might not be as egregious as they sound.
Samson initially asked Skipper if he believed that the existing ESPN/ABC and WBD packages would actually triple in value without streamers like Amazon being involved.
“No, but they don’t have to for the NBA to triple their national broadcasting revenue,” Skipper said. “And I think it’s not a crazy sum to think that they may approach it or they may actually reach it. They’re not going to have two packages when this is over. They’re gonna have at least three. So you don’t have to triple all the packages to triple the money.”
Samson countered that it sounds like a zero-sum game as broadcasting partners might balk at the increased rights fees because they require a massive increase in revenue to make up for them. Skipper wasn’t buying that thought process.
“That sounds like a great formula to lose rights that you would really like to have and I always enjoy that many of my competitors approached it that way,” said Skipper. “I don’t think you can get out a spreadsheet and kind of go, ‘Okay I don’t need the NBA anymore’ because somebody else is going to pay an exorbitant number. The people who lost always released statements that said ‘We refused to do a financially irresponsible deal.’ I’m like okay great I hope you continue that practice because then we’ll have all the rights someday.
“Rights go up. They look terrible in the beginning, by the end they look great. That’s why broadcasters should do long-term deals. I think the NBA will get somewhere between 200 and 350 percent more money in this round of deals than they did last time.”
Samson challenged Skipper on how he would explain to shareholders why spending so much on media rights makes sense.
“We didn’t have reckless indifference, we had a business model,” said Skipper, relating it to his time as ESPN President. “We prioritized the rights we needed and the preponderance of our money came from distribution fees, which are only fairly loosely correlated with the fees you get. So if you have to pay enough to keep the NBA, and you don’t renew some other rights deals, the revenues don’t change very much. In fact, they might go up.”
In regards to how it could be seen as overpaying for a product like the NBA, Skipper scoffed at the notion given the value they represent for a media company like ESPN.
“You used the great word ‘overpay’ and I used to hear that word all the time,” said Skipper. “In fact, one prominent ESPN SportsCenter anchor accused me of overpaying for the NBA and I asked that person ‘Well, there’s only two ways to overpay. One is that you paid more than anyone else would pay for it, that’s overpaying. And two is that you don’t need it. So overpaying [in that instance] is two dollars.
“ESPN needs the NBA. They’re gonna be smart enough not to pay dramatically more than anybody else would pay. So they’re not overpaying.”
How do you know you’re not overpaying compared to your competitors? Per Skipper, there are always ways, especially if you’re the current rightsholder.
“There are ways to figure out what you believe your competitors are gonna do and you have to have the courage of your conviction of your intel and you proceed from there,” said Skipper. “If you are in a negotiation, which is not a blind bid auction, and you’re the incumbent, and the rights holder wants you to have them, they are usually willing to tell you kind of what your next bid needs to be in order to get it.”
[Sports Business/The Dan Le Batard Show, Barrett Sports Media]
