On the court and in the living room, NBA media deal raises the stakes

Bulls brass already gearing up for free agency free-for-all following the 2015-2016 season.
Bulls brass already gearing up for free agency free-for-all following the 2015-2016 season.

by Joe Musso

The NBA’s agreement with ESPN and Turner Sports to extend their media rights deal through the 2024-25 season comes as no surprise to those close to the association, but the astronomical terms of the nine-year mega-deal promises jarring changes from front offices to the family front room.

The nine-year, $24 billion contract, which will go into effect in the 2016-2017 season, will cost ESPN and Turner Sports a combined $2.6 billion dollars annually.  This reflects a 180 percent increase from the $930 million dollar annual agreement signed in 2007.

The deal underscores how rapidly the NBA pie is growing, and how hungry industry players are to claim a bigger slice.  The new contract represents a whopping sum of money, but secures one of the most coveted properties in the sports media landscape.

“The agreement locks in some of the most valuable, original, premium live sports programing that we’ll continue to monetize across TNT and all other platforms within our extensive portfolio,” said David Levy, President of Turner Broadcasting System, Inc.

Turner Sports is currently responsible for the NBA’s digital presence, operating and maintaining NBA.com, NBA TV, NBA League Pass and NBA Mobile. Under the new multi-platform agreement, consumers will have the ability to stream nationally televised games without a cable subscription. The details of the mobile streaming initiative have yet to be finalized but according to league officials a framework has been put in place.

“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,” said ESPN President John Skipper.

The increased coverage has basketball fans salivating, but the new deal is bound to affect consumers’ bottom line whether they tune in or not.

According to SNL Kagan financial statistics, in 2014 it cost cable providers $6.04 monthly, per subscriber to broadcast ESPN and $1.48 for TNT. The new terms of agreement will require ESPN and TNT to pay the NBA $1.67 billion more annually. This all but guarantees that the two networks will bump the monthly charges for cable providers, who will in turn pass those costs on to the consumer.

From the front room to the front office no one is safe from the tidal wave created by the extraordinary new media agreements.

The current salary cap for the 2014-15 season is set at $63.065 million and is forecast to skyrocket as high as $88 million when the new deal goes into effect during the 2016-17 season.  This unprecedented jump has already forced NBA Commissioner Adam Silver to consider a gradual annual increase plan for the salary cap, much like the NFL has done in the past. Also, team executives will have to prepare themselves for an off-season free agency frenzy never before seen in professional sports.

The huge increase in league revenue is also likely to deepen existing tensions between the players association and team owners.  Under the current collective bargaining agreement, players are guaranteed between 50 and 51 percent of the league’s basketball related income, a drastic cut from the 57 percent guaranteed prior to 2011 negotiations.

With renegotiations set for the 2017 offseason on the heels of a massive spike in revenues, the NBA and the players association appear to be headed down an all too familiar path towards the second lockout in seven seasons.