Report: New 9-year, $24B NBA TV deal to be announced Monday includes online video service
At 10 a.m. on Monday, NBA commissioner Adam Silver will address the media to announce that the league has secured a new media rights deal, extending their current deals with Disney (ABC, ESPN) and Turner (TNT).
The extension is expected to run through 2025, and will see the NBA rake in $24 billion over nine years, according to a report from The Wall Street Journal. It's an appreciable boon for the league that should see basketball-related income, and thus, the salary cap, rise significantly. (More details on the financial breakdown are available in the post below.)
The details of the deal read very much like the current agreement, save for the spike in value. One significant addition, though, involves the use of digital media.
From the Journal:
The league also laid plans in partnership with ESPN for a new online video service that would show live regular season games, the people said. In a significant move for ESPN, which derives its huge profits from the pay-TV ecosystem, that service will be open to people who aren’t cable or satellite TV customers.
Under the current deal, those without cable or satellite are unable to watch games that are broadcast nationally. Even subscribers to League Pass, the league's online subscription service, see those games blacked out. Since marquee games are often the ones tapped for national television, providing these games online will broaden the league's reach for its most important showcases.
Further, the online service will reportedly not be a part of ESPN's WatchESPN streaming app, which is also only available to pay-television customers. This is an entirely new wrinkle for both the league and the network.
The details of the service remain somewhat vague:
It isn’t clear whether the online service will be a subscription offering or a “transactional” one in which people will pay for individual games. The parties are considering licensing the package to wireless carriers such as Verizon that are building online video services, one of the people familiar with the matter said. The number of games that will be made available for the online service is still being decided.
So the new deal stands to be a plus for fans, with more options when it comes to selecting how you consume your NBA content. A fan may no longer even need a TV or satellite subscription and be able to take in almost every game, between League Pass and this somewhat undefined ESPN/NBA streaming service.
From a financial perspective, it's unclear exactly when and how dramatically this will affect the league's operations. As explained below, there are several details still to be worked out, but the salary cap - determined based on basketball-related income - should rise significantly within the next two seasons.
Earlier reports have indicated that the league is worried about a single-season spike, and suggested it's possible that the league could work out a way to smooth out the increase over multiple years. If the new contract escalates over time rather than maintaining a flat annual value, then part of that concern will already be taken care of. The new deal can also impact other areas of business, and a $1 rise in TV revenue doesn't necessarily mean a $1 rise in basketball-related income and an equivalent rise in the salary cap (the cap is based on 44.74 percent of basketball related income, minus projected benefits and with a few other adjustments).
The salary cap is going to rise appreciably, either all at once in 2016 or quickly over the next several years. Until the league nails down exactly how and when those changes will be made, the market for contracts could be tense and uncertain. As pointed out below, LeBron James can become a free agent in 2015 or 2016, when his maximum salary - determined as 35 percent of a team's salary cap - stands to be far more than the $20.6 million he'll make this season.
For the league and the players, the new deal represents a major accomplishment. Revenue is set to rise significantly, and that makes both sides better off, no matter the methodology and timing for applying said revenue.
How this impacts the collective bargaining process is less obvious. In 2017, both the league and the players union can opt out of the CBA. They'll be splitting a bigger pie, and there's now a greater financial cost to all sides if there were to be a work stoppage, but said negotiations are far too complicated to predict three years out.