Davis Gives ESPN Its Best LLWS Overnight Ever Under Armour Makes Big Offer To Durant Study: Most FBS Schools Lose Money On Sports MLB.TV Blackouts Could Be Lifted By '15 SEC Network Lands Carriage Deal With Verizon FiOS Media Notes Raptors Need One More Vote For Practice Facility College Facility Notes Maryland Adds Lifetime Scholarships For Athletes Davis Becomes First Little Leaguer On SI Cover
Upcoming Conferences and Events
SBD/Issue 88/Sports Media
NBA Finalizes Cable-Heavy TV Deal, Sees 25% Fee Increase
Published January 23, 2002
The NBA announced yesterday that it has reached six-year agreements with ABC/ESPN and AOL Time Warner to have ABC, ESPN, TNT and a new national cable sports network to be jointly-owned by AOL Time Warner and the NBA televise NBA games beginning in the '02-03 season. Also under the deal, AOL becomes the league's preferred interactive services provider. TNT will televise 52 regular season games in primetime, 48 of which will be part of Thursday-night doubleheaders. ESPN will air 75 regular season games on Wednesday and Friday nights, and ABC will air 15, predominantly on Sunday afternoons, beginning with a Christmas Day doubleheader. That compares to Turner showing 80 and NBC 33 regular-season games in the current contract. TNT will air the Thursday-night doubleheaders, as well as two opening night games, on an exclusive basis, with no other NBA games being shown in any market on those nights. TNT will also air the NBA All-Star Game. ABC will air the NBA Finals in primetime, and ESPN and TNT will exclusively televise one Conference Finals series each. ESPN also gets the NBA Draft, which has been carried by TNT. The NBA wants to expand its first-round playoff series from best-of-five to best-of-seven, but that would require approval of the NBPA (THE DAILY). NEWSDAY's Steve Zipay notes NBA owners voted 25-4 to approve the deal last week (NEWSDAY, 1/23).
THE NUMBERS: BLOOMBERG NEWS' Scott Soshnick reported ABC/ESPN and Turner will pay a combined $4.6B over the six-years for the rights. NBA Commissioner David Stern said that the $765M annual average "eclipses what the NBA was getting from its expiring agreements" with Turner and NBC by about $150M. ABC/ESPN paid about $2.4B for its part of the deal, while Turner paid about $2.2B. Soshnick noted it is the "smallest increase in NBA TV rights fees since 1983. Since then, the league has more than doubled its rights fees each time" (BLOOMBERG NEWS, 1/22). In DC, Eric Fisher calls the 25% rights fee increase a "surprising feat given the marked weakness of the U.S. economy. But to do that, more than twice as many regular season games will be aired in this new deal and almost all the games will air on cable" (WASHINGTON TIMES, 1/23). Stern: "This is a very substantial increase in a turbulent marketplace. It's relatively easy to go from $100[M] to $200[M]. But you begin to slow down on your rate of increase as your numbers get higher" (CHICAGO TRIBUNE, 1/23).
ESPN: The WALL STREET JOURNAL's Flint & Fatsis write, "The key to the deal was ESPN," as the cable net is "assuming the brunt of the costs" of Disney's $400M per year share. ESPN President George Bodenheimer, noting his company's multi-media properties: "In the old days, you made a calculation of ad revenue against your games. The model going forward cuts across six different TV networks, radio and Internet" (WALL STREET JOURNAL, 1/23). Stern: "NBC is the successful over-the-air network depending on ad sales. Disney and AOL ... have focused on both the Internet work and cable, so they have a broader array of assets." Bodenheimer added, "Any league that is not willing to sell rights where you can exploit all of a company's assets is in for a tough time" (USA TODAY, 1/23). In Houston, David Barron reports ESPN2 will launch "NBA Night in America," a Tuesday show that will feature "live cut-ins to NBA games," and ESPN Classic will "obtain the rights to air vintage NBA games." The company "also extended agreements with ESPN.com, ESPN Radio and SportsTicker." ABC Family will air "Inside Stuff" (HOUSTON CHRONICLE, 1/23). ESPN Senior VP & GM for Programming Mark Shapiro said that the net may schedule games on New Year's Day, "competing against ABC's college football [BCS] and cablecast after ESPN's Outback Bowl game." MULTICHANNEL NEWS' Simon Applebaum reports ESPN's package includes "both video-on-demand rights for NBA-game time-shifting and Spanish-language rights, the latter suggesting that some ESPN games may run on its Deportes package." Bodenheimer said that there would be "no surcharge for operators to help underwrite the costs" of the deal (MULTICHANNEL NEWS, 1/23).
TURNER: CABLEWORLD's Staci Kramer wrote that under the new deal, Turner's TV package is "sweetened," as TNT gets the All-Star Game and one conference final series. Turner Sports President Mark Lazarus said the terms are "more akin to the benefits that the broadcast package has typically enjoyed" (CABLEWORLD, 1/22). Lazarus said the new jointly-owned cable net, the working title for which is All Sports Network (ASN), will "be a full and diverse sports network with NBA programming as a foundation, but not by any means the sole programming genre." Stern added the net will be distributed on AOL Time Warner's 13 million subscriber Time Warner cable system (DAILY VARIETY, 1/23). USA TODAY's Rudy Martzke writes, "With NBA owners involved with Cablevision (Knicks), Charter Communications (Trail Blazers) and Comcast (76ers) that encompass 35 million homes, the NBA figures to produce another 10 million homes" (USA TODAY, 1/23). MULTICHANNEL NEWS' Applebaum: "It's not clear whether [ASN] will replace either CNN/SI, ... or NBA.com TV." But Lazarus said the NBA "will take the lead on distribution" of the service (MULTI. NEWS, 1/23). In N.Y., Richard Sandomir writes the "principle difference between the ESPN and TNT deals is that ESPN's regular-season games will have to compete against local broadcasts," and TNT's will be shown exclusively. Lazarus: "Exclusivity gives us a story we can tell our advertisers about." Sandomir adds AOL will pay $290M next year, with 3% annual increases for the remaining five years. It will pay another $20M annually for the Internet rights, "with similar increases." The "remainder of AOL Time Warner's commitment will be from its share of profits, split with the NBA, from [ASN]" (N.Y. TIMES, 1/23). Lazarus, on the NBA having two cable partners: "I don't think it dilutes. I think it plays more into what consumers' viewing habits are. They watch what they can and they catch what they can" (CBS MARKETWATCH, 1/23).
THE WEB PORTION: INTERNETNEWS.com's Christopher Saunders reported that under the part of the deal that makes AOL the official ISP of the league, subscribers to AOL "will be able to access free, streaming Web audio feeds from some NBA games." The number of games included was not disclosed. In addition, the two-year-old online content-sharing and promotional deal between AOL and the NBA "will be renewed one-year early" (INTERNETNEWS.com, 1/22).
STERN LIKES SHIFT TO CABLE: Stern said of the move to cable, "We're just following the trend, not setting it here. There's tens of thousands of hours of sports programming that are appearing on cable. So if you don't enhance your presence or don't have the capacity by playing only once a week to gather enormous numbers of people, then you are going to be in trouble" (HOLLYWOOD REPORTER, 1/23). More Stern: "We'll have a more concentrated audience and a higher rating. The reality is there's been an extraordinary shift of viewership to cable television" (WASHINGTON POST, 1/23). Stern added, "This is all a fundamental shift that's occurred in our industry. We're now positioned to take full advantage" (WASHINGTON TIMES, 1/23). Stern, on the deal's negotiations: "It was a legal Olympics. All of this may have ruined a holiday, but we are very pleased. From a business context we have shown a 25% increase, we have obtained a 50% interest in a new network, and we are now involved with the two largest integrated companies in the world" (L.A. TIMES, 1/23). Stern: "This represents a fundamental change in our philosophy. There is no such thing as oversaturation. I used to believe it was important to aggregate viewing on a few stations. But if they're not watching us, they're watching someone or something else like ESPN1, ESPN2, Outdoor Life, The Golf Channel. We decided it was time to join the dance more aggressively, and we knew we had to have a number of different agreements, across several different divisions of the networks, to obtain the amount of increases that we were able to" (SACRAMENTO BEE, 1/23).
NBA Follows The Money To Cable
WHAT THE ANALYSTS ARE SAYING: The Hollywood Reporter Editor Howard Burns: "I think the league has to be considered a winner because if you're able to get a 25% rights increase in an economy of this sort, I think you have to give the league credit for being able to do that." But Burns added, "I think the one thing that the league needs to watch out for is oversaturation. With this new contract you're going to have some 240 regular games on the air. That's before the playoffs" ("Market Wrap," CNBC, 1/22). Salomon Smith Barney analyst Jill Krutick: "We think this deal strengthens AOL Time Warner's (AOL) service as the place for online sports content while reaffirming Disney's ABC Sports and ESPN as leaders in sports programming through 2008" (HOLLYWOOD REPORTER, 1/23). Pilson Communications President Neal Pilson: "The startling development is that for the first time the cable industry has outbid a broadcast network for a premier sports package" (BLOOMBERG NEWS, 1/22). In Toronto, William Houston calls the 25% rights fee increase "clearly a triumph for the NBA, considering its regular-season ratings on NBC dropped" 35% from '97-98 to '00-01 (GLOBE & MAIL, 1/23). Pilson: "The NBA had to follow the money" (ATLANTA CONSTITUTION, 1/23). In Boston, Bill Griffith writes the deals "could be the most complicated deal in television sports history." But it "also means a milestone for ESPN," as the net is now a rights-holder to "all four major American sports simultaneously." Meanwhile, ASN "could face a rocky road," as it will "likely end up on a digital tier (triple-figure channel) and thus require upgraded cable service instead of landing on a traditional analog (double-figure) spot" (BOSTON GLOBE, 1/23). In Sacramento, Breton & Howard-Cooper write that with the deal, ESPN "became the most powerful force in sports broadcasting" (SACRAMENTO BEE, 1/23).
NBC'S RESPONSE: NBC Sports Chair Dick Ebersol, whose network has been an NBA partner since '90-91, said in a statement, "The definition of winning has become distorted. If winning the rights to a property brings with it hundreds of millions of dollars in losses, what have you won? When faced with the prospect of heavy financial losses, we have consistently walked away and have done so again. ... We wish the NBA all the best. We have really enjoyed working with them for more than a decade to build the NBA brand" (NBC).