NBA Lockout Watch, Day 124: Ad Sales Numbers Show Cost Of Canceling Games

Newly released data shows that the total amount spent by NBA advertisers last season excluding the NBA Finals was $627.7M, a figure that networks "would be hard-pressed to match if there is a significantly altered season,” according to Lombardo & Ourand of SPORTSBUSINESS JOURNAL. Advertisers last season “spent $42.2 million on NBA game and pregame programming in November and $61.4 million in December for a total of $103.6 million across the league’s three national television partners (Turner, ESPN and ABC).” The “most lucrative ad sales month last year was in May with $170 million in advertising spent during the NBA playoffs.” Kantar Media reported the “top five NBA advertising sales categories” last season were the automotive industry at 18% of the total ad sales, followed by restaurants (12%), mobile and tablet (8%), beer/liquor (8%), and movies (7%). Separate research by Nielsen showed that Ford was “the NBA’s top national broadcast advertiser with $19.3 million in spending” during the ‘10-11 regular season. Yum Brands was “second with $16.9 million spent on NBA national sales last season” (SPORTSBUSINESS JOURNAL, 10/31 issue).

BREAKING DOWN THE NUMBERS: Credit Suisse analyst Spencer Wang on Friday said if the full NBA season gets canceled, "the risks to Time Warner and Walt Disney appear manageable." Wang: "Our analysis finds that a lost NBA season would have a negative impact on advertising revenue for TW's and Disney's cable networks segment. However, given the higher margin profile of replacement programming (college football and college basketball in the case of ESPN, and primetime library content in the case of TNT), we believe profitability and margins would improve moderately for each network." He added, "Based on Kantar Media data, we estimate the NBA generated roughly $664 million in advertising revenue, net of about 15 percent in agency commissions, during the 2010-11 season, up about 7 percent from about $620 million in the 2009-10 season. Given that ESPN telecasts more games and, more importantly, the NBA Finals, we believe advertising revenue is heavily weighted in favor of ESPN (about 70 percent) compared to TNT (about 30 percent)" (HOLLYWOODREPORTER.com, 10/28). MEDIA POST’s David Goetzl noted the Kantar Media survey found that ESPN “lost an estimated $25 million, and TNT lost an estimated $227 million last season on the NBA.” Wang: "In general, we estimate that the NBA is essentially a break-even or a loss leader for the TV networks, based on advertising revenue alone.” The figures are “solely based on in-game ad revenues,” and they do not “take into account advertising in shoulder programming, such as pre-game and highlight shows, which presumably will suffer during the lockout” (MEDIAPOST.com, 10/31).

OPTIONS: In Portland, Andy Giegerich noted marketing execs from the Trail Blazers' largest sponsors said that the team “is willing to be flexible with their partnership agreement terms should the NBA continue to cancel games.” Team sponsors said that the Blazers “could give them several options, including credit toward future sponsorship payments or event short-term suspensions of their agreements so they can spend their marketing dollars elsewhere.” In addition, the sponsors said that the Blazers and other teams “are expected to rework their deals so that any terms and assets are allocated across a shortened season.” Stark’s Vacuums Owner Jim Starks, whose company has sponsored the Trail Blazers for the last 20 years, said that the team “used the strategy during the 1998-99 lockout.” Spirit Mountain Casino Marketing Manager Greg Fritz said that the team “is in contact on a daily basis” (PORTLAND BUSINESS JOURNAL, 10/28 issue).