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Volume 21 No. 31
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Fast break: NBA media rights

Monster deals came together quickly

Editor’s note: This story is revised from the print edition.

Turner Broadcasting System President David Levy was sitting next to new NBA Commissioner Adam Silver inside New Orleans’ Smoothie King Center during last February’s NBA All-Star Saturday Night when he realized that the league was dead serious about renewing its media rights deal two years early.

“When do you want to start?” Levy asked.

“I’m ready to start now,” Silver replied.

The team stays together: ESPN’s John Skipper, Turner’s David Levy, the Wizards’ Ted Leonsis and the NBA’s Adam Silver.
Photo by: RICH ARDEN / ESPN IMAGES
Meanwhile, ESPN President John Skipper was late getting into New Orleans because of a snowstorm that snarled travel on the East Coast. But when he arrived, he got the same message. The NBA wanted to jump-start its media talks more than a year before the incumbents’ exclusive negotiating windows were set to kick in.

The 2014 All-Star Game was Silver’s coming-out party of sorts. It was his first major public appearance, coming

just two weeks after longtime Commissioner David Stern stepped down.

Sensing the white-hot TV rights market and the near desperation of the incumbent networks to keep the NBA in the face of increased competition from Fox and NBC, Silver was eager to get started on media

{podcast}

SBJ Podcast:
Media writer John Ourand, NBA reporter John Lombardo and Executive Editor Abraham Madkour analyze the NBA's massive new media rights deals on the day they were announced.

deals that he thought would define the early part of his tenure as commissioner.

ESPN and Turner executives loved what they heard and were all too willing to negotiate early. They left New Orleans charged with the task of preparing wish lists on a new deal. Everyone was so optimistic that they believed deals could be closed by the NBA Finals, just four months later.

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Silver made it clear from the start that his preference was to stay with ESPN and Turner. But he didn’t only focus on the incumbents. In the weeks after the All-Star Game, Silver had several conversations with executives from Fox and NBC, as well as Google and Apple. He got a sense of how much ESPN and Turner would have to pay to renew their rights deals to keep the league from going to the open market.

Shortly after the All-Star Game in February, Silver sent word to Skipper that ESPN’s bid would have to be in the neighborhood of $1.4 billion per year over nine years to renew. Even though the number was nearly three times more than the $485 million average that it’s paying in the current deal, ESPN quickly agreed to the figure. Skipper called on John Wildhack, executive vice president of programming and production, and his group to come up with enough rights to make it worthwhile, sources said. That included a swath of digital, international and radio rights. Rights to the WNBA, D-League and Summer League also were wrapped into that figure.

Turner also came up with its target list, which included many more digital rights that it could use on its Bleacher Report website. The NBA and Turner eventually agreed to an average annual fee of $1.2 billion, which is considerably more than the $445 million annual average it had been paying.

It became clear to the NBA that ESPN and Turner were willing to pay enough to keep the rights from going to the open market.

“I don’t think we left any money on the table,” Silver said at last week’s press conference in New York where the league announced the culmination of eight months of talks with staggering nine-year, $24 billion deals.

The vast breadth of the deals meant that finishing agreements by the Finals was unrealistic. ESPN wound up with 17 different documents that encompassed everything from the main deal to the WNBA’s digital rights. Similarly, Turner had to negotiate two huge deals — one rights deal for TNT and a separate deal for NBA Digital, which Turner has managed since 2008.

Talks escalated during the NBA Finals in June. Bill Koenig, NBA president of global distribution, took the lead for the league, and ESPN’s Wildhack and Turner Sports President Lenny Daniels led talks for their respective networks.

Koenig held separate meetings in Miami during the Finals with each network. The Turner contingent was holed up at the Mandarin Oriental hotel, while the ESPN executives were at the InterContinental Miami.

The Miami meetings in June lasted between three and five hours and much of the framework of the deals was established. Turner’s contingent stayed in Miami for seven days to hammer out that framework. “We were in Miami, but we didn’t see much sun,” Daniels said. “We dined on chicken wings many nights.”

Daniels said the NBA was willing to work with Turner on rights that would help the media company grow areas of its business, like digital, during the deal.

“We went into the process with very strong relationships with both Turner and ESPN,” Koenig said. “We were happy to have worked out a deal that serves the purposes of our network partners. Everyone understood the market dynamics. Both Turner and ESPN were motivated, recognizing that we had potentially other options.”

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Key to the negotiations was involvement of the two media committees formed by Silver earlier in the year: one made up of owners, the other of team presidents, which for the league was unprecedented.

The committee members were not at the actual negotiating table, but they were closely involved with the deals. Both committees made recommendations to Silver and Koenig and their feedback was crucial in guiding Silver and Koenig in crafting what the teams wanted out of the new deals.

Just after the All-Star Game, members of both committees traveled to Atlanta in mid-March and then later that month went to Bristol to meet with ESPN executives.

In Atlanta, Koenig and the league’s media committees toured Turner’s NBA studios, meeting with top Turner executives. An unlikely effective moment came during a general session meeting when Turner NBA broadcaster Ernie Johnson came into the meeting and recited a 20-paragraph poem rhyming the network’s commitment to the NBA.

The lighthearted verse was meant to entertain, but also to show how much Turner valued its relationship with the league. The two have been partners for the better part of three decades.

“It was goose-bump fantastic,” said Washington Wizards owner Ted Leonsis, who chaired the owners media committee. “It was one of those little things that showed the right touch and reconfirmed that they were a great partner.”

In late March, it was ESPN’s turn to impress. The group of NBA owners traveled to Bristol, where they spent a day meeting with ESPN executives. The ESPN contingent felt that this was a critical moment for the negotiations, since they rarely get the chance to show off their Bristol campus to such important executives.

“We don’t get a ton of visitors up here, much less a group of NBA owners,” said Burke Magnus, ESPN’s senior vice president of programming acquisitions.

The committee spent a half-day mainly camped out in Building 4 — the biggest building on the campus that also houses the newsroom. After a lunch of sandwiches delivered to a boardroom, Skipper led them on a tour of the gleaming new “SportsCenter” set, which was still months away from debuting. ESPN executives thought the preview of its new digital center, a football field away from Building 4, would be a big selling point.

But it was a visit to Skipper’s relatively spartan office that convinced Leonsis of ESPN’s commitment.

“We slipped into his office and on his wall is this Americana painting that has the 50 greatest players in the NBA on it and their jerseys,” Leonsis said. “You can’t make that up. He looks at that every moment.”

Leonsis was inspired by the commitment. “Both networks said, ‘We want to extend and tell us what is important to you,’ which we laid out,” he recalled last week.

Leonsis also had one request for ESPN.

“I said that if you do the deal, you have to put us in an ESPN ‘SportsCenter’ commercial,” Leonsis said.

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Another crucial meeting occurred a few months later at the Allen & Co. Conference in Sun Valley in mid-July. In the shadow of the spectacular Idaho mountain range and among Hollywood and business tycoons, Silver and Leonsis met with Disney CEO Bob Iger and with Skipper and hatched a plan for an over-the-top network. Separately, league executives met with Time Warner CEO Jeff Bewkes.

“We were able to speak directly to Iger and then we were able to talk to Jeff,” Leonsis said. “Jeff reiterated how much Time Warner valued the NBA and how he empowered Levy to get a deal done. He was well-versed and that gave everyone comfort that we were at a good place.”

 
Time Warner CEO Jeff Bewkes (left) and Disney CEO Bob Iger were part of the group at Sun Valley talking about an over-the-top network.
Photos: GETTY IMAGES
By Labor Day, just seven months after the initial meetings around the All-Star Game, the league and the network partners had hammered out the agreements’ massive financial terms, and the NBA set an Oct. 6 deadline to finish the deals.

Koenig and his staff and network executives worked around the clock. Several times over the next few weeks, Koenig and his staff would meet for six hours in an NBA headquarters conference room with ESPN, then spend another six hours with Turner executives. Then, they would work through the night papering what they had negotiated during the day.

Starting Friday, Sept. 26, all sides were locked in conference rooms — ESPN in Manhattan, Turner in Atlanta and the NBA in its headquarters — to complete a final push to the deals. There were few face-to-face meetings in the next week, as most business was conducted over the phone. On Tuesday, Sept. 30, Wildhack called his wife in Connecticut and asked her to ship down some clean clothes because it was taking longer than he expected.

That’s the day the deal was completed in principle. But league and network lawyers needed three more days to prepare the contracts for signatures.

“It was the legal teams on both sides writing the final draft,” Wildhack said. “I went home for eight hours. I saw my kids for 10 minutes. I unpacked and repacked because I had to come back to New York on Friday morning.”

The deals finally were signed Friday, Oct. 3, and the league then sent out a vote to all 30 NBA owners. The unanimous vote was completed by Sunday, Oct. 5.

It was around 10 p.m. that night when Levy texted a picture of him signing the deal to Bewkes and Turner CEO John Martin. Bewkes texted back, “For this kind of money, you’d think you’d put a tie on.”

The message made Levy laugh and he shared it with others, including Silver, who presented him with a tie before the Oct. 6 press conference.