The setting was an industry conference.
Onstage, the cost-cutting president of a former media company warned that he won’t overpay for the NBA in upcoming rights negotiations. If the “numbers are going to suffocate us, we are going to leave”.
Speaker David Zaslav, Chairman and CEO of Warner Bros. Discovery, was he at the RBC TIMT 2022 Global Conference last month? No.
It was actually former NBC president Andy Lack in 2001 – just before the network lost the NBA to ESPN.
Twenty years later, it could be deja vu again for the NBA.
From Zaslav surprised the sports world pretending “We don’t need to have the NBAat a Nov. 15 investor conference, the industry worried about the implications for upcoming rights negotiations.
The NBA will be looking for a handset 50 to 75 billion dollars or more of Warner Bros. TNT licensees. Disney’s Discovery and ESPN, beginning in the 2025-2026 season.
- With a young, tech-savvy fanbase and global appeal in markets like China and India, don’t be surprised if the NBA gets it.
- That would double or triple the payout on its current 9-year deals that pay a total of $24 billion, or $2.6 billion per year, from the 2016-17 season to 2024-25.
If the NBA doesn’t get the offers it wants from TNT and ESPN during their exclusive negotiation period, the league could open auction to technology giants like Amazon, Apple or Google.
The Zaslav Doctrine
Was Zaslav saying TNT could leave the NBA after 33 years? Or was he talking tough to impress a Wall Street crowd that downgraded mainstream media stocks?
And how will NBA commissioner Adam Silver react to Zaslav’s vow to stay ‘disciplined’ until he secures an NBA deal that reflects the ‘future’, not the past?
Commissioners are not sympathetic when their media partners cry poverty. They want to be wooed and ultimately overpaid for the precious live sports rights that sustain the TV ecosystem.
Now the NBA must decide if it wants to reconnect with cable networks like TNT and ESPN – which are losing subscribers every year due to cord cutting – and embrace the brave the new world of streaming. Or even return to broadcast television.
An executive said Zaslav’s comments went through the league like a lead balloon.
“Zaslav was gesticulating – but very badly. He doesn’t understand how to balance Wall Street and his sports brand.”
But media consultant Patrick Crakes noted that it doesn’t matter what network executives say at the conferences; it’s what they do in the boardroom that counts.
“If the NBA can negotiate in public, why can’t it [Warner Bros. Discovery]? I would be careful pulling too much from those comments,” Crakes said. “That said, the market is changing rapidlyand there is a lot of uncertainty around almost every renewal.
That said, an NBA-TNT divorce still seems unlikely given their successful history:
- From top to bottom, TNT executives and talent love the NBA and want to renew the relationship, sources said.
- TNT and Bleacher Report are also deeply integrated with the league’s media properties, including NBA TV, NBA.com and the NBA app.
- Only TNT can deliver the long “Inside the NBA”, the gold standard for studio broadcasts. The network recently gave Charles Barkley a 10-year contract extension and Shaquille O’Neal, Kenny “The Jet” Smith, and host Ernie Johnson Jr. their own extensions.
Why would TNT extend the cast of ‘Inside the NBA’ if he got out of basketball?
Like Ben Thompson of Stratechery wrote“I assume these deals include some sort of exit clause in the event that Warner Bros. Discovery doesn’t retain the NBA, but that’s a pretty explicit signal of intent when it comes to the NBA’s next contract.”
Broken TV relationships
In contrast, nothing lasts forever in sports television.
Just ask ESPN, who is losing Big Ten Conference football games after 40 years. Or CBS Sports, who will wave bye Bye to the SEC Conference after nearly 20 years.
Warning signs are flashing for the TNT-NBA partnership:
- Zaslav wants cut costs by $3 billion after WarnerMedia’s merger with Discovery Inc. Dumping expensive sports rights is a quick way to cut costs – and Zaslav noted that he has other sports besides the NBA, including MLB, NHL and the NCAA “March Madness” Men’s Basketball Tournament.
- Sports TV is a relational business. TNT has lost several longtime senior executives who have been instrumental in the relationship with the NBA, including Lenny Daniels (27) and respected Turner Sports chairman David Levy (33).
- As the ad market hits a wall, Warner Bros. Discovery isn’t the only media company reduce. Disney, CNN, Gannett, Vice and BuzzFeed have all announced layoffs or hiring freezes.
- Previously, bulletproof tech giants are also downsizing. Amazon is launching what could be the largest layoffs in its 28-year history – up to 10,000 employees could lose their jobs.
The NBA and TNT declined to comment for this story – but sources still say deep-pocketed tech giants like Amazon could be the solution, not the problem.
Like the NFL, the NBA could create a balanced list of media partners that includes both linear TV networks like TNT and ESPN as well as all-digital partners like Amazon.
In this scenario, the NBA wouldn’t have to squeeze TNT and ESPN for every last nickel. Instead, he could make his desired number by dividing a separate, streaming-only plan to a tech company that can afford it.
Consider Amazon’s deal for NFL’s ‘Thursday Night Football,’ which pays $1 billion per year until 2033. With “TNF” on Prime Video for the next decade, Amazon reported his strong interest in the NBA, sources said.
A partnership with a tech company like Amazon or Apple could also give the NBA the freedom to potentially untie some of the digital tasks handled by TNT in the next contract.
A dynasty in danger?
Driven by the dynastic Chicago Bulls of Michael Jordan, Bob Costas and the “Roundball Rock” score of John Tesh, the 12-year run of the “NBA on NBCwhich ended in 2002 is still remembered by many hoops fans.
Could history repeat itself 20 years later with TNT and the NBA?
Turner Sports’ iconic name was once renamed “Warner Bros. Discovery Sports”.
The nightmare scenario for sports TV executives is that thrifty corporate executives cancel them at the time of the agreement.
Former CBS Sports president Neal Pilson knows that feeling all too well.
In 1993, CBS had controlled the NFL’s flagship NFC package for nearly 40 years. But results-driven CBS CEO Larry Tisch was unhappy with the deal which paid the NFL $265 million a year.
- Tisch told a reluctant Pilson to offer the NFL $250 million a year — or a $15 million pay cut. Bad decision.
- Rupert Murdoch’s upstart Fox Sports floated a four-year, $1.6 billion bid that offered to pay the NFL $400 million a year. The late Tisch declined to match. The rest is history.
- Fox has controlled the NFC package for 30 years. Murdoch’s network will air Super Bowl LIVII — its 10th Big Game — on February 12, 2023.
Five years after losing the NFC package, and under new boss Sean McManus, CBS Sports agreed to pay $500 million a year for the weakest AFC package – $100 million more than Tisch was. willing to pay to retain NFC. But it also turned out to be a bargain, with quarterbacks John Elway, Peyton Manning and Tom Brady taking AFC TV’s ratings to new heights.
Sometimes negotiating in public can help. Other times it can lead to disaster.
Pilson interpreted Zaslav’s comments as part of an “invitation” to start negotiations; “warning” part there will be limits on how much he is willing to bid.
“I wouldn’t even define what was said as harsh. Throwing something like that in a public forum is not the [equivalent] to tell a league to get lost in a private meeting behind closed doors. This is hardball,” Pilson said, who is now a media consultant. “That’s still a long way off the definition of a softball statement that I doubt will make its way into the negotiating room.”
Step up or step away
Ultimately, the market will set the price for NBA rights.
Like CBS and the NFL in 1993 and NBC and the NBA in 2001, it will be up to the incumbents to “stand or walk away,” according to Pilson. But if they do work, they better prepare for the fallout from viewers, affiliates and advertisers.
“Big Top Value Sports is unique. They don’t create new ones. I always call them beachfront property,” Pilson said. “What is happening is there are now more competitors for these rights than 10 to 15 years ago with Apple, Google and Amazon entering the arena.
The NBA appears to hold the cards as it heads into its next round of media rights talks in 2023.
As Silver said during a industry conference last month: “We are currently in the enviable position of letting the market work its magic a bit, you know, to see where the best ideas will come from, which will generate the best value.”