Tuesday October 3, 2023

Will TNT Walk Away From The NBA?

  • The industry is still buzzing over David Zaslav’s warning that he doesn't need the NBA.
  • Amazon’s waiting in the wings for a crack at the global league.
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The setting was an industry conference.

On stage, the cost-cutting president of a legacy media company warned that he wouldn’t overpay for the NBA in upcoming rights negotiations. If the “numbers are going to choke us, we are going to walk away.”

Was the speaker David Zaslav, president and chief executive officer of Warner Bros. Discovery, at RBC’s 2022 Global TIMT Conference last month? Nope.

It was actually former NBC president Andy Lack way back in 2001 — right before the network lost the NBA to ESPN.

Twenty years later, it could be deja vu all over again for the NBA.

Ever since Zaslav surprised the sports world by claiming, “We don’t have to have the NBA,” at an investor conference on Nov. 15, the industry has been buzzing about the implications for upcoming rights talks.

The NBA will be seeking a combined $50 billion to $75 billion or more from incumbents Warner Bros. Discovery’s TNT and Disney’s ESPN, starting with the 2025-2026 season.

  • With a young, tech-savvy fan base, 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 from its current 9-year deals that pay a combined $24 billion, or $2.6 billion a year, from the 2016-2017 season through 2024-2025. 

If the NBA doesn’t get the offers it wants from TNT and ESPN during their exclusive negotiating period, the league could open the bidding to tech giants such as Amazon, Apple or Google.

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The Zaslav Doctrine

Was Zaslav saying TNT could walk away from the NBA after 33 years? Or was he talking tough to impress a Wall Street crowd that has downgraded legacy media stocks?

And how will NBA commissioner Adam Silver react to Zaslav’s vow to stay “disciplined” until he gets an NBA deal that reflects the “future,” not the past? 

Commissioners aren’t sympathetic when their media partners cry poverty. They want to be courted and ultimately overpaid for the valuable live sports rights holding up the TV ecosystem.

Now the NBA has to decide if it wants to re-up with cable networks like TNT and ESPN — which are losing subscribers every year to cord-cutting — and embrace the brave new world of streaming. Or even return to broadcast TV. 

One executive said Zaslav’s comments went over like a lead balloon at the league. 

“Zaslav was posturing — but very poorly. He doesn’t understand how to balance Wall Street and his sports brand.”

But media consultant Patrick Crakes noted it doesn’t matter what network executives say at conferences; it’s what they do in the boardroom that counts.

“If the NBA can negotiate in public, why can’t [Warner Bros. Discovery]? I would be cautious drawing too much out of these comments,” Crakes said. “That said, the marketplace is evolving rapidly, and there is a great deal of uncertainty around nearly every renewal.”

That said, an NBA-TNT divorce still seems unlikely considering their successful history: 

  • From the top down, TNT executives and talent love the NBA and want to renew the relationship, said sources.
  • TNT and Bleacher Report are also deeply embedded with the league’s multimedia properties, including NBA TV, NBA.com and the NBA app.
  • Only TNT can offer the long-running “Inside the NBA,” the gold standard for studio shows. The network recently gave Charles Barkley a 10-year contract extension and Shaquille O’Neal, Kenny “The Jet” Smith and host Ernie Johnson Jr. extensions of their own.

Why would TNT extend the “Inside the NBA” cast if it was getting out of the basketball business? 

As Ben Thompson of Stratechery wrote, “I would assume those deals include some sort of out clause in case Warner Bros. Discovery doesn’t retain the NBA, but it is a pretty explicit signal of intent as far as the next NBA contract is concerned.”

Broken TV Relationships

On the other hand, nothing lasts forever in sports TV.

Just ask ESPN, which is losing Big Ten Conference football games after 40 years. Or CBS Sports, which will wave bye-bye to the SEC Conference after nearly 20 years.

Warning signs have been blinking for the TNT-NBA partnership:

  • Zaslav wants to cut $3 billion in costs after WarnerMedia’s merger with Discovery Inc. Dumping expensive sports rights are a quick way to reduce costs — and Zaslav noted he has other sports besides the NBA, including MLB, the NHL, and the NCAA’s “March Madness” men’s basketball tournament.
  • Sports TV is a relationship business. TNT has lost several long-term, top executives instrumental to the NBA relationship, including Lenny Daniels (27 years) and respected Turner Sports president David Levy (33 years).
  • With the ad market hitting a wall, Warner Bros Discovery is not the only media company cutting back. Disney, CNN, Gannett, Vice, and BuzzFeed have all announced layoffs or hiring freezes. 
  • Previously bulletproof tech giants are downsizing, too. Amazon is launching what could be the largest layoffs in its 28-year history — as many as 10,000 employees could lose their jobs.

The NBA and TNT declined to comment on this story — but sources still say the deep-pocketed tech behemoths like Amazon could be the solution, not the problem.

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Like the NFL, the NBA could create a balanced roster of media partners that includes both linear television networks like TNT and ESPN as well as all-digital partners such as Amazon. 

Under this scenario, the NBA would not have to squeeze TNT and ESPN for every last nickel. Instead, it could make its desired number by splitting off a separate, streaming-only package to a tech company that can afford it. 

Think Amazon’s deal for the NFL’s “Thursday Night Football,” which pays $1 billion a year through 2033. With “TNF” on Prime Video for the next decade, Amazon has signaled its strong interest in the NBA, said sources.

A partnership with a technology company such as Amazon or Apple could also give the NBA the freedom to possibly unwind some of the digital duties handled by TNT in the next contract.

A Dynasty in Danger?

Driven by Michael Jordan’s dynastic Chicago Bulls, Bob Costas and John Tesh’s driving “Roundball Rock” score, the 12-year run of the “NBA on NBC” that ended in 2002 is still remembered fondly by many hoops fans.

Could history repeat itself 20 years later with TNT and the NBA?

The iconic Turner Sports name has already been rebranded “Warner Bros. Discovery Sports.” 

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The nightmare scenario for sports TV executives is for penny-pinching corporate higher-ups to overrule them come deal time.

Former CBS Sports president Neal Pilson knows the feeling all too well. 

Back in 1993, CBS had controlled the NFL’s marquee NFC package for nearly 40 years. But CBS’ bottom-line-focused chief executive officer Larry Tisch wasn’t satisfied with the deal that paid the NFL $265 million annually. 

  • 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 swooped in with 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 the past 30 years. Murdoch’s network will broadcast Super Bowl LIVII — its 10th Big Game — on Feb. 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 weaker AFC package — $100 million more than Tisch was willing to pay to keep the NFC. But that too proved a bargain, with quarterbacks John Elway, Peyton Manning, and Tom Brady driving AFC TV ratings to new heights.

Sometimes negotiating in public can help. Other times it can lead to disaster. 

Pilson interpreted Zaslav’s comments as part “invitation” to start negotiations; part “warning” there’ll be limits on how much he’s willing to bid. 

I wouldn’t even define what was said as hardball. To throw out something like that in a public forum isn’t the [equivalent] of telling a league to get lost in a private meeting behind closed doors. That’s hardball,” said Pilson, who’s now a media consultant. “This is still way in the definition of a softball statement that I doubt will make its way into the negotiating room.”

Step Up or Step Away

Ultimately, the marketplace 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 “either step up or step away,” according to Pilson. But if they walk, they better be prepared for the fallout from viewers, affiliates, and advertisers.

“The marquee value sports are unique. They’re not creating any new ones. I always refer to them as beachfront property,” said Pilson. “What’s happening is there are now more competitors for these rights than 10-15 years ago with Apple, Google, and Amazon stepping into the arena.”

The NBA appears to be holding the cards as it heads into its next cycle of media rights talks in 2023. 

As Silver said at an industry conference last month: “We’re in the enviable position right now of letting the marketplace work its magic a little bit, you know, to see where the best ideas are going to come from, what’s going to drive the best value.”

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