NBA Media Rights Renewal

We believe the new NBA Media Rights deal underlines the significant value of premium live sports content and positions the League and its chosen partners for long-term success. Below, we discuss key characteristics of the new deal, the rationale for the League and bidders, and the financial and valuation impact for the League and its franchises.

In late July, the NBA formally approved its new media rights deal, which has been years in the making. The new deal will pay the League a reported $76 billion over 11 years, which represents a $6.9 billion Average Annual Value (“AAV”). This is an approximate ~2.6x step-up on a gross basis from the previous AAV of $2.7 billion. The new deal will involve one returning partner in Disney / ESPN and two new partners in NBC / Peacock and Amazon, who are expected replace Warner Bros.-Discovery (“WBD”) / Turner.^[1]

ESPN will retain the “A” package, which is worth ~$2.6 billion, and includes the NBA finals, Wednesday and Sunday night games, Friday night games following the NFL season, a special ABC Saturday night package, conference finals, early round playoff games and WNBA broadcasts. Despite paying more and receiving fewer games, ESPN will importantly gain greater international and digital rights, which is core for the company to package with its direct-to-consumer product, scheduled to launch in the fall.

Comcast has won the ‘B’ package and will pay ~$2.5 billion annually over the life of the contract. This package includes ~100 games per season, half of which will be exclusive to Peacock, the company’s DTC product, and several playoff series. In addition, Comcast has committed to airing games on the company’s flagship broadcast network NBC in primetime on Tuesday and Sunday (during the NFL offseason).

The new ‘C’ package was won by Amazon Prime and represents the first time the tech giant will broadcast the NBA. The deal, which costs ~$1.8 billion annually, includes alternating conference finals, a Thursday package, Friday or Saturday games, NBA Cup, early round playoffs and international rights.

The last remaining hold up is WBD’s ‘matching rights’, which is subject to ongoing litigation between the media company and the NBA. Some media contracts allow incumbents to ‘match’ the terms of the contract to retain the rights, which WBD exercised. Importantly, matching rights are not only determined by consideration, but also by method of distribution, which is at the heart of the League’s rejection. While we wait for an outcome—either through judgement or settlement—we will focus on the existing deal at hand and what it means for the NBA and its partners.

In our last Annual Media Update, we proselytized the importance of leagues and rightsholders continuing to prioritize reach over monetization. In selecting Comcast and Amazon, the NBA has clearly signaled this choice to the market, even going so far as to call out the deals’ ability to “expand the reach of NBA telecasts, with all national games available on broadly distributed streaming services…and with dramatically increased exposure on broadcast television”.^[2]

In Amazon, the NBA has selected a streaming partner with global distribution—over 230 million subscribers worldwide—and the ability to broadcast outside of the U.S. Even domestically, there are more Prime Subscribers (~93 million) in the U.S. than traditional and virtual video subscribers (~69 million). The NBA is seeking to reach their fans where they are by serving "[the] large portion of our fan base that no longer subscribes to [cable and satellite],” per Silver. Meanwhile, in Comcast the NBA has another partner that can go over-the-air. The new deal calls for 75 regular season games airing on broadcast TV each season (20+ on ABC and 50+ on NBC), up from about 15 in the current deal. This is especially important for the NBA because over the last 15 years viewership on broadcast TV consistently averages 1.9x – 2.5x of the viewership of games on cable TV (ESPN / TNT).

For Amazon, the move to partner with the NBA is timed in conjunction with the launch of a new advertising tier. In January, Amazon launched advertising as the default setting for all Prime Video accounts. As a result, the streaming service boasts the highest conversion of its subscriber base to advertising among all streaming services (Figure 1).

In what is a historically weak TV advertising market, Amazon can now offer three compelling reasons for advertisers to choose them:

For Comcast, we believe winning the NBA rights was highly strategic for both the company’s cable business as well as its streaming business. For the cable business, the acquisition of these rights from Turner helps lower costs and grow its revenue base. Turner networks’ (e.g., TNT, TBS, etc.) affiliate contracts with Comcast are up at the end 2025. With the NBA, TNT currently costs Comcast around $3 per subscriber, per month, but without the NBA, Comcast will push to pay a significantly lower affiliate fee. Not only will Turner incur damage from lower affiliate fees for TNT but will also lose significant leverage in negotiations for other Turner networks whose negotiation was bundled with TNT.^[3] In addition, Comcast will be able to charge higher network affiliate fees to Sinclair and Nexstar, two broadcast groups that own a significant number of local NBC affiliates.

For Comcast’s streaming business, Peacock, the ability to add 50 exclusive games throughout the season will not only drive subscriptions, but importantly reduce churn. Currently Peacock represents just 1.4% of total monthly TV viewing and ~3% of total streaming viewership, as of July 2024. By regularly attracting scale audiences to its platform, not only will NBC immediately grow viewership, but also drive increased viewership to non-NBA programming.^[4] Adding the NBA will accelerate Peacock’s ability to reach critical mass in the great streaming struggle that we believe will sooner or later lead to mass consolidation.

We believe the NBA is following the ‘NFL playbook’ of media rights, which we view as a positive development for the League. First, by selling more rights nationally and creating a new package, the NBA is selling into a healthier ecosystem while maximizing the ratio of bidders to packages. Importantly, the NBA is not picking a ‘winner’ in streaming wars, but rather ‘playing the field’. This strategy expands the Leagues’ reach across channels while at the same time cultivating new streaming partners in Amazon, Peacock, Venu (ESPN / Fox / WBD JV), and ESPN’s soon-to-launch DTC service.

Second, the NBA’s new media rights deals ensure the League’s content will be ubiquitous from February through June. NBA games will now be televised on every night of the week, and importantly succeed NFL games on the same networks in key time slots—such as Thursday night (Amazon) and Monday night (NBC)—that U.S. sports fans are already accustomed to.

Third, the centralization and sale of content nationally will result in more equally distributed league-wide revenue, which enhances on-court parity and will cement structural profitability across all thirty teams. The shift from local media rights to centralized media rights will also more than offset any lost revenue from Regional Sports Networks.

While the financial impact on teams is extremely positive, the structure and terms of the media deal are a change from previous deals. Preceding NBA media rights deals have seen a large step-up in Year 1 with a standard escalator, typically 3% – 4%, thereafter. This deal is more backloaded with ~$140 million distributed to each team in the 2025-26 season growing to ~$290M by 2036-37. (Figure 3). While the media rights uplift has been widely reported to be a 2.6x step-up in the AAV, given the new deal incorporates certain rights that league previously monetized (via NBA TV) as well as certain local inventory, we believe the net uplift to be slightly lower.

We do believe this new deal will cement structural profitability across the League, which, in our view, will have a positive impact on the growth potential and capital deployment in the medium and long term.

There are several other aspects of the new media rights deal that represent additional upside, and we are very excited about: (i) the ability for the League to invest in growth initiatives; (ii) the improved financials across the WNBA; and (iii) potential for expansion.

We believe that the increased media rights revenue will enhance the ability to deploy capital at the League level via value enhancing initiatives, particularly as it relates to monetizing fan data and international growth. One such initiative that the League is already considering is the potential creation of a league in Europe. The League could draw on its experience in Africa with the Basketball Africa League, which launched in 2021, to grow and monetize basketball around the continent.

Additionally, we are excited about the continued growth of the Women’s National Basketball Association (“WNBA”), which is the premier global women’s professional basketball league.^[5] The new media rights deal will allocate $200 million per year on average to the WNBA (up from $30 million per year in the previous deal). The current rights agreement also includes a price reevaluation after the 2028 season to account for the League’s growing popularity. This would entitle each team to $14 million per year on average, which would be the fifth highest on a per-team basis among North American professional team sports.

Lastly, we believe that now that the media rights deal has been finalized, the NBA will explore expansion into new markets. In Silver’s press conference announcing the new TV deal, he said that the League plans to “engage this fall, in earnest, … [and is] in the process of making those determinations.” While expansion would result in a net reduction in the value of media rights revenue received by each franchise (given the media rights would now be shared pro-rata by 31 or 32 franchises), we believe that the value the NBA will target for expansion fees, which are paid to the existing 30 franchises, will be value accretive.

Now that the NBA rights have been agreed to, what impact can we expect on the rest of the sports ecosystem and what will we be watching?

First, WBD and Turner would have to replace significant lost content with other sports rights. The network has already secured other rights—the French Open, NASCAR, and College Football Playoffs—but none bring the scale nor the tonnage of the NBA. Should they lose their lawsuit, we believe they will continue to be aggressive in the premium sports rights market to protect their affiliate fee revenue.

This will become difficult given that there are limited premium sports properties coming up for renewal in the next few years. The rights renegotiation football field is stacked in 2028 and 2029 with expensive properties (e.g., MLB, NHL, and college football) coming back to market—precisely when the NFL has its media rights opt-outs in 2029 (Figure 4). We believe this will lead to an arms race to “be the next league” to the table. We expect these leagues to grab as much of the pie as possible before the NFL decides whether to opt-out. And while we believe there is demand for these content rights, it is not infinitely elastic, and it is something that we are carefully watching.

[1] This is subject to ongoing litigation.

[2] Streaming made up 41.4% of all TV viewing compared to 40.3% the month before. Cable viewership in July remained about even with June, though its overall share decreased from 27.2% to 26.7% due to the broadcast and streaming increases.

[3] Turner networks (incl. TNT) comprise ~70% of WBD’s domestic affiliate revenue.

[4] According to NBC, 90% of viewers who subscribed for the Peacock’s exclusive streaming game in 2024 watched non-sports content afterwards, primarily the original series “Ted” and season two of “The Traitors.”

[5] Arctos through its investment in NBA franchises, which collectively own 42.5% of the WNBA, and the Golden State Warriors, which owns 100% of the Valkyrie, has look-through ownership of ~2% of the WNBA.

©Arctos Partners, LP, 2024. All rights reserved.

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