INSIDE.com

NBA Looks For the Open Man as Its Contract With NBC Runs Out
NBC Sports wants to come back at a less-than-exorbitant price, but another bidder, like Disney's ABC-ESPN combination, could block that shot.
by Warren Cohen

Tuesday, May 22, 2001

National Basketball Association teams know that in the playoffs, it's not just the superstars who can hurt you, but the rogue players off the bench who appear unexpectedly. On the Los Angeles Lakers, for instance, Shaq and Kobe will always be formidable, but veteran Robert Horry seems to sink a three-pointer or block a shot at the most unwelcome times.

Right now, NBC, the NBA's network broadcaster of record, is similarly fearing the appearance of a rogue. In this case, it's a rival network that may try and swipe the only big league team sport that still appears on NBC. Next year will be the last of a five-year rights contract for both NBC and Turner Broadcasting, which airs the league on cable. Both networks have until Oct. 15 to negotiate with the league; if no deal is reached, all networks are open to bid on a new contract that would begin with the 2003-04 season.

Most industry sources believe that if given the chance, ABC and ESPN, both owned by Disney, will attempt to acquire the league's broadcast rights. They're sports-hungry franchises with room on their schedules to incorporate the NBA. While ABC would not confirm or deny interest, a spokesperson at ESPN said that the network would be interested in acquiring the NBA rights 'if it made good business sense.' Some ABC sources believe the network will be in there just to raise the price for NBC. With the pressure of extra bidders, sports TV insiders believe that the cost of NBA rights fees should increase by at least 20 percent.

This is bad news for NBC, which was hoping to renew the NBA on the cheap. NBC Sports chairman Dick Ebersol has complained of escalating rights fees for major sports, which is why he started the XFL after dropping out of the price wars for National Football League games. NBC paid $1.75 billion to broadcast the NBA for five years starting in 1998, compared with $750 million for the previous four-year deal. Similarly, Turner put up $890 million in the last contract versus $350 million for the prior one.

If there was no competing bidder this time around, NBC probably wouldn't have to pay an inflationary rate. After all, the economy is in a major cold streak. More important, pro-basketball viewership has waned in the post-Michael Jordan era. This year's regular season household rating for basketball on NBC finished at a 16-year low of a 3.0 household, according to Nielsen Media Research. Last season, it averaged a 3.4 rating, and in Jordan's last season, a 4.6. It's a far cry from the 1985-86 peak that garnered a 6.8 rating. During this season, the NBA cut back on the number of regional games it broadcasts. And even in this year's exciting round of playoffs, the ratings were slightly down from the previous year, until finally picking up this past weekend. 'If others were not interested, it might be difficult in this economic environment to get an increase because ratings have not been all that special,' says media buyer Paul Schulman.

But in an era of diminished ratings all around, pro sports remains a premium buy. NBA viewership, for instance, outranks viewership for the Major League Baseball and the National Hockey League, but those sports increased their rights fees by 73 percent and 287 percent, respectively, in their last contract negotiations. Rights fees for the National Football League and college hoops more than doubled. Even though the high fees have made it difficult for sports broadcasts to generate profits, networks see an invaluable platform to promote their entire schedules to captive viewers. 'Sports has become a loss leader to make viewers watch other network programming and create global empires,' said Steve Sternberg, the vice president of research at TN Media.

But there is also a sports glut that prevents other broadcast and cable networks from picking up the games. The NBA broadcast season runs all year on cable but begins on NBC after the Super Bowl. With 29 teams, the network often airs double and triple headers to give various parts of the country their hoop fix. CBS has football, golf and college basketball to fill up weekends until March. And Fox already televises NBA games locally on its 22 regional cable affiliates, so it doesn't require more costly national broadcast rights. The network is also already airing baseball and NASCAR racing in earnest. 'I just don't see Fox being involved and interested,' says Schulman.

But ABC, while televising the occasional pro hockey game, as well as golf, may have room to absorb the NBA. And ESPN, with its multitude of cable channels, can always find room for a sport featured prominently on SportsCenter each night. The cable network also has rights to the women's and soon-to-debut developmental NBA leagues as well as broadcasting pro hoops nationally on ESPN radio.

NBA commissioner David Stern has publicly said that he hopes to remain with the incumbent broadcasters. But clearly he wants more money for the league. And while it's possible to see Turner and the budget-conscious owners at AOL Time Warner bypassing the NBA, it's a trickier proposition for NBC Sports, which has experienced some setbacks of late. Ebersol's XFL debacle cost the network $35 million. And despite paying a record $3.5 billion to broadcast the Olympics through 2008, NBC saw the 2000 Summer Games drop to their lowest prime-time ratings ever for the event. NBC executives have acknowledged that advance commitments to buy ads for next year's winter games in Salt Lake City have slowed due to the soft ad market.

If NBC loses the NBA, which still turns a profit for the network, it risks looking like an also-ran in the television sports world. That's why many industry observers believe that NBC will do whatever it takes to keep the rights. 'The NBA is extremely important to NBC,' says former network TV sports chief Neal Pilson of Pilson Communications. 'I think they will retain the rights, even though there won't be the dramatic increases seen in the recent past.' So, concerns over the soft ad market and softening interest in basketball could ultimately get pushed aside by a bidding war. That's good for the NBA, but not for NBC or potentially Turner. For the sake of ratings, both better hope that Jordan decides to lace up and come out of retirement.