At some future date great minds will reflect on the moment we’re all rocketing through and possibly make perfect sense of it.
But without the benefit of academic rigour or even hindsight, let’s just go ahead and admit we’ve got a lot of spare time on our hands, since most of us aren’t busy with barn raisings, painstakingly transcribing the Old Testament, fixing our own cars, sewing or occasionally going outside.
Into this void has rushed video games, the Kardashians and social media.
And when we’re not busy with those trivialities, we watch sports.
Not that there has ever been reason to doubt this, but the latest proof comes courtesy of the NBA, which announced its new television-rights deal Monday morning. As first reported by Richard Sandomir of the New York Times, it is massive. The deal with ESPN and TBS is worth $24 billion over nine seasons, or $2.67 billion per season. The current deal, which expires after the 2015–16 season was worth just more than $900 million annually.
It’s a shocking amount and another in a steady stream of big wins for new NBA commissioner Adam Silver, who was already making people forget David Stern with the way he handled the Los Angeles Clippers scandal, paving the way for a record $2-billion sale of the Clippers to Steve Ballmer.
This TV deal is another thing entirely. It is nearly double the $1.5 billion MLB earned this season in the first year of their new national-rights deal, which itself doubled the previous agreement. Even more amazingly it is within spitting distance of the $3 billion the NFL gets annually for its games in a deal signed in 2011.
All these deals are being driven by the same thing: Live programming has been recognized as the one thing that we actually like to see live, as opposed to recorded on our DVRs or streamed on Netflix. And sports provides loads of live programming with unpredictable endings that are DVR-proof.
Those elements make sports programming very attractive to advertisers in their efforts to sell us things to makes us less hungry and thirsty or stinky, not to mention those herculean pick-up trucks and pills for erectile dysfunction.
Another major factor is the television industry itself, which sees live sports as a bulwark against people who want to do away with their cable connections altogether and watch everything over the Internet, somehow.
So we’re used to seeing rights deals for sports take some massive jumps, but a three-fold increase is remarkable. There are all kinds of potential ramifications for the NBA’s deal, beyond Silver chest-bumping Charles Barkley.
Among them:
· The certainty of another labour stoppage in the NBA. The NBA locked out the players at the start of the 2011–12 season and secured a 12-percent pay cut from its players by crying poor. The current CBA runs through the 2020–21 season, but either side can terminate the deal after the 2016–17 season. With the Clippers selling for $2 billion and TV rights tripling, it’s hard to imagine the players not demanding a bigger share of an ever-growing pie.
· In particular, this time around NBA stars will be looking to get paid. Only in the bubble economy of sports and entertainment can you argue LeBron James is getting taken advantage of when he’s pulling in $21.1-million a season, but he is. In no sport does one player have a larger impact on a franchise or a league than a superstar does in the NBA, and arguably only soccer stars and F1 drivers have greater global reach than the biggest NBA names, yet the Cavaliers can pay James only 30 percent of their overall payroll. Meanwhile some estimates have suggested James or Kevin Durant could be worth $75 million annually if there wasn’t a salary cap in the NBA. It’s no coincidence that James only signed a two-year deal with the Cavaliers. He wanted to be able to sign his new deal when the new TV money kicks in and likely after the NBA’s CBA better recognizes the value of the stars that fans turn their TVs on to watch.
And closer to home:
· When BCE Inc. and Rogers teamed up to buy 75 percent of MLSE in a deal worth $1.07-billion (and which valued the business at $1.5 billion) in 2012, then-MLSE chief executive officer Richard Peddie told me it was a steal, and that it wouldn’t be long before MLSE would be worth $3 billion. It’s hard to say he’s wrong. The NBA deal alone will send another $45 million (USD) to the bottom line, or $30 million more than the Raptors were getting before.
· And remember how NHL commissioner Gary Bettman looked like a genius not very long ago for earning a 10-year, $2-billion U.S. TV deal with NBC in 2011–12? Or when the $5.2 billion that Rogers Communications paid for 12 years of Canadian NHL rights seemed outrageous? The way the market is going, the $200 million (USD) the NHL is getting annually for its U.S. package suddenly seems way too low and the $433 million (CDN) that Rogers is paying the league for Canada isn’t high enough.
· The massive increase in TV money from the NBA, along with improved local TV ratings, and a strong season-ticket-renewal rate should give the Raptors more sway within MLSE. The Leafs will likely always be a stronger source of local revenues for the company, but as strong as the NHL is as a business, the NBA is even stronger.
· Put another way, the Raptors get about four times as much from their national TV package than the roughly $11 million the Leafs get from the NHL. Moreover the NBA remains the major sports league best positioned to reach into markets like China, India, South America and Europe. When MLSE CEO Tim Leiweke was musing about the Raptors surpassing the Leafs in terms of fan interest within 10 years, it was likely hyperbole, but the Raptors could become the key revenue driver for the company over time.
· The Raptors should have some very motivated players. Kyle Lowry signed a deal with a player option for the 2017–18 season—if he stays healthy and plays to his potential, he’ll have a chance to sign a deal that dwarfs the $12 million annually he’s making now. Similarly, DeMar DeRozan will almost certainly opt out of his deal after the 2015–16 season in order to get lifted by the NBA’s rising revenue tide.
And overall?
The NBA’s new deal is more proof that the big money for major-league sports will increasingly come from those of us at home, on our couches, rather than those who actually huff themselves down to the games to be what is effectively a live studio audience. A recent study by PricewaterhouseCoopers predicts that gate revenues for the North American sports industry will grow at a rate of about 2.6 percent annually, while media rights will grow by 9.1 percent.
As if we needed more evidence that we are a society that likes to watch.