The NBA has scheduled a press conference for Monday morning to announce its new media rights deals, an extension of their current deals with Disney (ABC, ESPN) and Turner (TNT) that, according to the Wall Street Journal, will run through 2025.
The league also laid plans in partnership with ESPN for a new online video service that would show live regular season games, the people said. In a significant move for ESPN, which derives its huge profits from the pay-TV ecosystem, that service will be open to people who aren’t cable or satellite TV customers.
The contracts with Disney and Turner will give them the rights to NBA games through the 2024-2025 season, the people said. NBA telecasts will continue on Turner’s TNT, ESPN and Disney’s ABC network, which will continue to show the NBA Finals, one of the people said.
Disney has been paying the NBA about $485 million a year under its existing contract, while Turner has paid about $445 million annually. Those deals were set to expire after the 2015-2016 season. The precise value of the new contracts wasn’t clear, but they will be worth at least twice as much as the earlier deals, the people familiar with the matter said. One of those people said that estimate is conservative.
The New York Times reports that the deal is worth $24 billion over nine years, nearly $2.6 billion per year, and will take effect after the 2016 season.
NBA to announce $24 billion/9 year deal w/ ESPN and TNT on Monday. Annual average value nearly 3x current deal.— Richard Sandomir (@RichSandomir) October 6, 2014
The important part of this deal for non-business folks and fans is that all that extra money. It's part of BRI, which is collectively bargained to be shared with the players...in the form of the salary cap. Pro Basketball Talk broke down what the impact could be:
Using those figures – including a flat $2 billion for the new contracts – the salary cap, which is determined by the NBA’s Basketball Related Income, would rise by $15,960,833.
Of course, there are caveats.
For one, I’m using the average numbers. If both the current and new contracts escalate – meaning the league is drawing more than average in 2015-16 and less than average in 2016-17 – the salary-cap increase would be diminished at first. The NBA reportedly wants to smooth any large salary-cap spikes.
These deals don’t exist in a vacuum. Perhaps this contract will adversely affect other elements of Basketball Related Income. Maybe ESPN and Turner are projecting their contracts will be more valuable, because more people will opt to watch games on television rather than attending live.
But the report calls for contracts that pay more than $2 billion, and I just used an even $2 billion. So, there’s wiggle room in the other direction, too.
All in all, about $16 million is a decent guess for the average salary-cap increase due to the new TV contracts.
There's a resistance to the idea that the salary cap could increase outright from the get-go, though. From Grantland:
Executives on lots of teams have gotten the sense from the league office that the NBA will try to smooth the increase of the cap level to minimize the impact of any massive one-year jump in revenue. Exactly how it would do that is unclear. The precise team salary cap — $58 million last season, $63 million this season — is tied to overall league revenues; the two rise and fall together. Players are guaranteed about 50 percent of the league’s “basketball-related income,” and the league and union set the cap figure so player salaries add up to a number in that 50 percent ballpark.
The league’s specific plan for smoothing out the cap increase is unclear, and in the end, it may opt against doing so at all. The players will receive their guaranteed 50 percent share of revenues regardless of any engineering.
If the new deal isn't phased in, it could have a substantial, though not atmospheric increase for max players.
Quick and dirty estimate, LeBron's 35% max in 2016 about $29 mm a year to start, if no phase in of $, which there could well be.— Nate Duncan (@NateDuncanNBA) October 6, 2014
CBSports.com will have more coverage from Ken Berger after the deal is announced.