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Tug of war over NBA rights provides glimpse of media’s future

The N.B.A. season began last week with a face-off between the Denver Nuggets, with Nikola Jokic, center, and the Los Angeles Lakers, with LeBron James, right.

By Kevin Draper and Benjamin Mullin

The NBA’s season tipped off last Tuesday with stars including LeBron James and Nikola Jokic beginning the long quest for a title. But the action that will have longer-term ramifications for the league, and the media and entertainment landscape, is happening off the court.

The companies holding the rights to show NBA games — The Walt Disney Co., which owns ESPN and ABC, and Warner Bros. Discovery, parent company of TNT — are collectively paying the league $24 billion over nine years for that privilege. But their contracts expire after next season, and the NBA hopes to more than double the money it receives for rights in the next deal, according to several people familiar with the league’s expectations who spoke on the condition of anonymity to discuss ongoing negotiations.

It won’t get that without a fight. After decades in which sports leagues garnered ever-bigger piles of money for the rights to show their games, there are signs that media and technology companies are under increasing pressure to justify the exorbitant amounts they spend on broadcast rights. Interest rates are high, Wall Street is demanding profitability over growth, and streaming has reconfigured the entertainment industry.

The result of the NBA’s negotiations will say a lot about the future of broadcast networks, the cable bundle, streaming services and the sports media ambitions of technology companies.

“I think in this era that we’re coming out of, this is the last of the big deals,” said John Kosner, who advises sports media and tech startups after a two-decade career as an executive at ESPN.

The NFL, the most valuable sports league in the world, did not quite double its rights fees when it signed new agreements in 2021. And that was before the stock market declined, interest rates rose and wars began in Europe and the Middle East.

Disney and Warner Bros. Discovery, which have televised N.B.A games for more than two decades, aren’t necessarily in positions to shell out lots of cash, either.

Disney has carried out extreme cost-cutting and layoffs this year, and CEO Robert Iger has said the company is considering “strategic options” to sell equity in ESPN. Warner Bros. Discovery has also cut costs and said in August that it had a debt load of nearly $50 billion following the merger of the two companies last year.

The most likely scenario, according to the people familiar with the negotiations, is that Disney and Warner Bros. Discovery will sign new agreements with the NBA to televise fewer games. The NBA declined to comment for this article.

The two companies together show about 160 regular-season games each year, as well as the playoffs and NBA Finals. Most games are shown on cable (ESPN and TNT), with a handful on ABC.

For both companies, NBA broadcast rights still represent a valuable bargaining chip in negotiations with their biggest customers: cable and satellite companies. Those distributors pay billions of dollars to Disney and Warner Bros. Discovery for the rights to show their cable channels, including TNT and ESPN, based in part on the expectation that those channels will air sports including NBA games.

An NBA package would also help both companies shift to a streaming future. Warner Bros. Discovery recently added a live sports package to its streaming service, Max, while ESPN has been vocal about having a stand-alone streaming offering for its flagship channel in the near future.

Disney and Warner Bros. Discovery are not likely to be the only companies showing NBA games, though. If those companies end up showing fewer games in the new deal, the league may create a third rights package, perhaps even a fourth, of the games no longer included in the first two packages, as well as the league’s new in-season tournament.

The most likely buyers for those packages of games are Amazon and NBC, according to the people familiar with the negotiations.

Top executives at Fox, CBS and Google-owned YouTube have said that they are unlikely to put in serious bids for broadcasting rights. The intentions of Netflix and Apple are less clear, but Netflix has long said it is uninterested in paying the kind of prices the NBA is looking for. Apple has largely committed itself to a sports strategy of buying up all of a league’s domestic and international rights, as in its recent deal with Major League Soccer. That isn’t possible with the NBA.

Amazon and NBC are attractive partners to the NBA for different reasons.

For a generation, most NBA games have been watchable only with a cable package. But the collapse of the cable bundle — from around 100 million households with a cable package a decade ago to around 70 million today — has made old-school broadcast networks, the most widely distributed television channels, more attractive. With CBS and Fox as unlikely bidders, the league could want games to be shown on NBC’s broadcast channel.

As for Amazon, it is seen as highly unlikely that the NBA — a league proud of being forward-thinking regarding technology — would sign a new rights agreement with only traditional media companies, according to some of the people familiar with the negotiations. Amazon has long been interested in broadcasting the NBA, according to a person familiar with the league’s negotiation history, and it has won plaudits for how it has handled Thursday night NFL games.

The media and technology companies declined to comment for this article. CNBC, Bloomberg and The Wall Street Journal have all previously reported on parts of the NBA’s media-rights negotiations.

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