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The NBA’s current TV contract expires in two years, and as the only major sports league or property whose rights become available before 2020, the league is about to score a big-time payday.
Miami Heat forward LeBron James and guard Norris Cole.
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Now that NBC has locked up television rights for the Olympics through 2032, the NBA league contract that expires in two years is basically the only major sports rights package available before 2020. That means the NBA has a strong negotiating position in the marketplace as its television contract gets close to an expiration date.
“The NBA's television contract is coming up at a favorable time in the cycle,” said Marc Ganis, president of Sports Corp Limited, noting that professional football, baseball, and hockey, as well as college football, all signed new long-term national television rights deals in recent years. “There are more networks in the marketplace that need NBA games than will get them.”
Put more simply, the NBA is going to get paid.
Comcast CEO Brian Roberts and IOC President Thomas Bach
NBC's Olympics deal caught industry observers flat-footed with the surprise announcement Wednesday. NBC, which is owned by cable giant Comcast, and the International Olympic Committee said that they were extending their U.S. television rights deal for six Olympic events beginning in 2021 through 2032. NBC is paying $7.65 billion in total, or $1.275 billion for each games, for the U.S. broadcast, cable, internet, and mobile rights, along with an additional $100 million signing bonus to promote the games that take place between 2015 and 2020.
NBC previously paid just under $10 billion combined over several deals to broadcast the Olympics from 2000 to 2020. With Wednesday's deal, the network will stand as the sole U.S. broadcast home for the first three decades of the new century.
Steve Burke, NBC's Chief Executive, called the Olympics “part of the fabric of our company” in announcing the deal. He also called them “massively popular and profitable programming,” which is only partially true. While the Olympics are indeed a huge ratings draw, they aren't always profitable. For instance, NBC lost $223 million on the 2010 Vancouver games and only eked out a slight profit on the 2012 London games. Burke said during Comcast's first-quarter earnings call last month that the Sochi games were profitable, but he didn't provide an exact figure.
But for Comcast, the nation's largest cable operator which generated more than $17 billion in revenue over the first three months of this year, the Olympics don't need to be profitable. The company views the games as a promotional platform for the programming of NBC and its other networks, aiming to take advantage of the large viewership to attract new audiences to its regular programming. Indeed, in light of the proposed $45.2 billion offer to acquire Time Warner Cable, spending $7.65 billion on the Olympics is basically pocket change for Comcast.
“It is hard to project anything reasonable financially with a deal that doesn't start until eight years from now and ends 18 years from now,” Ganis said. “Clearly, they are making a bet using today's money. It's not a massive gamble for them. Even if they miss, they aren't betting the company so it is a worthwhile deal for them to do.”