NBA’s Decision to Select Revenue Over Reach Explains Why TV Ratings are Down

JohnWallStreet

NBA ratings for nationally televised games are down season to date (-23% on TNT, -20% on ESPN). While the talking heads have been quick to blame everything from injuries (see: Zion Williamson) to load management (see: Kawhi Leonard), Dallas Mavericks owner Mark Cuban attributes the decline in eyeballs to the league’s television partners. The Shark Tank star said (in a Twitter reply to a Mavs front office executive) that “ratings are down because all of our national broadcasts are exclusively available on cable, which is losing subs daily.” By contrast, the NFL “benefits from being on broadcast tv which is in every digital and traditional package.”

Howie Long-Short: Cuban isn’t wrong. Playing games almost exclusively behind a paywall (yes, cable is the original paywall) does limit viewership, but the NBA consciously chose revenue growth over reach. Octagon’s Dan Cohen (SVP, global media rights division) said that like the NFL, “the NBA is a premium property that can live on over the air television. The league could have had negotiated both reach and revenue during the last [rights negotiations] cycle.” Instead, they opted to sign a 9 year $24 billion deal - nearly 3x the value of the prior broadcasting agreement - with ESPN and Turner Sports.

The NBA should have some additional options - beyond over-the-air and cable - if it wishes to rebalance reach and revenue when their current broadcast deal expires following the ’24-’25 season. Cohen says, “all the over-the-airs (except Fox) are continuing to develop sophisticated direct-to-consumer [platforms] and will be looking for premium properties to fuel those assets” (think: CBS + Champions League). In other words, the possibility exists that the league will have the ability to sign a deal with a media partner that can offer both the reach of over the air and the potential to generate revenues from behind a paywall.

Cohen says that no league does a better job of balancing reach and revenue than the National Football League. “The reach is there, look at the numbers they did for the Cowboys game on Thanksgiving (32.53 million viewers); and they’re being paid appropriately (+/- $5 billion/year for media rights).”

Fan Marino: Cuban isn’t panicking about the NBA's declining ratings as he insists the numbers “don’t capture the full commitment to the sport” (think: social media, YouTube, IG, SNAP, FB streams and highlights), but Cohen sits on the other side of the fence. He believes that the vast amount of free short-form content Gen-Z fans consume negatively impacts game viewership. “Short-form content is incredibly valuable to drive awareness and fan engagement, but there is a little bit of a rubber band effect where there is now so much free content available that it’s coming back to hurt the NBA; it’s a double-edged sword and they’re beginning to feel the other side of it.

The NBA has already begun calling on Google to limit the amount of game content users can post on YouTube, so it reasons to believe that the league will continue to be more and more proactive in protecting its live and near live rights as the value of short-form content continues to increase. Remember, much of the content Cuban referenced is given away because when the league’s current media rights agreement was signed streaming (and social to a lesser extent) was still in its infancy. That is going to change - you may recall, we recently noted that Facebook has agreed to pay $100M for the rights to cricket highlights - which is not great news for outlets that make a living piggybacking on others’ I.P. (think: Barstool).     

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