Much has been written about the NBA’s looming media rights deals, which is in the final stages and could be announced sometime in the next two weeks. The $76 billion bonanza constitutes a historic success for the NBA and a necessity — to varying degrees — for the winning bidders. What does it mean for the league’s audience?
Riding the wave of cable’s rise and fall
The NBA has been a primarily cable sport for more than two decades. The league’s 2002 deal with ESPN and TNT, which shifted the All-Star Game and conference finals to cable and reduced the league’s over-the-air presence by more-than-half, played a key role in legitimizing cable as a viable option for the kind of marquee sporting events that were previously exclusive to broadcast television. The decision was questionable at the time, with the league suffering a sharp decline in ratings that was chronicled by Rudy Martzke of USA Today — to the chagrin of then-commissioner David Stern — and new partner ESPN/ABC coming nowhere close to the white glove treatment NBC had given the league for 12 years.
Noting the differing fortunes of the NBA and NASCAR, then-Fox Sports executive Ed Goren said in 2005 that NASCAR had become “basically a network sport … at a time when the NBA, for whatever their reasons were, [went] from a predominantly network sport to a predominantly cable sport,” adding “I think the numbers speak for themselves.” Yet Stern would soon be proven a trendsetter, as Major League Baseball, the NCAA Men’s Basketball Tournament, Bowl Championship Series, and even NASCAR reached their own cable-heavy deals over the next few years. He may well have looked like a visionary by the start of the 2010s, when cable networks were in more than 100 million homes and the league’s ratings bounced back with the dawning of LeBron James‘ prime.
There is no question that the league lost viewers in the shift from NBC to ESPN/TNT, but basic cable was widespread enough that it ended up a risk worth taking. As cable has declined in the past decade, it has become increasingly obvious that being a borderline cable-exclusive sport is no longer tenable.
Thus, the new deal is — pending a challenge by Warner Bros. Discovery — as much a shift away from cable as the 2002 deal was away from broadcast. For the past 22 years, the majority of NBA games have aired on cable networks ESPN and TNT, with a handful on ABC and none exclusive to streaming. Assuming no changes to what has already been reported, the new deal will include fewer games on ESPN, the addition of a second over-the-air partner in NBC, and an extensive schedule on streaming platforms Amazon Prime Video and Peacock. Considering that some ESPN games are likely to air on its own streaming service ESPN+, the number that are exclusive to cable television is likely to pale in comparison to what had been the norm.
By shifting primarily to broadcast television and direct-to-subscriber streaming, the NBA is cementing a strategy thus far in use by a handful of teams at the local level, from the Phoenix Suns to the erstwhile Phoenix Coyotes. These prior deals have typically involved distributing games via over-the-air digital subchannels — think Antenna TV — alongside a team-branded streaming service. Even though such deals have generally resulted in increased viewership, there is little doubt that a traditional RSN deal would be far more lucrative. With the RSN model collapsing at a far greater pace than cable as a whole, teams are making these changes out of necessity. Trading revenue for reach is less a strategy than one making the best out of a bad situation. By contrast, the NBA is sacrificing nothing leaving cable, and instead is on the brink of a major financial windfall. Thus, the NBA’s move can be characterized as one of strategy than necessity.
Where the viewers are, and where they are heading
The theory underlying the shift from cable is that leagues need to meet viewers where they are. For the NBA, that has long been cable. For the league’s existing television audience — 1.1 million viewers per game during last year’s regular season — replacing TNT with the combination of Prime and Peacock does not make watching games easier, it simply adds new costs. Currently, a single cable or streaming MVPD subscription pays for an entire season of national NBA games. Prime and Peacock combine to add as much as $250 per year ($15/mo for Prime and $6/mo for Peacock) on top of a cable subscription, and that figure should rise as prices are inevitably hiked.
It is rarely prudent to antagonize one’s existing fanbase, but for the league — and the industry — it may be a necessity. According to the Nielsen offering “The Gauge,” streaming accounted for 39 percent of total day viewing in the month of May (the height of the NBA Playoffs), more than cable (28) or broadcast television (22). That is certainly a point for streaming. Yet it is not so simple. Streaming is not like cable, where a having a subscription means access to all (or nearly all) of the networks. It is a siloed, a la carte platform, wherein that 39 percent is splintered across multiple options.
Of that 39 percent, Prime and Peacock accounted for three and one percent, respectively, the latter on par with the FAST channel Pluto TV. (YouTube — regular YouTube, not YouTube TV — led the way with ten percent.) Having NBA rights might nudge those figures upward, but there is a sharp difference between the overall reach of streaming and of any individual streaming service. Viewers may be shifting to streaming, but not necessarily where the NBA is going.
Broadcast television is of course a different story. While the majority of broadcast TV viewing is via a cable or satellite subscription, Nielsen estimated earlier this year that more than 18 million homes access over-the-air networks solely through an antenna (plus an additional 4.6 million who have an antenna along with cable and satellite), a figure that gives broadcast a not-insignificant leg up on cable.
One might assume the median cord-cutter to be apathetic at best toward live sports, but the kind of viewer who ditched cable because his or her favorite shows were available to watch on Netflix is unlikely to purchase an antenna just to watch “Law & Order.” Whether sports or news, the reason to purchase an antenna is live programming. A fiscally-inclined fan can still watch a healthy number of sporting events, including the biggest ones, solely through broadcast television.
A great deal for the NBA, but what of its audience?
The new NBA rights agreement is thus a better deal for those infrequent viewers — those who do not need to watch every game, or even simply stumble across a game while flipping channels — than for its core audience. That is not necessarily a bad trade-off. Those casual eyeballs count the same as the ones belonging to ardent fans. There is a reason why broadcast still remains an outsized draw compared to cable or streaming.
The above does not hold for Prime Video or Peacock, as streaming services are not the kind of platforms wherein one simply stumbles upon programming. One has to make the affirmative choice to subscribe to, and then click the app icon of, a streaming service — and then to search for the desired programming. The kind of viewer that Prime and Peacock would bring to the NBA is one who would be watching more games if he or she could afford it; for example, the younger viewer who does not pay for cable and perhaps tracks games via social media (or pirated streams).
Theoretically, the new deal should also make the NBA more accessible to those viewers, however large a pool they may occupy. If one is not already subscribing to cable, the combined monthly price tag of Prime and Peacock is reasonable. As mentioned previously, the sheer number of existing Amazon Prime subscribers — upwards of 180 million in the United States — means that a good number of current and potential NBA viewers already have that service (whether or not they realize it comes with Prime Video).
Both NFL Thursday Night Football on Prime and last year’s NFL Wild Card Game on Peacock attracted younger audiences than the typical NFL game, which has been broadly interpreted as an indication that younger viewers seek out games on streaming services — though much of that may simply be a result of fewer older viewers tuning in.
It is far more likely that the NBA will be bringing new subscribers to Prime and Peacock than those services bringing new viewers to the NBA, but the new deal at least allows for the option of attracting fans for whom the cable bundle is prohibitively expensive.
Ultimately, the NBA is looking at the potential of broader audiences over-the-air and younger audiences on streaming, at the expense — literally — of its existing cable audience. Instead of remaining vulnerable to the continued erosion of the bundle, the league is putting itself in the position to recapture some of the audience it has lost over the years, and hold onto some of the audience that is sure to ditch cable over the life of the deal. One imagines that any viewership shortfall on Prime and Peacock — assuming their games are even Nielsen rated, which at least for Peacock is no guarantee — will be made up for by larger audiences on NBC.
It is unlikely that the NBA expects most fans to be able to watch all games under the new deal. Peacock may be a bridge too far for someone already paying for cable and Prime. A cord-cutter is obviously not going to spring for a cable subscription to watch games that are exclusive to ESPN. Viewers may have to choose between one conference final and another depending on the platforms to which they are subscribed.
In this era of media, increasing reach is going to paradoxically mean increasing fragmentation. For the NBA, that is a risk worth taking for $76 billion and insurance against cable’s decline.
