The NBA has the youngest fan base among the top-grossing American sports leagues, and while the league’s demographic profile is enviable, its cable-heavy distribution scheme makes it particularly vulnerable to the ravages of cord-cutting. With another media rights auction on the horizon, the NBA and its longtime partners will look to make a sharp pivot to the streaming platforms most favored by hoops fans.
Speaking to investors during the Warner Bros. In Discovery’s third-quarter earnings call, WBD President and CEO David Zaslav suggested that while the NBA continues to serve as a ratings powerhouse for linear cable channel TNT, an expanded streaming component is a prerequisite for extending the four-decade partnership.
“When [NBA commissioner] Adam [Silver] thinks about the future, he thinks about it the same way I do, Zaslav said during Thursday’s presentation. “He doesn’t love — none of us love the idea that the only way to watch these games is on cable. It should be an opportunity, because there are many people under the age of 25 who do not have access to it.”
With a reach of about 78.7 million pay-TV homes, TNT is among the most distributed channels on the cable disc, but Zaslav believes his streaming service can secure an even bigger audience for the NBA. “It’s not lost on Adam that we have a platform that reaches almost 100 million homes and that we’re going to launch a new platform,” Zaslav said, referring to the spring 2023 launch of a combined HBO Max/Discovery+ service . “It’s going to be … you know, the technology and the overall usability of the platform is strong.”
WBD ended the third quarter with a total of 94.9 million global direct-to-consumer subs, of which 53.5 million are based in the US and Canada.
As is the case with all traditional cable networks, TNT is in the midst of a perilous balancing act as it looks to expand its streaming presence without doing anything to undermine the revenue of old-school affiliates. With an average monthly sub-fee of $3.09 per household, TNT generates about $944.8 million in annual revenue before selling a single half-minute of ad inventory.
But that revenue stream is shrinking along with the US pay-TV business. With an estimated base of 64.2 million subscribers across the various cable, satellite and telcos and a total reach of 123.8 million homes, the penetration of the traditional cable bundle is reduced to just 52% of the national television base. Just four years ago, 76% of TV households subscribed to the package; since then, 27 million users have cut the cord.
Of those who remain attached to the package, 69% are aged 50 and over, with younger consumers making up just a fraction of the total pay TV audience.
Silver has long been ahead of the cord-cutting curve, warning for years that the generational shift away from the dominant linear TV model would put a squeeze on the NBA’s supply of younger fans. While television will retain an outsized chunk of NBA rights when a new deal is hashed out before the 2025 expiration date, streaming is expected to play a far more important role. Should the incumbents retain the NBA package, the new rights deals would allow a greater allocation of live games to ESPN+ and the new-look WBD streaming service.
A standalone package of NBA games is also expected to be auctioned off as Disney and WBD look to lock in their renewals. A weekly slate of two exclusive streaming games per week could bring in anywhere between $1 billion and $1.25 billion per season, while the incumbents’ fees would escalate into the nosebleed seats. (Under the current $24 billion deal, ESPN/ABC and TNT pay the NBA a combined average of $2.6 billion per year. The annual fee could rise north of $7.5 billion under the new pact.)
Per Nielsen estimates that pro hoops last year accounted for a quarter of TNT’s commercial viewings; as such, the live games and Inside the NBA studio shows are anything but indispensable to the network. That doesn’t mean WBD is unwilling to play hardball with the league when the time comes to negotiate a new rights deal. At the end of the earnings call, Zaslav echoed the usual platitudes about future spending, telling investors that the company is “going to be disciplined” in its approach to an NBA renewal.
“Ultimately, if it’s an NBA deal, it’s going to be a deal that’s very attractive to us, and very attractive to Adam,” Zaslav said. “We have a global sports business that no one else has. And we have a platform, a high-quality platform like HBO Max, that can generate 30 million people watching in a short period of time. … Think what that could do to sports.”