NBA Ratings Up But Adam Silver’s Media Rights Tech Strategy Is Key

The rating are up for the NBA playoffs and that gives rise for celebration for NBA Commissioner Adam Silver and those in the league office. Recently Silver has been talking lots about the leagues media rights negotiation which will take place between now and the 2024/25 season when the current terms concludes. However, the negotiations will be far more complex than just taking a look at ratings comparisons.

Silver has gone on record as saying sports media will change more in the next 5 years than in the last 30 years. Clearly, he is thinking about something different than the legacy approach to sports rights. Typically, Sports leagues, including the NBA, have traditionally relied on exclusive bulk deals with centralized media platforms like ESPN, Fox, CBS, NBC, and TNT to maximize the value of their media rights. Recently, some of the technology platforms, like Amazon
AMZN
and Apple
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are entering the fray to bid for those rights.

With the rise of streaming technology, web3, and the increasing demand for more direct and personalized/digitized experiences, leagues have been incorporating a more direct-to-consumer (DTC) approach in their strategy. The NBA and MLB have launched direct to consumer offerings and the NFL last year rolled out NFL+, a collection of games that can be streamed live. In each case, these DTC offerings are subject to the overarching media deals with the media platforms that generally involve exclusivity.

For example, after the NBA sells the exclusive media rights to a slate of its games to ESPN and TNT, it offers the remaining games DTC outside their team’s local markets. In addition, the teams can also sell the media right to their team’s games in their local markets. That is how the regional sports networks were conceived, acquiring these local media rights from teams and then offering them on local cable networks. However, these regional sports business have been crushed by the proliferation of cord cutting. Unfortunately, their attempts to launch streaming services to make up for the loss in revenue have either been opposed by the rights holders or the revenue from streaming was not nearly enough to make up for the lost revenue by the cord cutting. The major player in regional sports network business, Diamond Sports Group (DSG) recently declared bankruptcy. I covered the woes of DSG and other regional sports networks in a previous article.

Notwithstanding, as we enter the next phase of the sports media rights evolution we will see an additional shift in the way we value and sell sports media and a rise in the importance of technology designed to personalize the consumer/fan experience. Media will become both more fragmented and interactive, with a cascading effect from bulk sales, that includes the broadest of distribution, to micro transactions.

Although buoyed by a big uptick in ratings so far in the year’s NBA playoffs, Silver points out that the NBA has been struggling with a dilemma: its young fans that are coveted by advertisers often consume clips and highlights on social media rather than watching the full broadcasts live. Since the size of the audience determines the size of the rights fees paid by broadcasters, the NBA (or other leagues) will certainly continue to sell certain programming in bulk to media platforms. They will also continue to withhold the ability to go direct to consumers on games that are not covered by the agreement. However, I bet Silver will push to withhold the rights to micro-transactions for all games (except perhaps games that are free to air). These micro-transaction might be more appealing to this younger audience that has a great appetite for consuming short form content—especially if packed with excitement.

Silver has gone on record saying that every moment of every NBA game has potentially a different value. For example, a meaningless game in the standings has less value to many fans than two contenders playing for first place in the Conference or Division. On a more micro level, a close game is more valuable than a blowout and the last minute of an important, close or playoff game has even more value. The implications of all this are that portions of games can be sold through micro transactions minute by minute using dynamic pricing. These micro-transactions can be triggered by real time notifications through the leagues new app.

One final point of negotiation might be the league retaining the rights to DTC communications embedded in the live broadcast through QR codes or other technology. This would involve new and exciting interactive viewing and second screen experiences. This could include an automatic notification on the league’s DTC app during key portions of the game, triggering commerce, digital collectibles (including proof of witnesses a key moment) or even gambling. Viewing an NBA game will become a personalized, contextually relevant and immersive experience, triggering a myriad of DTC commerce opportunities.

The nature and scope of those micro-transactions and interactive broadcast rights will be the subject of intense negotiations because the stakes will be high. I must say I agree with Silver’s position that the next 5 years will produce radical changed in the sports media business. I am excited to watch how the NBA leads the way.