The NBA boasts the youngest fan base among the highest-earning U.S. 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 a new media-rights auction on the horizon, the NBA and its legacy partners will look to make a sharp pivot to the streaming platforms most favored by hoops fans.
Speaking to investors during Warner Bros. 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 the linear cable channel TNT, an expanded streaming component is a prerequisite to extending that four-decade partnership.
“When [NBA commissioner] Adam [Silver] thinks about the future, he thinks about it the same way that I do,” Zaslav said during Thursday’s presentation. “He doesn’t love the—none of us love the idea that the only way to watch these games is on cable. There should be an opportunity, because there’s a lot of people under 25 that aren’t having access to it.”
With a reach of some 78.7 million pay-TV homes, TNT is among the most widely distributed channels on the cable dial, but Zaslav believes his streaming service can secure an even greater 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 be launching 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 closed out the third quarter with a grand total of 94.9 million global direct-to-consumer subs, of whom 53.5 million are based in the U.S. 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 while not doing anything to undermine its old-school affiliate revenues. With an average monthly sub fee of $3.09 per household, TNT generates some $944.8 million in annual revenue before it sells a single half-minute of ad inventory.
But that revenue stream is shrinking alongside the U.S. pay-TV business. With an estimated base of 64.2 million subs spread out among the various cable, satellite and telco operations and a total reach of 123.8 million homes, the penetration of the traditional cable bundle has been whittled down to just 52% of the national TV base. Just four years ago, 76% of TV households subscribed to the bundle; since that time, 27 million users have cut the cord.
Of those who remain attached to the bundle, 69% are age 50 and up, with younger consumers accounting for a mere fraction of the overall pay-TV audience.
Silver has long been ahead of the cord-cutting curve, and for years he’s warned that the generational shift from the dominant linear TV model would put the squeeze on the NBA’s deliveries of younger fans. While TV will retain an outsized portion of the NBA rights when a new deal is hashed out ahead of the 2025 expiration date, streaming is expected to play a far more significant role. Should the incumbents retain the NBA package, the new rights deals will allow for 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 will escalate into the nosebleed seats. (Under the terms of the current $24 billion deal, ESPN/ABC and TNT pay the NBA a combined average of $2.6 billion per year. That annual fee could soar to north of $7.5 billion under the new pact.)
Per Nielsen estimates, pro hoops last year accounted for one-quarter of TNT’s commercial impressions; as such, the live games and the Inside the NBA studio show are all 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 close of the earnings call, Zaslav voiced the usual platitudes about future spending, advising investors that the company was “going to be disciplined” in its approach to an NBA renewal.
“In the end, if there’s an NBA deal, it’s going to be a deal that’s very attractive for us, and very attractive for Adam,” Zaslav said. “We’ve got a global sports business that nobody else has. And we have a platform, a high-quality platform like HBO Max, that could generate 30 million people watching within a short period of time. … Imagine what that could do with sports.”
