By Benjamin Mullin and Lillian Rizzo
Sports TV networks are facing a big problem: They have virtually
no games to put on the air.
In quick succession over the past 24 hours, the National
Basketball Association, National Hockey League and Major League
Baseball announced they were suspending operations due to concerns
about the coronavirus pandemic, and the NCAA canceled its men's and
women's basketball tournaments.
Now, their broadcast partners could face significant fallout.
The networks that carry NBA games will take a substantial hit to
advertising revenue and could potentially be on the hook for big
rights-fees payments, according to analysts and people familiar
with sports-rights deals.
Walt Disney Co.'s ESPN and AT&T Inc.'s Turner, the parent of
TNT, together spend about $2.7 billion annually to show NBA games
nationally. In addition, regional sports networks owned by media
giants such as Comcast Corp. and Sinclair Broadcast Group Inc.,
among others, air NBA games in local markets.
Comcast also is the NHL's major broadcast partner. Meanwhile,
ESPN, Turner and Fox Corp.'s Fox all have MLB rights.
The NBA is the most popular of the professional leagues that
suspended operations. Losing NBA games will leave a major hole in
the TV networks' prime-time schedules, translating into lower
ratings that will harm their ad sales -- especially if the season
doesn't resume for the playoffs that normally begin in April,
analysts said.
In the last NBA season, TV networks brought in nearly $600
million in ad revenue from NBA games and $972 million from the
playoffs, according to research firm Kantar.
Networks' other major stream of revenue -- from the
channel-carriage fees paid by cable-TV distributors -- also could
be impacted. Distributors require some TV programmers to air a
minimum number of games; if they don't, the carriage fees could be
cut, according to a report by Rich Greenfield, an analyst for
LightShed Partners. Since most of the NBA season is complete, he
said, many TV programmers may have met the quota for telecasts.
As networks assess the possible damage, a major variable is how
soon the NBA can resume play. If it can do so relatively quickly,
the worst business impact could be avoided, people close to the
networks say.
Mark Cuban, owner of the Dallas Mavericks and a streaming-video
entrepreneur, called the suspension of the NBA games due to the
coronavirus a "black swan event," adding that the league and its
partners are "in new territory."
"In terms of impact on media, it really depends on how the virus
plays out," Mr. Cuban said in an email. "The NBA and major media
companies will have to focus on the health and safety of their
employees and stakeholders. That will drive all
decision-making."
The suspension of the major sports leagues could have wider
implications for the pay television industry. Cable and satellite
TV providers have lost millions of subscribers to cord-cutting over
the past several years.
Live sports has been one of the major selling points of the
traditional TV bundle. The NBA's suspension could potentially
accelerate pay-TV cancellations, said Michael Nathanson, an analyst
for MoffettNathanson.
"We worry about seasonal churn," Mr. Nathanson said. "We think
sports is the glue for subscribers."
It's unclear whether the networks will be required to pay rights
fees for the full NBA season even though they aren't airing games.
Some media executives likened the season's suspension to the
1998-1999 NBA season, which was shortened due to a lockout. That
year, networks still paid rights fees.
Media contracts, including sports-rights deals, often include
exit clauses for both sides for catastrophic events, but it isn't
certain that those would apply in this case. The league could work
with TV networks to help them mitigate any losses from advertising
and distribution partners, including by letting them air more NBA
games in subsequent seasons, the people familiar with the NBA
rights deals said.
"This is an unprecedented situation," ESPN said in a statement.
"We have great relationships with our league partners and are
confident we can address all issues constructively going forward.
Our immediate focus is on everyone's safety and well-being."
After several college basketball tournaments were canceled, ESPN
put its "SportsCenter" program on throughout the day on its main
network and the ESPN2 channel simulcast programming from ESPN and
ESPNNews to fill the airtime.
A Turner Sports spokesman said the company is supportive of the
NBA's decision to "protect the health and well-being of everyone
involved."
Turner and ViacomCBS Inc.'s CBS Sports, which air the NCAA
tournament, known as "March Madness," said they were fully
supportive of its cancellation.
Like other networks, CBS will be filling its air with a mix of
substitute programming, which will include a mix of news,
prime-time entertainment and daytime shows, said a person familiar
with the network's plans.
In a statement, Fox Sports said: "We fully support our league
partners and are actively working with them to navigate this
evolving and unprecedented situation."
NBC Sports didn't have immediate comment.
Sinclair, which owns more than 20 regional sports networks,
including many that air NBA games, anticipates scenarios such as
this in its TV-rights agreements, said Jeff Krolik, president of
Sinclair's local sports unit. The company will continue to monitor
the situation and hold discussions with the league, teams and
pay-TV providers, he said.
David Levy, the former head of Turner Sports who struck the
unit's multibillion-dollar deal with the NBA, said that major
networks' first business priority should be preserving their
long-term relationships with leagues by supporting their decision
to protect their players.
"I wouldn't be thinking about profits and revenues at this
moment," Mr. Levy said. "I would be thinking about our employees
and our country."
Write to Benjamin Mullin at Benjamin.Mullin@wsj.com and Lillian
Rizzo at Lillian.Rizzo@wsj.com
(END) Dow Jones Newswires
March 12, 2020 19:06 ET (23:06 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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