Why is NBA TV money exploding when fewer people are watching?

More than 20 million viewers tuned in to watch LeBron James and Kevin Durant face off in the 2017 NBA Finals. 

Since then, the number of eyeballs on the NBA’s marquee event has dramatically declined. 

The 2021 Finals between the Milwaukee Bucks and Phoenix Suns drew 9.91 million viewers; the 2022 Finals between the Golden State Warriors and Boston Celtics averaged 12.24 million viewers; and last year’s Finals between the Denver Nuggets and Miami Heat had a U.S. audience of 11.64 million viewers. 

The domestic audience watching the NBA Finals over the past four years is roughly half the audience that was watching bouts between the Cleveland Cavaliers and Golden State Warriors in 2016 and 2017. Nonetheless, the money the NBA receives on its next national TV rights deal is about to increase by close to 2.6X per year.

On Wednesday, The Wall Street Journal reported that the NBA is “closing in on deals” with NBC, ESPN and Amazon worth $76 billion over 11 years. If those numbers are accurate, that means the NBA will receive nearly $7 billion annually from its national rights partners — up from the $2.7 billion in annual rights fees it collects now. How is it possible that the NBA’s national rights deal can increase by such a multiple when the league’s TV audience has fallen off so much?

For perspective, I reached out to Eric Blevins, who is the Sports Law Program Manager with the Tulane Center for Sport. Here is our conversation, which has been lightly edited.

CC: Why is the NBA’s national rights deal exploding in spite of TV viewership declining so much from 2016 until now?

EB: It’s the $1 billion question. The $7 billion question. I probably would put the answer in two buckets. The first is those numbers are down, yes. But overall, and more importantly relative to the entertainment landscape, the NBA is a really strong property. Number two, this deal is a long-term investment. It’s not so much about what the league has done or is doing right now but what you’re going to do over the next 10 years or whatever the reported length is.

The NBA is very strong. The playoffs for last year — the Finals were down from those historic numbers. But I think I saw the 2023 playoffs were the most watched over the last five years. So in a narrow view, pretty good. Then you think about how much of the last few years are affected by COVID. Does that kind of affect where we are in terms of the 2023 Finals numbers? All of that can maybe be an excuse.

I think maybe the most interesting note about where the NBA kind of falls relatively is there is this Variety article that listed the top 100 telecasts of 2023. Over half of it is live sports. The NBA is very strong. But all of these broadcast deals are fitting in this world where live sports are becoming the most valuable property because they are kind of the only remaining appointment viewing in this new world where the cable model is collapsing. Live sports (are) the only thing you have to see what happens live. With very few exceptions. Sports, nobody cares after the game is over. There is that uncertainty of outcome. You want to see who is going to win. I think that explains why sports are so popular. 

Within that top 100, the NFL is a unicorn. Forty-five of the 100 are NFL games. Six are NBA games. Which doesn’t sound like a lot. But besides the NFL and NBA, there is no other pro sports telecast in that top 100. There are some major college games. But it’s really the NFL and NBA. Even though the NBA is way behind the NFL, it’s almost way ahead of everything else. Relatively speaking, everyone wants live sports. And of that live sports bucket, the NBA is probably number two or number three if you consider the English Premier League.

CC: So, trying to distill what you just said, there are two main elements. One: While Finals viewership has fallen off, there is still an enormous audience for the NBA. Two: the live sports element, where sports is one of the only things where you still have to experience it as it happens.

EB: I think those are the biggest reasons. Going back to that Variety list, the only thing that cracks the top half other than live sports are the Oscars — so obviously, something you want to see live — but then “Next Level Chef.” The series two premier was in the top 40. A show I have never heard of.

You see people talking about the demographics. The value of the viewer you’re getting with the NBA is higher because it’s younger. People want the younger viewer. The folks who are spending more money. The people who are fans of the NBA are a higher-value viewer.

Then the last part that explains the high rights fees, there is more competition. The NBA is popular. Live sports are popular. But you’re seeing in this deal, there are multiple players. It’s a simple matter of more people bidding raises the price.

CC: It looks like Amazon is going to be one of the NBA’s partners on this next deal. Do you have any thoughts on Amazon increasingly becoming this go-to place for live sports? They already have (select) Yankees games, and they already have Thursday Night Football.

EB: Amazon is probably the biggest player in that streaming piece. But I think the big story is that streaming is becoming a major player. It’s part and parcel of the collapse of the former model. I think Amazon is the bellwether in all of that. They have Thursday Night Football. They added NASCAR. Interestingly enough, they invested in Diamond and may be the reason that company gets saved from bankruptcy. They might emerge with some of those regional rights deals in the NBA, the NHL. Do we see the Pels on Prime? I don’t know. Maybe. I don’t know whether it’s a good thing or a bad thing for consumers. That’s for the consumers to say. But it’s certainly not changing. It’s only going to keep growing. Apple is making some moves. They got that big deal with MLS. 

Globally, I think this is an even bigger story. Amazon has already been streaming the NBA in Brazil and Mexico. But I think going back to the first point about why rights are going up, I think international growth is one of those reasons. Why do they want to pay a ton? Because they think they can grow internationally. The streaming platforms in all of these new innovative delivery services. The way they are getting the games out there, it’s so much easier to get the games out there to a global audience than it would be with cable and the dinosaur methods.

CC: With rights fees in general, does this feel like we are in a bubble? How sustainable does this rapid growth feel to you?

EB: I don’t think so. If there was a bubble, it was probably Diamond. It was the old model. Diamond paid a huge amount then all of a sudden lost a lot of value with the change in technology and the change in the broadcast landscape. 

The streamers and the companies who have not traditionally been in the sports broadcast world have kind of been testing the waters. They are not taking the biggest piece of the package to start with. Amazon is going in and saying, ‘OK, we will just take Thursday Night Football.’ It seems like these companies know what they’re getting into. They seem to be more cautious. One example of that is Ligue 1, the French Soccer League. In the fall, their rights deal was with Amazon. It was with Amazon and a French company called Canal who were each paying about $300 million a year for different packages of French soccer games. That deal ran up last year. The league held a bidding auction for the rights. Nobody bid the minimum amount. They are actually struggling right now. I saw a report that they might try to do their own direct-to-consumer. 

I think the point to your question is companies aren’t just throwing huge amounts of money at sports. They seem to be smart in that they’re going after the proven winners, which is the NFL, which is the unicorn. I think the NBA is at the top of that next group with probably the Premier League.