National Basketball Association executives should be popping the champagne over their jaw-dropping television contracts totaling $24 billion because such big-money deals are likely to vanish, analysts say.
The point of sports saturation on television in the United States is rapidly approaching, warns Smith College sports economist Andrew Zimbalist.
"At the end of the day, we have a lot more sports programming than we've ever had," Zimbalist told Reuters in a telephone interview. "And we've had pretty much the same number of household television sets.
"Ultimately what has to happen is that supply and demand have to meet at a lower price."
Sports lovers in the United States can now watch Premier League soccer from the Britain, or college football games nearly every day of the week. The NFL, NHL, NBA and Major League Baseball are currently all on display with a TV remote control.
What has made sports programming so valuable is what Zimbalist labels the "DVR revolution." Where people often watch television dramas and comedies on their DVR - and skip the commercials - sports enthusiasts want to see the games live.
The NBA's recently announced nine-year, $24 billion contract with ESPN and Turner averages $2.66 billion per year, up from $930 million of the current pact, which expires next season. Zimbalist said the size of the deal was a shocker.
"I am surprised that it basically tripled," he said. "I, along with some of the owners, expected a doubling of the deal. So it's larger than we thought it would be.
"But I think that we're at the end of the cycle now with television money."
David Carter, executive director of the Sports Business Institute at the University of Southern California, concurs, saying he expects a flattening of the television deals.
Carter said there are already some "pockets of softness," citing some problems with regional sports cable networks. He added that the value of college conference networks might slow on cable, saying, "instead of $2 per subscriber, they might end up with $1.50 or $1."
He noted the NBA's $24 billion deal was more than just a television deal.
"The deals are certainly getting more creative to drive these big numbers," he said. "We don't know, necessarily, all of the additional inventory that the NBA may have made available to their partners."
NEW PLATFORMS
Carter cited rights to emerging new media platforms, saying both the NBA and its partners "are trying to project long-term where media consumption is going to be."
"This isn't just a TV contract, like it might have been a decade ago," he said. "This is a media contract. And where that goes, what that means for consumers is yet to be determined given how fast technology is moving."
A new streaming channel planned by ESPN is an early step that could upend the traditional cable and satellite companies if it leads to more consumers cancelling their pay TV service.
ESPN executives insist, however, they are committed to the current pay TV system.
The NBA's big-money deal was driven, in part, by the league's emerging global popularity, something that sets it apart from the other three major U.S. sports, said Carter.
One of the clear winners in this deal are the players, whose union in 2017 will likely opt out of the current collective bargaining agreement.
With the new TV deal in place and the Los Angeles Clippers having recently been sold for a record $2 billion, the players could want a hike in their share of the league's revenue, which in 2011 they agreed to decrease to 51 percent from 57 percent.
The NBA's biggest star, Lebron James, chose this off-season to sign a two-year deal with the Cleveland Cavaliers, knowing that his contract could rise dramatically with a more lucrative broadcast pact in place by 2016.
He will earn about $21 million in each of the next two years but could see his salary jump into the $30 million range with his next contract in Cleveland.
"It was being a businessman," James said of his decision to sign just a two-year deal with the Cavaliers. "I understand the business of this sport."
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