By Senad Karaahmetovic
Bank of America analysts weighed in on the discussion pertaining to the NBA rights package with the current contract concluding in 2025.
The analysts expect to see strong demand for sports rights in the coming years as this type of programming “continues to deliver strong viewership, despite continued cord-cutting, and has been a critical driver of linear advertising.”
Among other players, BofA sees both Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) increasing their sports presence. Comcast (NASDAQ:CMCSA) has also reportedly signaled an interest in the NBA.
“We believe the NBA will seek a significant premium from their current ~$2.6bn average annual value (AAV), driven largely by necessity for linear incumbents to retain these rights to drive existing businesses and facilitate a transition toward digital while new tech. entrants seek to bolster their streaming offerings. The NBA is a highly attractive sports package given its global appeal and programming volume with a 6 month+ season,” the analysts said in a client note.
The current NBA rights package is owned by Walt Disney Company (NYSE:DIS) and Warner Bros Discovery Sports (NASDAQ:WBD), which may both struggle in the bidding war.
“We believe the incumbents, ESPN and Turner, both value the NBA, but are unlikely to pay the magnitude of increase reported in the press at their currently constructed packages. Notably, both ESPN and Turner have exclusive negotiation rights through April 2024. We believe a more likely outcome is that the NBA is split up into multiple packages, including linear and streaming, while introducing a large platform (e.g., AAPL/AMZN), which would serve to maximize reach across distribution platforms and increase the aggregate value of the media rights,” the analysts added.
Ultimately, the analysts forecast that it will take a bid of 2-3x the current value to seal the deal.
“We view incumbents as likely to maintain their rights, with each paying a $1bn increase but with a potentially smaller rights package with the balance in value made up by a new technology entrant.”
“A resolution to the NBA contract is a critical piece in how these companies manage their respective strategic transitions,” they concluded.