NBA Could Double TV Rights Fees & Net $15 Billion

07.16.14 3 years ago 2 Comments
LeBron James

LeBron James (Tom Szczerbowski)

When LeBron James signed his two-year, $42 million contract with the Cleveland Cavaliers earlier this week, knee-jerk reactions were those of frustrated confusion – if he was actually committed to the Cavs, why would LeBron sign a short-term deal that ensures he’ll become a free agent in two summers?

No matter what his detractors believe, the answer has nothing to do with James’ desire to flee Cleveland a second time; it’s all about LeBron and his camp expecting a significant spike to the salary cap when the NBA signs a new TV deal for the 2016-2017 season. And according to the Wall Street Journal, the league stands to benefit financially from that agreement even more than previously anticipated.

Looking to capitalize on an already wild free agency period, an influx of young talent, and several superstars playing in the primes or twilights of their careers, the NBA is reportedly pursuing an astronomical payday when the current TV contract expires after the 2015-2016 season. The WSJ’s Sharon Terlep and Amol Sherma say that the league is seeking to double the amount it receives from Disney and Turner for broadcast rights to its games in the next TV deal.

Given current contracts with the broadcasting giants are worth between $445 million and $485 million per year, the WSJ’s Mike Shields – citing Terlep and Sherma’s report – writes that the league could net $15 billion over the coming deals’ totalities if reports of its intent on doubling Disney and Turner’s current fees are accurate.

…the NBA is going big, looking to double its TV rights fees from Turner and Disney, reports WSJ. That could mean $15 billion in rights fees assuming an eight-year deal starting in 2016.

The New York Times reports that discussions between the NBA and its broadcasting partners are already underway, and that consideration is being given to splitting coverage of the Finals between Disney and Turner.

Both Disney and Turner have eight-year contracts in place that run through the 2015-2016 season, but the companies are already in preliminary discussions with the league about extending their deals, the newspaper reported.

NBA may look to split the finals coverage between the two media companies so that the championship round games would air on channels belonging to both, the Journal said.

NBA team owners are meeting Tuesday to discuss TV-rights deals and other matters, the report said.

Approximately $950 million individual, annual contracts for the TV rights to NBA games would significantly raise the salary cap for the 2016-2017 season. The cap number is directly tied to basketball related income (BRI), of which television contracts are a sizable portion. It’s not a coincidence that James – and Dwyane Wade, Luol Deng, and others – signed a two-year contract this offseason; with the cap number set to jump in 2016 once new deals with Disney and Turner are inked, free agents stand to grossly benefit.

Grantland’s Zach Lowe says that some teams are projecting the cap to rise by nearly 30 percent come 2016-2017, setting it at approximately $85 million – a $22 million increase on this season’s number. All free agents in the summer of 2016 would be in for sizable raises under that scenario, but especially those worth a maximum salary.

LeBron has made no secret of his qualms with the league’s restrictions on salaries for its best players. He believes he should be compensated for not just his on-court value but his financial worth, too, and both considerations would place his yearly take well above the $21 million he’ll receive from the Cavaliers.

Under the current CBA, players with 10 years of experience are allowed to sign contracts that will pay them 35 percent of the first season’s cap number. From there, they’re entitled to 7.5 percent annual raises. Thus, if the cap number for 2016-2017 jumps to $85 million or something close to it as a result of the NBA doubling its fee from Disney and Turner, James could command a deal from Cleveland worth just under $30 million in its first season and escalating bumps of over $2.2 million for every year thereafter.

You thought this summer’s free agency was crazy? The next two periods of player movement stand to be just as fluid and perhaps more so. If players are intent on receiving as much money as they can before the CBA likely expires in 2017, they should all exercise opt-out clauses and refuse to sign extensions so they can become free agents in one of the next two summers. Even if players are unable to hit the open market as the new TV deal hits in summer 2016, they’re inclined to do so at this time next year – the league is projecting the cap for 2015-2016 at $68 million, and that could be an undersell given the slow swell of the coming season’s number.

The NBA, obviously, is absolutely thriving financially. As teams sell for $2 billion and the league seeks to double-up on huge TV deals in two years, it’s the players’ right to take advantage.

That LeBron signed a two-year contract says nothing of his commitment to the Cavs; by all accounts, he intends to stay home for good. Instead, it’s a smart, calculated choice to capitalize as much as possible financially on a league that’s certainly doing so as a direct result of he and his peers.

Would you test free agency before the new TV deal?

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