The Business of Sports

What’s a Sports Fan to Do Without the NBA?


(This story has been updated. A quote on page 2 that had been attributed to NHLPA Executive Director Don Fehr was actually made by sports agent Allan Walsh)

It’s midweek in early November and you’re befuddled. The World Series is done, NASCAR is winding down, and meaningful pro golf is a distant memory. The college hoops tipoff is still a week away—and who really pays attention to college basketball before February, anyway?

So you open the paper to look at the evening’s sports listings. They’re pretty slim. ESPN is showing second-rate college football—Temple at Ohio, following last night’s Northern Illinois at Toledo. We’ve got women’s collegiate volleyball, the MLS playoffs, and men’s pro tennis on delay.

Facebook friends chime in that they’re watching Champions League futbol … and Road House. Some claim they don’t really miss the NBA because they’re getting their fix watching reruns of Kim’s [Kardashian] Fairytale Wedding.

Without NBA games to watch, what’s a hardcore American sports fan supposed to do during those dark, still, newly Standard Time hours between Monday night and college football’s GameDay (aka Saturday morning)?

One smart choice is Bloomberg Television’s Sportfolio on Wednesday nights. We’re big backers for obvious reasons. Outside of that, the diehard sports fan’s games of choice are the National Hockey League and—unless you’re an out-of-market Time Warner Cable (TWC) subscriber—a return next week to Thursday night football on the NFL Network.

Hard Foul: Who Feels the NBA’s Pain?

Without a doubt, the NBA lockout is taking a substantial toll on fans, owners, players, arena workers, and the league’s advertising partners.

On Tuesday, Commissioner David Stern levied an astonishing $500,000 fine on Miami Heat owner Mickey Arison for divisive but honest comments he made on Twitter “that violated the league’s censure on speaking publicly about the lockout,” according to league sources. The fine, one of the largest for an individual in NBA history, is reportedly “five times the amount other owners have previously been fined for public comments about the ongoing labor situation.” While the consensus among media pundits is that the heft of the fine is in direct proportion to Stern’s desire that the league’s 29 owners continue to present a united front, it’s possible that the commissioner is simply looking to replace, in part, some of the NBA’s currently dried-up revenue streams.

The lockout is also changing the on-course plans of Charlotte Bobcats majority owner Michael Jordan. The NBA legend has been forced to pull out of his cherished role as captain’s assistant for the United States Presidents Cup golf team competing at Australia’s Royal Melbourne later this month. Jordan has been replaced by 11-time PGA Tour winner John Cook, who will join golfer Jay Haas as an assistant to captain Fred Couples.

Are the NBA’s broadcast partners also experiencing acute lockout-revenue-loss pain? Newly-released data from SportsBusiness Journal indicates that the total amount spent by NBA advertisers last season, excluding the NBA Finals, was $627.7 million, a windfall that networks “would be hard-pressed to match if there is a significantly altered season.” In 2010 advertisers “spent $42.2 million on NBA games and pregame programming in November and $61.4 million in December, for a total of $103.6 million across Turner, ABC (DIS), and ESPN, the league’s three sanctioned TV partners. According to Nielsen (NLSN), Ford (F) was the NBA’s top national broadcast advertiser last season, spending $19.3 million, followed by $16.9 million from Yum! Brands (YUM).

Both ESPN and TNT reportedly lost money last season on their NBA telecasts, an estimated $25 million and $227 million respectively. According to an analysis by Credit Suisse, given the higher margin profile of replacement programming (college football/basketball for ESPN and prime time library content for TNT), profitability and margins would improve moderately for each network.

Based on Kantar Media data, a Credit Suisse analyst told Hollywood Reporter, “we estimate the NBA generated roughly $664 million in advertising revenue, net of about 15 percent in agency commissions, during the 2010-11 season. Given that ESPN telecasts more games and, more importantly, the NBA Finals, we believe advertising revenue is heavily weighted in favor of ESPN (about 70 percent) compared to TNT (about 30 percent). … In general, we estimate that the NBA is essentially a break-even or a loss leader for the TV networks, based on advertising revenue alone.”

“Discover” the NHL

For some basketball fans, NHL ice may be slippery foreign territory. North America’s most accessible credit card, however, is a familiar presence.

The NHL has just announced that it has extended its partnership with Discover Financial Services (DFS) in a new five-year agreement. As part of the deal, Discover will become title sponsor of the NHL’s inaugural NHL on NBC broadcast on Thanksgiving Friday, Nov. 25. The high-profile hockey game, pitting the Detroit Red Wings against the Boston Bruins, will be called the Discover NHL Thanksgiving Showdown. To further promote the event, the NHL and Discover will enter a float in the Macy’s Thanksgiving Day parade the day before, featuring Grammy Award-winning recording artist Cee Lo Green.

Discover had signed a one-year deal with the NHL last season to become the league’s official credit card in the U.S.; the partnership included a presenting sponsorship role at the 2011 NHL All-Star Game in Raleigh. While this season’s NHL All-Star Game is in Ottawa (where Visa (V) is the league’s credit-card partner and Tim Horton’s restaurant chain is the title sponsor), Discover will remain the official card of the NHL Winter Classic as well as the NHL All-Star Game on U.S. telecasts and other NHL properties.

To kick off the new relationship, Discover just launched two 30-second TV spots in its popular “Peggy” series of ads that feature the Chicago Blackhawks’ Patrick Cane and Bruins’ Tim Thomas.

As the NHL has continued to expand geographically, it’s become more challenging for some franchises to develop players coming up from the lower-tier American Hockey League because of the great distances involved. To ease players’ travel fatigue and allow teams to be more hands-on day-to-day, several NHL Western Conference franchises, according to TSN.ca, are “involved in ongoing discussions to improve the geographic challenges some teams face in trying to develop their players from afar.”

Earlier this month, the report confirmed, the Anaheim Ducks, Los Angeles Kings, San Jose Sharks, Phoenix Coyotes, Colorado Avalanche, Vancouver Canucks, Edmonton Oilers, and Calgary Flames held a private meeting with NHL deputy commissioner Bill Daly, The group conceptually discussed introducing a western wing to the American Hockey League. The “possibility of creating an entirely new league within the next two to three years, primarily based to serve some of the NHL’s Pacific and Northwest division teams, has also been suggested by some involved.”

With its own collective bargaining agreement expiring next year, NHL executives are closely watching what’s happening in the NBA—especially where player salary concessions are concerned. NHLPA Executive Director Donald Fehr, however, has indicated to hockey beat writers that the “impact of the NBA talks on the NHL’s labor situation is likely to be minimal.”

Agent Allan Walsh was quoted in the Sacramento Bee saying, “With hockey-related revenue increasing, from $2.1 billion at the beginning of this CBA to $3 billion today, the proposition that NHL players should give up more down the road is illogical. This is their system. I don’t know how the league can come to the players in the future, say their system doesn’t work, and expect the players to give up more.”

Tune in, Again, to the NFL Network

The NFL Network begins its sixth season of Thursday Night Football on Nov. 10, featuring the bitter rivalry game of Oakland Raiders at San Diego Chargers, in fiercer shape than ever. Already, 637,594 people (and counting) currently “like” NFL Network on Facebook, and the cable network saw more than 20 percent year-over-year viewership gains in the third quarter of this year. Total-day viewership stood at at 160,000 viewers, compared to 133,000 viewers in 2010.

What’s more, according to AdWeek, NFL Network is “close to selling out its eight-game prime-time slate.” The league reports that its network has sold more than 80 percent of its in-game inventory, retaining spots in the latter half of the schedule to accommodate last-minute buys. Auto, retail, and quick-serve restaurant categories have dominated the ad buys.

All this growth has come with the NFL Network still unable to strike a carriage deal with Time Warner Cable. Industry sources claim that the two parties had made considerable progress in 2011 to resolve differences that started soon after the NFL Network launched in 2003. Last Friday, sources familiar with the negotiations report, the parties left TWC’s New York offices without a deal after contentious meetings at which senior executives from both sides were unable to bridge several differences on sports tier carriage and cable subscriber fees.

TWC subscribers, however, will still be able to catch the same Thursday night NFL games as their NFL Network-accessible brethren—as long as the games are being played in their home markets, where they are available via local network affiliates.

While NBA fans everywhere are left indefinitely in the dark.

Rick_horrow
Rick Horrow is a leading expert in the business of sports. As chief executive officer of Horrow Sports Ventures, he has been the architect of 103 deals worth more than $13 billion in sports and urban infrastructure projects. He is also the sports business analyst for CNN, Fox Sports, and the Fox Business Channel. Karla Swatek is vice-president of Horrow Sports Ventures and co-author of Beyond the Box Score: An Insider's Guide to the $750 Billion Business of Sports (2010). Horrow is also the host of Sportfolio, a new program on Bloomberg TV that airs Wednesday nights at 9 pm ET.

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