Almost two years after
signing the “Big Three”, the Miami Heat are on the verge of winning the
organization’s second NBA Championship. Since no team leading 3-1 in a
seven-game NBA Finals have ever lost the series, it is safe to assume that we
should see LeBron James, Dwayne Wade, and Chris Bosh “taking their talents” to
some of Miami’s most famous clubs to celebrate the title.
Yet, winning the title will be only one piece of good
news that Miami Heat organization should receive over the next few days. Forbes
reports that the Heat is close to signing a new television rights agreement
with Fox Sports Florida that will pay the team $80-100 million on an annual
basis. This deal is expected to provide the team with the second most lucrative
regional sports network deal in the NBA after the Los Angeles Lakers new deal
with Time Warner Cable.
We had previously discussed the importance of media
rights deals to sports organizations in B6A’s blog post about the sale of the Los
Angeles Dodgers. Yet, the Heat’s deal provides a new layer to the
conversation. Many people thought that baseball teams would be the only organizations
that could achieve large new television rights deals because they could usually
provide at least 162 games to broadcast on a regional sports network (RSN).
This means that a RSN could depend on achieving relatively high ratings on over
44% of their programming year. Yet, the Heat and Lakers deals show that RSNs
are willing to pay close to eight and nine figure sums for teams that provide
half the number of games as baseball (even if NBA games on average receive
higher ratings than baseball games).
And the trend of paying more for broadcast rights for
sporting events outside of baseball does not seem to be ending any time soon.
If anything, media rights agreements should continue to increase over the next
five years. Not only are there more national broadcast sports networks and RSNs
but also many RSNs, like the Pac-12 Network and Big Ten Network, are looking to
expand into new markets to become national sports networks. More importantly,
new national and regional media rights agreements are no longer confined to
major professional and collegiate sports or conferences. The NBC Sports Network
recently announced a new
deal with the Ivy League to broadcast “10 football, 10 men’s basketball and
four men’s lacrosse games a year” shows that there is demand for content that
can appeal to niche, but lucrative, demographics.
Sports games and events have always held a unique appeal
to broadcast networks as they are one of the few sources of content that
DVR-proof. This occurs because once a fan knows the score of the game / contest
then he /she is unlikely to watch on a recording making it significantly more
likely fans watch games / contest live. Not only does this increase traditional
ratings (and carriage fees), but also it makes more likely that television
viewers will watch commercials.
The factors
have allowed for the rise in the quantity and amount of new media rights deals and
provide unique opportunities for sports property rights holders to vastly
increase their annual revenue. The demand to broadcast games appears to be at
an all-time high because of the amount of competition. Sports organizations at
all levels need to be able to properly value their broadcast rights and then find
ways to monetize this valuable asset. B6A can help sports determine the value
of their broadcast rights using similar valuation techniques demonstrated in
our Los
Angeles Dodgers post.
More importantly, it is time for sports organizations to
make media rights agreements a higher strategic priority - particularly at the
high school and small college levels. Many of these organizations spend
significant amount of time, money, and energy attempting to have fans attend
their games. Yet, the most lucrative asset these institutions have could be the
broadcast rights to the games even if attendance is low. Working with RSNs or
digital distribution providers could provide a significant new source of income
for school districts and universities struggling to keep athletic programs
afloat. As more and more state, county, and local governments struggle with
overwhelming deficits, one of the first budget cuts made is to athletic
departments. Therefore, finding new sources of revenue is crucial to the
survival of these programs. While most high schools and colleges will not
receive the multi-million agreements that the Heat and Lakers enjoy, exploring
media rights agreements can help provide much needed cash flow to struggling athletic
departments around the country.
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