Ball's bounce goes ESPN, TNT's way

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Cable's got game.

The National Basketball Association's six-year TV rights deal with Walt Disney Co. and AOL Time Warner is a landmark not only for the $4.6 billion it will fetch the league, but also for the fact that the lion's share of the 1,189 NBA games telecast each season will be on one of four cable networks.

Starting with the 2002-03 season, Disney's ESPN and ESPN2; AOL Time Warner's TNT; and a new cable network formed in a 50-50 joint venture between the NBA and AOL Time Warner will carry nationally more than 200 games. In addition to regular-season games, TNT gets the all-star game and 45 games in the playoffs and conference finals. That leaves Disney's ABC-TV with 15 Sunday games, five playoff games and the NBA Finals. So while the NBA season finale goes to broadcast, the bulk of the season's national telecasts goes to cable.

Sports migration

"Sports television is definitely making its way from network TV to cable," says Hadrian Shaw, sports analyst with Kagan World Media, a consultancy based in Carmel, Calif. "The NBA deal is unique in that the vast majority of the games will be on cable."

General Electric Co.'s NBC had previously broadcast most of the NBA games, with some games telecast on the cable side via AOL Time Warner's TNT and TBS. NBC had offered $1.3 billion to reup with the NBA for four years.

Why would NBC, on a roll as the top-rated broadcast network, walk off the NBA's court? "The numbers are just too big for one network to afford," says Michael Goodman, senior analyst with the Yankee Group, Boston. "This requires multiple outlets. You get 50 or 60 or 70 games spread across several networks, and the economics are much more palatable."

The advantage Disney and AOL Time Warner have is, in a word, "amortization," Mr. Goodman says, explaining that the only reason the NBA deal works is that the two media companies are splitting the rights to carry the games, and Disney's networks will be able to telecast more games than NBC ever could.

The combination of broadcast and cable network coverage in the new rights deal, along with print and online synergies and ad sales, creates a powerful selling opportunity, says Ed Erhardt, president of customer marketing and sales at ESPN/ABC Sports. ESPN lands its first NBA telecasts as well as cross-marketing and exposure with sibling ABC, he says.

But the model also seeks to tap a new type of fan, one who doesn't rely on one medium to get his sports fix, Mr. Erhardt says.

"The model is changing. It's a multimedia sports fan out there," he says. "We're beautifully set up to take advantage of that and provide advertisers access to all those multiple touch points."

That's the power behind the deal, says David Tice, VP-client service with Knowledge Networks/SRI, which tracks sports media development. NBA executives likely are hoping to use the variety of media to hit a male audience that's slipped in recent years. Consider ESPN's reach: More than half of all U.S. adult males tune into ESPN, read its magazine or hit its Web site at least once a week, Mr. Tice says.

The deal delivers to the NBA Disney's male audience on its various media platforms, says Gregg Winik, exec VP at NBA Entertainment. In addition, Disney and the NBA have discussed an ABC sitcom with an NBA plot line, NBA promotional animation created by Disney, and on-air mentions of the NBA during ESPN's "SportsCenter."

"The key to the deal in this 500-channel environment is having integrated companies that can promote and deliver audiences," Mr. Winik says. "It's hard today to cut through."

The NBA also will be able to reach fans via the new sports network it's creating with AOL Time Warner. The partners hope to debut the network, now using the working title of All Sports Network, with 40 million subscribers. It will replace shuttered CNN/SI.

While the rights fee appears steep, it could be viewed as the cost of being able to cross-promote programming and content across networks, or simply being able to say your network carries the NBA, Mr. Tice says. "ESPN can use the NBA to boost [its National Hockey League] ratings," he says. "Being in concert with the league-that's a payoff. There are a lot of things that go beyond the number of ads sold and the cost being paid."

A Morgan Stanley analyst wrote that ABC and ESPN will lose a combined $2.2 billion on the NBA deal. For his part, Mr. Erhardt wouldn't comment on whether ABC and ESPN will make money. Discussion on the street has focused on how upfront sales are moving to cable from broadcast. With $4 billion in total ad sales for cable last year, the NBA deal could mean another $300 million to $400 million-or about 10% of sales-moving from broadcast network to cable, Mr. Erhardt says.

sports as loss leader

Think of TV sports as a loss leader, says Kagan's Mr. Shaw. Disney likely will recoup its investment through a combination of ad sales and subscriber fees.

In part, the success of the NBA's move to cable depends on the NBA product itself, says John Rash, senior VP-director of broadcast negotiations at Interpublic Group of Cos.' Campbell Mithun, Minneapolis. Advertisers with adult or male targets will consider the cable networks carrying the NBA only if the brand, the teams and the individual players remain popular to the mainstream, he says.

"The best marketed product may still have performance challenges if there are not compelling stories to be told, either on a personal or a team basis," Mr. Rash says.

The NBA's move to cable is part of a steady migration of sports off broadcast network TV, says David Carter, principal with Sports Business Group. "When this plays out, I would dare you to find a sports fan who would not be exposed to the NBA every day," he says. "For sponsors and advertisers, there's no better way to go about touching them."

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