NBA marketing strategy hinges on new TV deal

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It may look like business as usual for the National Basketball Association as it tips off its 1997-98 season Oct. 31, but NBA marketing executives are preparing for a new era that will dawn with the next season, one whose expensive price tag will be paid for by advertisers.

The foundation for this next stage of the NBA is TV. Then up, the Michael Jordan factor.


The league now is negotiating new four-year TV contracts that could net the NBA up to 50% more than its current deals with NBC and Turner Sports. The present pacts, which expire at the end of the '97-98 season, are valued at $1.1 billion, or $275.5 million a year.

Turner's regular season telecasts begin Oct. 31; NBC begins weekly broadcasts after the all-star game next February. Neither Turner nor NBC would comment on their NBA negotiations.

"The outcome of our television negotiations will determine how we will market ourselves over the next four years," said Rick Welts, the NBA's chief marketing officer.

"I'm sure there's going to be a dramatic increase in TV rights fees, which I'm not sure is warranted, and the cost will be transferred onto advertisers, which is going to be a problem for some," said Mark Dowley, managing director at Momentum IMC, an event marketing company that handles NBA sponsors AT&T Corp. and American Express Co.

Many of the NBA's current sponsorship deals, like those with McDonald's Corp. and Quaker Oats Co.'s Gatorade unit, expire at the end of this season as well.

The NBA's sponsorship strategy has been to bundle promotional rights with TV time, and that won't change, Mr. Welts said. For sponsors, a 50% increase in rights fees will affect the cost of doing business with the NBA.

"We're always concerned about increases in sports TV rights fees because we all know who will pay for that," said Bill Schmidt, VP-worldwide sports marketing for Gatorade.

Advertisers won't shoulder the entire increase; for most networks, sports programming is a loss leader. Still, prices will go up.

Last season, NBC charged an estimated $80,000 for a 30-second spot during regular season broadcasts, up about 15% from the year before. This season, Turner will charge $19,000 to $20,000 per :30 during the regular season.


Marketers will still buy the NBA because it delivers the demographics they need: teen-age and young adult males.

"The NBA remains very hot with our consumers," said Mr. Schmidt, who added, however, that what could happen is that advertisers would respond to hefty price hikes by buying fewer units.

Mr. Welts said the TV networks are taking advertiser concerns into consideration in the negotiations. In fact, he said, it's possible that there will be fewer units available in the new packages, as they may include fewer games.

"Everyone has done their homework," he said. "NBC and Turner have a specific view of the cost of NBA advertising and where it can go in the future."


NBA and network executives said price hikes will only make them work harder to deliver added value to sponsors. Turner Sports Senior VP-Ad Sales Mark Lazarus pointed to three programs on tap for the first half of this season.

Turner sweetened a large fourth-quarter ad pact with Electronic Arts' EA Sports brand by giving the videogame marketer rights to use its logos and announcers in NBA Live '98, which hits stores later this month. EA Sports will get units on four games on Superstation TBS and units in nine games on Turner Network Television.

Moreover, Turner game telecast schedules will be included within the game itself and in packaging. EA Sports expects to sell 1 million copies of the game, generating an estimated 6 billion impressions.

Turner also is working on programs with longtime NBA sponsor Nestle USA and new NBA sponsor Sony Corp.

Mr. Lazarus said Turner will see an increase in overall ad sales revenue this season.


Some have pointed to a decline in regular season TV ratings last season as an indication the NBA property may be weakening. But Steve Sternberg, senior partner at BJK&E Media, New York, said ratings for all TV sports have declined because of increasing fragmentation and competition.

Moreover, "advertiser and sponsor interest is driven by their objectives," said Seth Matlins, senior VP at sports marketing agency ProServ, Washington. "The NBA is a terrific marketing vehicle for reaching a young male audience. The league has won with marketers on the quality of its impressions as much as its quantity."


And then there's Michael Jordan. His return from a brief retirement in 1995 drove the following season's ratings up, but only slightly. And last year's numbers dipped to pre-departure levels on cable (1.7) and broadcast (4.9). While sponsors and league observers agree ratings will be affected when Mr. Jordan retires for good, they trust in the NBA's ability to promote and package its teams and stars for maximum ratings impact.

Mr. Jordan has not announced a retirement date, indicating only that he has no desire to play for the Chicago Bulls should the team opt to start rebuilding for the future after this season. Among his sponsors, Nike next month launches a new Jordan brand designed to outlast his playing days.

But Gatorade's Mr. Schmidt said its 1998 Jordan marketing won't reflect or hint at a looming change. In fact, he said, it's possible that Gatorade will revive its famed "Be like Mike" jingle and tagline.

The key for the NBA, though, is to be ready. Expect to see more grass-roots programs to develop the next generation of fans this season--and more advertising and media programs next season.

"We were caught unprepared [when Mr. Jordan left the NBA in 1993] . . . and we didn't do a good job focusing on our best stories," Mr. Welts said. "That won't happen next time."

Copyright October 1997, Crain Communications Inc.

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