Just as the AFL starts talks with broadcasters to try and get a new rights contract in place, American TV sports rights have undergone a significant escalation in value in less than a week — so much so that some say the value of these already expensive rights have jumped by up to 300%. Yes, 300%. That’s the value of the new broadcast deal for US basketball — the contract rises from just over US$900 million a year to around US$2.66 billion from 2017. Seeing it’s a nine-year broadcast deal, the value will be an astronomical US$24 billion.

The AFL will look to what has just happened in the US and take heart, but that could be very much pie in the sky — the Australian economy and broadcast industry is in a very different place to the US, with its deeper pockets and much larger markets, larger companies and huge consumer markets. At the last round of negotiations, both the NRL and AFL added hundreds of millions to their broadcast rights deals. But today, the NRL is pulling in fewer viewers, while cash-strapped networks are looking unlikely to hand out more for the AFL.

Of course, the AFL (and its advisers) will want to test the waters to see if it can build on the already record $1.6 billion value of the existing deal with the Seven network and Fox Sports/Foxtel. But it will be on another planet if it can get the sort of increases the National Basketball Association and the National Football League have just secured in talks.

The NBA announced overnight that it had concluded long-term media rights contracts with Walt Disney Co (for its ABC free-to-air and ESPN cable networks) and Time Warner’s Turner Sports broadcasting division (which incidentally also announced it was cutting 10% of its work force overnight as well) that will almost triple the fees the NBA received under the previous contracts. The new contract starts after the 2016 season. According to The New York Times, the value of the contract rises from US$930 million a year to US$2.66 billion a year from 2017. The NBA was the last of the four major US sports to negotiate.

The NFL gets US$5 billion a year under its existing deal, up from US$3.9 billion. The new figure doesn’t include the US$1.5 billion a year struck last week with DirecTV. The NFL has fewer games than the NBA, and the deal doesn’t include some of the rights sold by the NBA. The National Hockey League rights, including Canada, is valued at US$633 million a year in the current contract. And Major League Baseball receives an estimated US$1.5 billion a year from broadcasters, led by Fox.

Turner’s TNT and Disney’s ESPN and ABC networks will continue to telecast the NBA games, which will also show the NBA finals. Disney is currently paying about US$485 million a year under its contract, while Turner is paying about US$445 million annually. That all but trebles in value. On top of this, the NBA plans to partner with ESPN for a new online video service that would show live regular season games. The service will be open to people who aren’t subscribers to either ESPN cable or satellite TV. These will be available on mobile devices

The NBA’s team salary cap rises in two stages from US$63 million year to US$88 million, meaning a flood of new and very expensive athletes will hit the boards in two years. Top of the list will be LeBron James, the most expensive player in the US. He signed a two-year deal to return to the Cavaliers in Cleveland worth US$21 million from this year. He will be a free agent at about the same time the higher salary cap takes effect, meaning another big pay rise is in store. And Steve Ballmer, the former CEO of Microsoft paid a record US$2 billion for the LA Clippers earlier this year. That was criticised for being too high. Ballmer will now pocket more than half a billion dollars over the nine year contract above what he will be getting under the current agreement. US analysts point out that no one forecast a near tripling in returns for basketball teams and their owners, so Ballmer’s big purchase will payoff.

The NBA deal followed a groundbreaking contract the NFL signed last week with DirecTV (which is in the process of being bought by AT&T, the telco) worth US$1.5 billion a year. That was reported 50% more than the previous value. The deal covers what DirecTV calls its “Sunday Ticket” package of out-of-market games. The eight-year deal is worth a reported US$12 billion — that’s up 50% in value from the US$1 billion a year DirecTV was already paying. It includes streaming games to mobile devices in some markets.

According to the consultancy arm of PricewaterhouseCoopers (PwC), the value of these deals will top sales of sponsorships and merchandise this year and contribute most to revenue growth in the North American sports industry. PwC estimated the value of the rights to live sport on television, radio and digital devices will jump 18.7% this year to US$14.8 billion, from US$12.5 billion last year. That will make rights income the second-biggest segment of the $60.6 billion sports sector after ticket revenue.

PwC estimated that total US sports revenue is projected to grow at a compound annual rate of 4.5% to US$70.7 billion in 2018. During that same period, media rights will create compound annual growth of 9.1% to US$19.3 billion, but after the huge escalation in the NBA deal, that estimate now looks too low.

Peter Fray

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