NBA expects big television revenue jump, which complicates lockout

Nothing runs professional sports in the United States like television and television money. And it’s right in the middle of the NBA lockout.

That starts with the current television deal, set to pay the league $930 million next season (assuming there is a next season). We told you before about how the NBA’s television networks — TNT, ESPN/ABC — are set to lose $1.25 billion in revenue if there are no games.

Over at Hoopspeak, Ethan Sherwood Strauss explains how the NBA has missed the boat on its national television deal (first signed in 2007).

Ad Week reports that ESPN/ABC and TNT would miss out on up to 1.25 billion dollars from a year with no basketball ad money. If the 2011-2012 season actually happens, those channels would collectively pay 930 million dollars for that 1.25 billion return in broadcast revenue, a potential 320 million-dollar gap between what the NBA sells TV content for and what broadcasters make off of it. This is a quite a steal for the TV side considering that broadcasters often overpay for the privilege of attaching themselves to sports. For perspective, networks give the NFL 4 billion dollars in return for 3 billion in ad money. My suspicion is that pro basketball could easily make up the 300 million they claim to be losing–if only the league had a mulligan on TV rights negotiations.

They don’t get to redo those rights until 2016, although the current partners may be willing to do an earlier renegotiation to keep the rights without opening up the bidding.

But when they do, the NBA will see a big jump in revenue, according to Forbes.

The buzz in broadcasting circles is that the National Basketball Association’s terrific television ratings and greater competition for sports programming are going to result in at least a $3 billion increase in the league’s next deal (30 percent more a year than the current deal)…

While buzz sometimes nothing more than just buzz, in this case a 30% increase might be too conservative. The Los Angeles Lakers reportedly inked a new cable deal in February that will pay the team an average of $150 million a year, five times their current fee. Almost immediately after Peter Guber and Joe Lacob bought the Golden State Warriors last summer the team inked a new cable deal with Comcast. Although the figure has not been reported, I have been told the deal paid the new owners between $40 million to $50 million upfront, plus a more than 100% increase in the annual rights fee. Heck, even the National Hockey League just got a new deal with Comcast that will pay the league 170% more than its current agreement.

What Forbes is writing about both the owners and players realize — the league had the best ratings it had seen in a decade last year and they will be getting more television money in the future. Which brings us to the current Collective Bargaining Agreement negotiations and lockout.

The last offer from the owners wanted to cap annual player salaries at $2 billion (they made $2.17 billion this past season) for a decade. Meaning that player salaries would remain flat an all of the money from the increased television rights deal would go into the owners pockets.

The players currently get 57 percent of the gross Basketball Related Income that comes into the league, a figure that includes the national television revenue. While the players have offered to lower their share down to 54 percent, they want it to remain a percentage because they want to share in the increased television revenue when it comes.

And that is part of the standoff. There will be more revenue for the league in future seasons, but who gets the lions share of it has to be hammered out.

If back in 2007 the league had not signed such a long television deal, one that had more flexibility, we might not be dealing with the threat of such a protracted lockout.