NBA TV deal is 'latest example of reckless spending' by big networks, Mediacom VP says

With the pay-TV industry starting to digest the news that Disney and Turner will triple the licensing fees they pay the NBA to around $24 billion over nine years, industry analysts and operators are asking the inevitable question: how are these massive programming costs going to get paid for?

"The near tripling of the fees ESPN and Turner are paying to the NBA is just the latest example of the reckless spending that has become the norm for the big TV networks," Tom Larsen, group VP of legal and public affairs at Mediacom, told FierceCable. "Ultimately, this uncontrolled bidding on sports rights harms consumers by driving up retail rates, and damages the overall health of the pay-TV business by driving away price-sensitive customers."

Both Turner and Disney's ESPN received expanded rights, most notably in the area of TV Everywhere. However, the average per-season costs exceeded the doubling expected by analysts--both networks will actually end up paying triple what they pay now over the life of their new National Basketball Association rights contracts, which run from 2016 through 2025.

The initial challenge for these networks, blogs analyst Michael Nathanson, will be coping with the initial cost rise--their NBA rights fees will nearly double right at the opening tipoff, when their old deals end after the 2015-16 season.

"While we don't model out our companies far enough to fully capture the entire effect of the initial step up in NBA expenses, this will obviously weigh down earnings as the networks digest the bump in expenses," Nathanson writes.

For their part, the league and its broadcast partners defended the deals, with NBA Commissioner Adam Silver saying at a Monday press conference that they "demonstrate the value of live sports in a DVR world."

However, word of the agreements came as a new study from PwC painted a somewhat unsustainable picture for sports media licensing growth. The research group predicts that North American sports media rights cost will spike 9.1 percent annually over the next four years and reach a whopping $19.3 billion by 2018.

For more:
- read this MoffettNathanson blog post (sub. req.)
- read this Wall Street Journal story
- read this Mediapost story

Related links:
NBA re-ups Disney and Turner deals with triple-sized price tag, expanded multiscreen rights
Playing the SportsNet LA blame game: Include the fans and the team, too
NBA looks to double licensing fees with already pricey ESPN and TNT