NBA suspension will cost AT&T and Disney a lot in ad revenue: analyst

Earnings
Losing ad revenue and paying rights fees for sports that don’t air might not be the only impacts of the coronavirus-related sports shutdown. (Pixabay)

The NBA suspended its current season indefinitely amid the coronavirus outbreak, and the move is likely to cost AT&T and Disney a substantial amount of advertising revenue.

Analyst firm MoffettNathanson calculated the impact for both Disney – which airs NBA games on ESPN and ABC – and AT&T’s WarnerMedia – which airs games on TNT. Taking into account the higher CPMs commanded by NBA games and the share of viewing those games take up across Disney’s and AT&T’s networks, the EBIT impact could reach $385 million for Disney and $168 million for AT&T.

“Given the broad exposure the media and advertising industry has to live entertainment (sports, film exhibition, theme parks, concerts, event marketing), the likelihood of continuing closures will bring unprecedented harm to these companies at a most fragile time,” the firm wrote in a blog post.

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Shortly after the NBA announced the suspension of its current season, many other leagues and events followed suit. The National Hockey League and Major League Baseball both suspended operations, the PGA postponed the Masters golf tournament and the NCAA canceled both the men’s and women’s March Madness tournaments.

TVNewsCheck said the cancellation of March Madness could cost CBS and Turner $1 billion in advertising revenue. Both networks currently pay $770 million each per year to air the NCAA men's basketball tournament through 2024. Media consultant Brad Adgate told the publication that the NCAA should extend the current deal by a year, and waive the TV rights fee for this year.

Losing ad revenue and paying rights fees for sports that don’t air might not be the only impacts of the coronavirus-related sports shutdown. Lightshed analyst Rich Greenfield predicts that without live sports, which is a key feature for many pay TV subscribers, cord cutting rates could accelerate.

“While we do not expect consumers to rush to cut the cord immediately, a prolonged sports outage could lead to a meaningful acceleration in cord-cutting and will certainly negatively impact gross adds, particularly as the most ambitious non-sports general entertainment content has all migrated to over-the-top streaming services (Netflix, Amazon Prime Video, Hulu, Disney+, HBO Max, Peacock, Showtime, Starz, etc.),” wrote Greenfield in a research note.

He said there’s also a chance that more pay TV subscribers will begin downgrading their service to less expensive packages that don’t include regional sports networks.

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