The new contract that the NBA announced with ESPN/ABC may look like a 20% fee hike, but Bank of America analyst Jonathan Jacoby says the "NBA contract's 'bark' is bigger than its 'bite'" as far as the financial impact. "The 20% headline increase is probably closer to a 9% step-up in costs in the 2008-09 season due to the way sports contracts are amortized, and even this probably overstates the true increase. To be sure, a good portion of the increase is purely related to higher license fees for traditional cable and TV broadcasts.
However, comparing the old contract to the new contract is a bit of an apples to oranges comparison. While there are several differences, the main difference is that 1) the new contract includes more games for ABC and ESPN networks than the old one, as well as international rights (TNT is on an equivalent basis) and 2) the new contract includes rights for streaming games to new platforms, noteworthy is Internet devices and mobile phones, while the old contract had no 'new media' rights," Jacoby said in his analysis.
He also noted that in ratings, the NBA on ABC is down about 7% year-over-year, ESPN is up 1%, and TNT is down 9%. Since the benefits from the "new media" rights will likely be felt mostly in the outside years of the contract, so no financial boon near-term. He was already expecting double digit EBITDA growth at ESPN for the next couple of years and doesn't think the NBA contract will have much impact on ABC either. So, it's pretty much a non-event and Jacoby maintains his "neutral" rating on ESPN/ABC parent Disney.
