Tue. Jun 25th, 2024

Why the NBA is negotiating a new WNBA TV deal

By meerna Jun12,2024

The good news for the WNBA can’t stop. The league’s television viewership sets records almost every night. Athletes, long relegated to the background of popular sports culture, now sell shoes and appear in advertisements. Caitlin Clark is the most talked about athlete in America (for better, for worse, but mostly for better).

And there’s still a lot ahead of us.

The league is set to receive a windfall for the broadcast rights, which expire next season and are valued at about $60 million a year, according to people familiar with the numbers. The NBA, which owns about 60 percent of the women’s league, is in the middle of negotiations on that deal, which Bloomberg and the Wall Street Journal say will be worth more than $7 billion a year to both leagues, compared to the roughly $2.7 billion the N.B.A. receives annually under his current contract.

The WNBA’s participation could be transformative, as several media executives predict the league could triple its annual rights revenue to $180 million to $200 million or more. But there’s one quirk: media companies don’t decide how much WNBA media rights are worth. The NBA will do it.

The NBA is seeking one total bid from media companies, which, according to people familiar with the process, does not separate the value of NBA and WNBA rights, and some media companies participating in the bidding do not assign a specific number of rights to the WNBA. That means a massive NBA deal could be rocket fuel for the WNBA — or that the WNBA’s increased popularity is a secondary consideration. It can also be a bit of both.

“If you don’t get a number from media companies, you stick with the NBA,” said Laura Gentile, an industry consultant and former ESPN chief marketing officer. – You claim this is a rounding error in the overall business plan. That may be true, but it doesn’t help the ecosystem grow. Women’s sports want accountability; they want their growth forecasts to matter.”

There is no need to worry that the NBA will not value the rights of the WNBA. One media executive with knowledge of the ongoing talks suggested that media companies recognize the growing value of the WNBA regardless of whether they assign a specific number to its rights. However, some wonder what this strategy potentially says about the future development of the league.

“Even if it’s less money, I’d rather have independent money,” said David Samson, former president of the MLB Miami Marlins and host of the “Nothing Personal” podcast, “because then you can run a real business. … If a media company says we value the WNBA at X level, that’s the true value of WNBA rights. Otherwise, it’s like buying social media followers: perceived value, but not real.

In interviews, several WNBA executives said they did not share those concerns. They said that as long as the money arrives, it doesn’t matter how it arrives. Many people said that regardless of accounting method, there are other reasons why leagues should cooperate. The leagues share resources and cross-promote, and the NBA can use its larger fan base to demand more exposure, better timeslots and other support for the WNBA.

“Going to market with the NBA is a huge advantage for us,” WNBA commissioner Cathy Engelbert told The Washington Post. “Especially with streaming services that rely on a 12-month subscription model. If we’re only there for 4.5 months… how attractive is that? But we and the NBA are probably the only sports properties that can provide 330 days of live programming – almost year-round. This is extremely valuable for a subscription platform.”

Added William Mao, vice president of media rights consulting at Octagon: “There is value in leagues and media companies to create an overall halo effect around professional basketball.” He added that he expects the WNBA “to receive the same multiple” of its current deal whether it negotiates on its own or with the NBA.

Regardless of the media agreements, the new surge of attention is attracting many WNBA stakeholders who hope its governance and business structures will be ready to be exploited. Part of it has to do with how much you can rely on the NBA, and the benefits can be obvious. Joe Lacob, owner of the NBA’s Golden State Warriors, recently paid a $50 million expansion fee to secure the rights to the WNBA Bay Area team, which used the Warriors’ existing infrastructure to launch. The Golden State Valkyries, a reference to a female warrior from Norse mythology, will begin playing next season.

This investment is also crucial when WNBA revenues continue to lag far behind other U.S. sports leagues. As Bloomberg reported last year, the amount ranged from $180 million to $200 million, a fraction of the more than $10 billion the NBA earns. NBA commissioner Adam Silver said in 2018 that the WNBA had lost an average of over $10 million per year since its inception, meaning the NBA has invested hundreds of millions of dollars in the league since its inception. The WNBA and its teams are still expected to lose about $50 million this year, according to two people with knowledge of the numbers who spoke on the condition of anonymity because they were not authorized to discuss the league’s finances.

“The truth is, it would be difficult for this league to exist without the NBA,” said one WNBA team executive, who spoke on condition of anonymity because the executive was not authorized to speak publicly about the league’s finances.

What remains confusing, even to some in the league, is how the WNBA’s ownership structure works. The NBA’s stake in the league includes the original 1996 investment as well as owners who jointly own the NBA and WNBA franchises. It also includes an additional percentage of the WNBA’s $75 million capital raise in 2022 – investors include Nike, some NBA owners and former Secretary of State Condoleezza Rice.

People familiar with the numbers say the amount of equity sold by the WNBA, which was not supported by all of the league’s owners, was about 15 percent. This suggests the league was valued at around $500 million. (The valuation did not include teams. Engelbert said at the time that the money was used for player marketing and fan engagement.)

Now the league is looking for further cash injections on top of the media rights deal. Toronto will also get an expansion team, and another city – perhaps Portland, Oregon – could soon follow suit, with each new team paying the league a hefty expansion fee. Engelbert said she wants the league to have 16 teams.

However, many people associated with the WNBA have warned that only about 40 percent of WNBA revenue actually goes to the league’s teams and players. The NBA gets about 40 percent, and outside investors also get a percentage. This, the people said, affects the valuation of the franchise and the financial benefits of the new TV deal. (This is a different setup than the NBA, where revenues are split evenly among the 30 teams. Payouts in both leagues are made after the league’s office expenses are covered.)

The WNBA currently has a salary cap for each team of approximately $1.4 million, which means the average salary for each player is just over $100,000. Also hanging over the league is the expectation that players will opt out of the collective bargaining agreement next year. In the past, players have been frustrated by what they perceive as a lack of transparency regarding the league’s finances.

Another recurring question in WNBA circles is how league decisions are made. When Engelbert announced that the league would pay for preseason charter flights, many were pleased but didn’t understand what had changed or who would ultimately foot the bill, which Engelbert said would cost $25 million a year for 12 teams. Others in the league believed it was Englebert’s call.

The same questions arise regarding expansion, with some in the league unsure who approves the expansion groups: the WNBA or the NBA. Engelbert reports to Silver, and the WNBA’s marketing and communications departments also report to the NBA. (A WNBA spokesman referred all questions about this story to the NBA. An NBA spokesman declined to comment.)

According to these people, it is not that these relationships do not work, but that building the infrastructure supporting the development of the WNBA remains extremely important. The WNBA has certainly taken some of these steps, such as appointing a chief growth officer.

Ultimately, the growth of the WNBA is now clearly visible. Person after person who spoke to The Post had a different prediction: The WNBA will likely have its own media rights deals whenever they are negotiated.

Kareem Copeland contributed to this report.

By meerna

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