Q. Since this was done so long before the previous deals were expired, who initiated the conversations to start doing this so early?
COMMISSIONER SILVER: I'll start with that. As we always say, I think we start negotiating the day after we finished our last deal and I think it's something we're always talking about ways to expand the relationship.
I think we began more formally negotiating in February of this year. That's when we appointed both the owners Media Committee I mentioned earlier and the team presidents, and I would say we have been negotiating fairly intensively through February. As I mentioned, included some field trips down to Atlanta so we could see their production facility and what they built out for NBA TV. I wanted to make sure our owners were familiar with that.
We spent significant amount of time up at Bristol seeing their new digital facility. And as John said, over the last several weeks, we literally have been going around the clock to finish these deals and we were determined to get them done before the season started.
JOHN SKIPPER: I would point out they found the airport in Atlanta to be significantly more convenient than the airport in Bristol. (Laughter).
I would only say, I'm sure David would echo, we were never ambivalent about wanting to renew this deal. We were anxious to get started as soon as possible. You heard me say before that this is a key property for us in our aggregation of sports rights, and there was never any intention on our part not to renew this.
DAVID LEVY: This is a foundation for us at Turner Broadcasting. The NBA has been with us; this will be 40 years when this deal ends. It's a priority to us to get this deal done.
It wins nights of television for us. It helps our consumers. It helps our cable operators and it helps, really, the advertising community, as well. Priority for us and glad we got it done.
Q. Can any of you talk about the complexity of what is the NBA's story in terms of development of character as far as what we have with LeBron, what we have with Kevin Durant; part of this deal I assume is based on how good the content itself is, not just the number of hours. So can any one of you talk about just the idea of the complexity of characters that we have in the league, villains and guys that are good?
COMMISSIONER SILVER: We have no villains but I'll (laughter) I'll let these guys take a shot at it.
DAVID LEVY: One thing about the NBA which really has built over the years is the fact that if you take a look at really on a market by market basis, you have a majority of teams now, not just one or two, but the majority of them can draw a rating every night, and that's because of the teams like Oklahoma City and Miami and Cleveland now that basically have really strong competition that we can put a game on Thursday night and draw a big, big number.
So we don't really look at it as individuals, each and every one, villains and not. The teams themselves are drawing in big, big ways and it's about competition on the floor that truly helps us as well.
Sports programming in general is on the rise. And what I mean by that, from a ratings perspective, it's probably the last, I would say, destination programming on television, appointment viewing. And so if we can get a piece of this premium sports property and maintain it for the next nine years, for almost the next decade, it's something that we wanted to do.
But I would say that the league is continuing to grow. Social media is going to help continue it to grow and that's what I think you're talking about, about the characters themselves. I think the people are actually writing more about each and every player. The players now are writing about themselves and using this new medium called social media to do so, and I think that will only enhance the value of the NBA and why we signed back up.
TED LEONSIS: I think it's important to note from an ownership perspective, that it's a global and national deal. But local is still obviously a big driver of what the league is all about, and we do have transcendent stars that cut across the world, but we didn't give up any rights locally and we protected each ownership's individual franchise.
So we see this being a really, really important deal that celebrates the power of this kind of programming. As David mentioned, it's very unique to have convening social programming in this world where the steering wheel is in an individual's hand, and other than sports, there really is no more appointment viewing. The game starts at 7:06, and fans have to be there but TV starts.
That we can convene large groups of audiences is very, very important, and from a sponsor's standpoint, they are very, very appreciative of that social, real time kind of engagement that we bring to our media partners.
Q. Do you guys think you would have paid more had this gone to market, and for Adam, why not let more bidders get involved?
JOHN SKIPPER: You heard me say before: We were not ambivalent about wanting to renew this. It's impossible for me, of course to speak about whether it would have cost more if it went to market, although clearly made the calculation that we were uninterested in exploring that possibility. So we did our deal now.
COMMISSIONER SILVER: I'll just add, we had lots of committee discussions with owners, team presidents and then with our entire board about the appropriate timing for these deals, and we ultimately made a decision that this was the right time to go.
There's no question that there are other competitors of these two companies who are interested in our rights, Comcast and Fox, in particular. We have extensive relationships with those companies; 17 of our teams are in business with Fox in the RSN business, eight or nine of our teams, depending on the Comcast/Time Warner cable merger, will be in business with Comcast.
And so we know them well. We had discussions but not negotiations with them. We also had a sense of where the emerging potential content acquirers are, the Googles, the Apples and companies like that.
So we ultimately made a decision that this was the right time to go. I think these are extraordinarily healthy deals financially, and we hope our partners do exceedingly well under them. So while I don't think we left any money on the table, we hope they will be very successful and we're confident that we maximized what our opportunity was in the marketplace.
Q. When you decide to pay, as you are, a lot more for these rights than you are currently paying, do you do a spreadsheet that says, these extra rights are worth this; these extra games are worth that; how do you figure out that you're going to pay nearly three times as much as you're paying now and be able to justify it?
DAVID LEVY: We can't go through the whole models of what we do, but I tell you this: It will be meaningfully valuable to our company at the end of this deal, and we'll have a strong ROI when the end of this deal happens. We don't go into any programming or sports rights without feeling that it will be strategically smart for our company to do. So we believe it will be meaningful valuable at the end of the deal.
JOHN SKIPPER: It remains clear that sports rights continue to be more and more valuable.
David said, and I agree, it's the only thing that you have to watch live and the only thing live you have to watch that you watch by appointment.
We also acquired a wide swath of rights so that we can build new business and continue to grow and drive results to the Walt Disney Company. We are quite content that we have done an outstanding deal here. We manage our business by looking at portfolio.
We don't look at an individual deal in isolation. What matters for us is what the entire portfolio of sports rights is and how we could use that to grow and drive results, and this deal fits very nicely in that.
Q. When a deal like this gets announced, there's a lot of curiosity about the business side for the league, in 2011, the assertion was that a lot of teams are losing money and now these are very large numbers coming in. What are the implications for the profitability of all 30 teams and what do you think might be the implications for 2017 and the CBA?
COMMISSIONER SILVER: Well, from a financial standpoint for the league, obviously the implications are very positive to have this additional money coming in. In terms of its impact on the CBA, our current deal provides that players receive roughly 50 to 51 percent off the top.
So a lion's share of this money will be paid directly to the players, so I think it bodes well in terms of the effectiveness of the current Collective Bargaining Agreement.
Having said that, as you mentioned, there is a potential re opener in three years, and I'm sure both sides will be studying the impacts of this new deal and seeking to ensure that it remains a fair deal for both sides.
Let me just add, too, that there are dramatic revenue sharing implications of a deal like this. That's something, in fact, we are going to begin discussing this afternoon. That's something handled by the NBA's planning committee. Coincidentally we have a meeting this very afternoon in which we are going to begin looking at new models based on this additional money, and I'm sure those discussions will continue into the Board of Governors meeting.
Q. With all of this new revenue coming in, does that suggest that all 30 teams are going to be profitable by the time we arrive at that decision point?
TED LEONSIS: It's on a market by market basis. There's so much that goes into profitability outside of what the players get paid: Your building deal, your lease, what kind of debt do you have on the team and the like.
But certainly this is a deal that is significant enough that it shows the value enhancement for owning a team. And I think that's a very, very positive to know that you're going to have this kind of additional revenues that you can model into your revenue and your cash over a nine year period.
I also want to say that the league has done a really, really great job of integrating what this would mean for salary cap, for debt capacity, for values of teams. There isn't any part of the league, of revenue sharing, that isn't being touched by this.
And today really kicks off that new era. But we have to remember the deal doesn't kick in for two more years.
Q. I was curious why the league embraced and wanted a stake in the over the top offering and whether you discussed those rights with any of the emerging providers, Apple, Google, Netflix. And for John, why you decided to do this first with the NBA, the OTT and whether you know what it looks like yet or it can launch before the 2016 season.
COMMISSIONER SILVER: In terms of discussing those rights with some of the emerging providers, yes, we have. It's an ongoing dialogue with the Silicon Valley based companies.
We have relationships with those companies, relatively small relationships, compared to the kind of deals that we have with these large media companies. But we're a major factor in social media. It's something that we study all the time and experiment with.
I think what came from those discussions was this notion that the marketplace is ready for a so called over the top offering; that there should be programming provided directly to mobile devices. As David Levy said in his statements, there is a millennial consumer out there who has a different approach to the traditional cable or satellite package.
But we think ultimately it will be supplemental. We think there's a demand to get live games on mobile devices, but it will ultimately supplement the premium content that they are providing through cable and satellite.
TED LEONSIS: I'd also add that this is such a global phenomena. There's two and a half billion people around the world connected to the Internet, and less than 300 million Internet connections in the United States.
So this phenomenon for mobile really serving as your computer of choice around the world and more and more people subscribing to mobile, that we needed to take advantage of that fact outside of the growing real time television footprint.
And so OTT, I think is here to stay. We have been doing OTT for a long time with our partner at Turner. They basically helped write the book for the industry and so I just think this is a natural evolution to our rights.
JOHN SKIPPER: It's really a questioning of timing and the partner. The NBA has a long standing tradition of being able to embrace new technology and work with us on creating new businesses and new products and providing us the rights to do that.
And as Adam said, the timing is kind of right. There are enough broadband connections now and broadband homes; there's receptivity and there's quality of video distributed over broadband pipes and wireless platforms that it seemed like a good time and with the right partner. And I'm trying to keep up with David who already has his over the top offering here.
DAVID LEVY: I was going to say, this is nothing new. The NBA has always been at the forefront. And League Pass was over the top and it's been over the top as a partnership with us and building that property. So this is just an extension and we are excited to have it as part of the portfolio.
TED LEONSIS: Has anyone noticed that Skipper and Adam are starting to look alike? (Laughter).
JOHN SKIPPER: You are a handsome devil.
COMMISSIONER SILVER: I think you still go to a barber shop. (Laughter).
Q. Right now the national TV deal every year that comes out is pretty set in terms of, there's a set slate of games that we flow in July what it's going to be. As part of this deal, is there going to be flex scheduling? Is that something you guys would pursue?
DAVID LEVY: Well, again, our Thursday night games are pretty much locked in as we go through the process of picking out the games with the league and figuring out what's best for Thursday nights. And there's arena situations that you have to deal with. But the 12 games, the incremental 12 games that we have, at the back end after the All Star Break, will be selective based on where we think the teams are heading into the postseason and what the opportunities are. So I guess that would be our selective process on those back 12 games.
COMMISSIONER SILVER: Let me just add, what this new deal does allow is for some additional flexibility on the Thursday night games and the Sunday afternoon games on ABC. There used to for the most part be window exclusivity on Thursday night and Sunday afternoons as opposed to game exclusivity.
By allowing our teams to schedule other games on Thursday nights and Sundays, one, it allows them to flex into the best game, make a decision two or three weeks before the game which one they will carry on a national basis. But also allows our teams to schedule additional games in a very compressed, tight schedule, which means especially for Sunday afternoons when many teams want to schedule family friendly games, special games to reach kids on Sunday afternoons, we'll be able to schedule far more games during that window now than we could in the past, and we appreciate that accommodation from both Turner and ESPN.
JOHN SKIPPER: The league has always provided us some level of flexibility on the Wednesday and Friday nights when other games are played, and now we'll have that on Sunday night. So the answer is yes.
Q. How great of an impact can this deal have on the salary caps and subsequent player salaries?
COMMISSIONER SILVER: Well, I'll start. Under our current formula, again, where the players, depending on the amount of revenue that comes in, get 50 or 51 percent, in essence, of the gross revenue. When this deal kicks in in 2016 '17, it will lead to a substantial increase that year in the salary cap.
There is precedent for smoothing that increase in. It's something that the NFL negotiated with its Players Association when it then entered into large increases to help teams in the planning process of in essence smoothing that money into the system.
I had a brief conversation with Michele Roberts, the new head of the union, on Friday to tell her that these new deals were coming. And, in fact, we have a meeting later this afternoon to begin those discussions with the union as to their interest in creating more of a smoothing effect. They will get their 51 percent of the money no matter what. It's just a question of how it comes in in terms of the cap.
So it will have a profound effect and I'm sure that the union has already begun studying it just as we have been studying how it will affect our system team by team, and a lot of it is sort of happenstance on who happens to have a free agent, who has cap room, what class happens to be coming up.
As we all know, certain agents and players have been timing their contracts so that they would become free agents in '16 '17, knowing that we were going to be entering into new television agreements.
TED LEONSIS: We all have to serve someone, and when you own a team your first point of service is to the fan base and the community that you serve, and then to the players.
As Adam noted, I feel like I work for the players. They are getting 51 percent, and we did a really, really good job for them and the rising ride will raise all boats, and it's one of the great things that makes the league so competitive.
We have great players, they are charismatic and the fans want to watch them and by being able to pay them more money and keep your free agents and go into free agency, I think it will make for a very exciting time for our fans in the out years.
Q. How do you guys feel I guess this question is probably for John, because Adam has talked about it and David has talked about it, what social media has become, the fact that someone is opening up their computer or on their iPad or mobile device, as the game starts, sits down and has that second screen and that's kind of been an automatic response. How is that in the back of your head as you go into these negotiations and complete them?
JOHN SKIPPER: Well, we regard it mostly as complementary and for the NBA, it's clearly a very social league given the age and multi ethnicity of the audience.
So that's one of the things that's attractive to us about the NBA is how engaged socially it is, how engaged their fans, their players are. And allow me again to say, that we care a lot about the demographics of the league and it is one of the reasons it is ascendant; the fan base is very young, it's very multi ethnic and it helps us in drawing fans to our network.
No comments:
Post a Comment