Everything You Need to Know About the Future of TV Advertising is in the New NBA Deal

The NBA reached a new 10 year rights agreement with Disney/ESPN and Time Warner/Turner over the weekend that will at least double and possibly triple the current annual rights fee paid to the league. The most interesting aspect of the deal is the de-bundling of at least some games from cable TV packages. From the Wall Street Journal:

“The league also laid plans in partnership with ESPN for a new online video service that would show live regular season games, the people said. In a significant move for ESPN, which derives its huge profits from the pay-TV ecosystem, that service will be open to people who aren’t cable or satellite TV customers.”

This is a big risk for their current business model as they derive around 60% of their revenue from cable TV providers as part of your cable package. However, it is where the market is going and the potential revenue from a la carte purchases (buying a game or a package of games) and more targeted advertising could bring in much greater revenue that the current business structure. What happens when people can consume content without a cable package? What could make up the revenue shortfall?

First, these assumptions can be made about where the market is going:

  1. Video on demand is driving content consumption. This can be live or recorded and through an internet or cable connection. The channel and time driven tune in window programming format is on the way out.
  2. More targeted advertising through programmatic buying platforms has re-shaped how internet advertising is purchased. Big spending advertisers will demand that TV eventually be sold the same way. 65% of advertising on the internet is now purchased on a performance based model.

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As smart set top boxes evolve, “smart TV” penetrates more households and more content is consumed on mobile devices the opportunity for hyper-targted advertising through TV/video will become the standard in the marketplace. The tools marketers that use to build deep data profiles constructed by piecing together a consumer’s engagement across multiple touch points that live in the cloud driven by Adobe, IBM, SalesForce, Oracle and SAP will drive more change in the $75 billion dollar TV advertising business than anything else in the last 60+ years.

There’s Gold in Them There Sports

This Wall Street Journal article really got me thinking about whether there is a ceiling on all things sports related in the US market target both men and women. TV ratings continue to climb in the NFL, NCAA football, EPL soccer and the NBA in the face of double digit ratings declines for traditional TV programming. Next season Kevin Durant will earn more from Nike than he does playing for the Thunder. What will the ceiling be on all things sports related? Are yoga pants now considered business casual? How much will LeBron James demand if he hits the open market on his next Nike deal?