CMCSA Comcast Corporation

By Benjamin Mullin and Lillian Rizzo 

Sports TV networks are facing a big problem: They have virtually no games to put on the air.

In quick succession over the past 24 hours, the National Basketball Association, National Hockey League and Major League Baseball announced they were suspending operations due to concerns about the coronavirus pandemic, and the NCAA canceled its men's and women's basketball tournaments.

Now, their broadcast partners could face significant fallout. The networks that carry NBA games will take a substantial hit to advertising revenue and could potentially be on the hook for big rights-fees payments, according to analysts and people familiar with sports-rights deals.

Walt Disney Co.'s ESPN and AT&T Inc.'s Turner, the parent of TNT, together spend about $2.7 billion annually to show NBA games nationally. In addition, regional sports networks owned by media giants such as Comcast Corp. and Sinclair Broadcast Group Inc., among others, air NBA games in local markets.

Comcast also is the NHL's major broadcast partner. Meanwhile, ESPN, Turner and Fox Corp.'s Fox all have MLB rights.

The NBA is the most popular of the professional leagues that suspended operations. Losing NBA games will leave a major hole in the TV networks' prime-time schedules, translating into lower ratings that will harm their ad sales -- especially if the season doesn't resume for the playoffs that normally begin in April, analysts said.

In the last NBA season, TV networks brought in nearly $600 million in ad revenue from NBA games and $972 million from the playoffs, according to research firm Kantar.

Networks' other major stream of revenue -- from the channel-carriage fees paid by cable-TV distributors -- also could be impacted. Distributors require some TV programmers to air a minimum number of games; if they don't, the carriage fees could be cut, according to a report by Rich Greenfield, an analyst for LightShed Partners. Since most of the NBA season is complete, he said, many TV programmers may have met the quota for telecasts.

As networks assess the possible damage, a major variable is how soon the NBA can resume play. If it can do so relatively quickly, the worst business impact could be avoided, people close to the networks say.

Mark Cuban, owner of the Dallas Mavericks and a streaming-video entrepreneur, called the suspension of the NBA games due to the coronavirus a "black swan event," adding that the league and its partners are "in new territory."

"In terms of impact on media, it really depends on how the virus plays out," Mr. Cuban said in an email. "The NBA and major media companies will have to focus on the health and safety of their employees and stakeholders. That will drive all decision-making."

The suspension of the major sports leagues could have wider implications for the pay television industry. Cable and satellite TV providers have lost millions of subscribers to cord-cutting over the past several years.

Live sports has been one of the major selling points of the traditional TV bundle. The NBA's suspension could potentially accelerate pay-TV cancellations, said Michael Nathanson, an analyst for MoffettNathanson.

"We worry about seasonal churn," Mr. Nathanson said. "We think sports is the glue for subscribers."

It's unclear whether the networks will be required to pay rights fees for the full NBA season even though they aren't airing games. Some media executives likened the season's suspension to the 1998-1999 NBA season, which was shortened due to a lockout. That year, networks still paid rights fees.

Media contracts, including sports-rights deals, often include exit clauses for both sides for catastrophic events, but it isn't certain that those would apply in this case. The league could work with TV networks to help them mitigate any losses from advertising and distribution partners, including by letting them air more NBA games in subsequent seasons, the people familiar with the NBA rights deals said.

"This is an unprecedented situation," ESPN said in a statement. "We have great relationships with our league partners and are confident we can address all issues constructively going forward. Our immediate focus is on everyone's safety and well-being."

After several college basketball tournaments were canceled, ESPN put its "SportsCenter" program on throughout the day on its main network and the ESPN2 channel simulcast programming from ESPN and ESPNNews to fill the airtime.

A Turner Sports spokesman said the company is supportive of the NBA's decision to "protect the health and well-being of everyone involved."

Turner and ViacomCBS Inc.'s CBS Sports, which air the NCAA tournament, known as "March Madness," said they were fully supportive of its cancellation.

Like other networks, CBS will be filling its air with a mix of substitute programming, which will include a mix of news, prime-time entertainment and daytime shows, said a person familiar with the network's plans.

In a statement, Fox Sports said: "We fully support our league partners and are actively working with them to navigate this evolving and unprecedented situation."

NBC Sports didn't have immediate comment.

Sinclair, which owns more than 20 regional sports networks, including many that air NBA games, anticipates scenarios such as this in its TV-rights agreements, said Jeff Krolik, president of Sinclair's local sports unit. The company will continue to monitor the situation and hold discussions with the league, teams and pay-TV providers, he said.

David Levy, the former head of Turner Sports who struck the unit's multibillion-dollar deal with the NBA, said that major networks' first business priority should be preserving their long-term relationships with leagues by supporting their decision to protect their players.

"I wouldn't be thinking about profits and revenues at this moment," Mr. Levy said. "I would be thinking about our employees and our country."

Write to Benjamin Mullin at Benjamin.Mullin@wsj.com and Lillian Rizzo at Lillian.Rizzo@wsj.com

(END) Dow Jones Newswires

March 12, 2020 19:06 ET (23:06 GMT)

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