The National Basketball Association's new four-year, $750 million extension of its TV deal with NBC Sports includes an unusual revenue-sharing plan.
Acknowledging the NBA's value as prime sports programming, NBC will pay 25 percent more than its existing four-year, $600 million contract, which runs through the 1993-94 season. That deal itself was more than triple what CBS paid for the previous four years' NBA deal, which ended with the 1989-90 season."When we signed the last contract, there was awesome speculation about how we'd do," said Dick Ebersol, president of NBC Sports. "We anticipated a modest profit, and we've exceeded that."
The cooperation between the NBA and the network extended to NBC's sharing financial records of its basketball telecasts during the current contract. That led to the revenue-sharing pact, which will split revenues between both sides after NBC attains $1.06 billion in gross advertising sales over the four-year contract.
The deal's guaranteed profit for NBC is part of a very public strategy by the network to eschew the free spending of the late 1980s and enter into new deals only when they will yield profits.
David Stern, the NBA's commissioner, predicted there would be profits to share even if the advertising market stays stagnant or "improves only moderately."
NBC's decision to spend more to retain exclusive broadcast rights to NBA games through 1998 stands in contrast to the difficulties facing other sports leagues. Major league baseball may see its television rights fees plummet by 50 percent; the National Football League's next network deals may yield flat or slightly lower fees, and the networks are likely to balk at paying $500 million for the 1996 Atlanta Summer Olympics sought by organizers.
The NBA is different because it has been profitable each year for NBC, while baseball has yielded huge losses for CBS, and pro football has spouted pools of red ink for CBS, NBC and ABC.
NBC caught the NBA wave when the current contract began in 1990-91 and took advantage of the growing profile of the league, its expansion into Florida, Charlotte, N.C., and Minneapolis, and its allure for young fans.
Regular season Nielsen ratings of the NBA on NBC rose from 4.7 in 1990-91, to 4.8 in 1991-92. The rating now stands at a 5.0. In 1989-90, the final year of the CBS deal, the rating stood at a 5.2. (Each rating point represents 931,000 households.)
An NBA executive said NBC would pay an estimated $180 million in the 1994-95 season, $191 million in 1995-96, $203 million in 1996-97 and $176 million in 1997-98.