Cable Operators

Affiliates Eye Payment for NBA Losses

11/21/2011 5:01 AM Eastern

The National Basketball Association
has moved closer to what commissioner
David Stern calls its “nuclear winter”: the possible
loss of the 2011-
12 season.

Already, enough
games have been
cancelled to raise
the prospect of paybacks
to multichannel
distributors for
license fees that include
NBA rights.

The NBA Players
Association on
Nov. 14 rejected the league’s “final” offer. It disbanded
itself into a trade association and filed
antitrust legislation aimed at a settlement that
could triple the players’ salaries from last season
to $6 billion — or serve as a legal mechanism
to get the parties back to the negotiating
table in time to save a season.

Meanwhile, all games have been cancelled
through Dec. 15, wiping away 26% of the scheduled
2011-12 campaign.

Programmers and distributors said each
contract has its own specific language and
terms. But the loss of 20 contests — each club
plays 82 — seems to be a trigger point for a
number of the regional sports networks that
present NBA games to rebate some of their license
fees back to distributors.

The disbursement fallout evidently won’t
come soon, though, or necessarily in cash.

The NBA is shut down through at least mid-
December, but reimbursement can’t come until
the dates of the
original schedule
actually pass,
according to one
programming executive.

Another said
those tallies probably
wouldn’t
occur until an abbreviated
campaign
is scheduled
or the entire 2011-12 season is officially blotted
out.

“If it started early next year, the NBA could add
an extra game a week and extend the season a
couple of weeks in June,” the programming executive
said, so it would make more sense to make
those calculations after a schedule is finalized.

What form the compensation would take is
another matter. “It’s difficult to make final calculations
[about the value of games] and we’d
probably have to set up a billing system, an expense
in its own right,” an MSO executive said.
“You might not see a rebate per se, but it could
be made up in marketing or in the next round
of negotiations.”

The second programming executive concurred:
“It could come in the form of marketing,
cash, or something in kind; [a rebate] doesn’t
necessarily mean we’re writing a check.”

An executive at a third RSN pointed out that
some affiliate contracts stipulate that rebates
would have to be passed along to consumers.

Regardless of the particulars, another MSO
veteran said recompense will come due. “For
the RSNs, TNT and ABC on Sundays, the NBA
is their most powerful sports brand. The games
will be replaced by college ball, but there are
not a lot of Kentucky or Duke games out there
as replacements,” he quipped. “There has to
be some kind of compensation from the networks.”

TNT and ESPN/ABC Sports — in the middle
of an eight-year contract under which they
allocate an average of $930 million annually
through the 2015-2016 season — must pay
rights fees to the league, with the funds then
distributed to the clubs. Those monies would be
rebated as games are missed, and deals would
be extended by one year if the entire 2011-12
campaign were lost, according to sources familiar
with the contracts.

It is unclear whether the cable networks are
contractually obligated to return funds to distributors,
or make other license-fee adjustments
in the wake of the air-balled contests.

TNT has been using various elements of its
primetime lineup to fill the NBA gap, while
ESPN has thus far mixed in college football and
college basketball.

September