The NBA's giant media deal could color future team sales
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The National Basketball Association is just weeks away from inking its giant media rights deal, which now is expected to fetch more than $75 billion.
What we don't know: If the windfall will significantly increase the prices paid for both majority and minority stakes in NBA team, or the near-term prevalence of such deals.
The bull case: The deal being discussed is around three times the current deal value, whereas initial expectations had been for around 2x or 2.5x.
- Not only does that mean more cash for each team, but it also establishes revenue certainty for both buyers and sellers. One buyside source suggests that most deal talk has cooled over the past few months, as everyone waits for the media rights to settle out.
- It also could set a higher floor for an international media rights deal, thus creating additional alpha.
The bear case: Most of the deal already has been baked into existing prices, and the jump between 2x and 3x isn't quite as significant once prorated for 30 teams over 11 years.
- Plus, there currently are only a very small number of institutional buyers that have pre-approval from the NBA to buy stakes in multiple teams.
- Control stake sale prices will continue to be driven higher by scarcity, particularly if the buyer is seeking a hometown club. Such deals are driven more by yearning than by sober financial models.
The bottom line: This deal will reshape the U.S. sports media landscape, particularly if the league partners with one of more streamers. But its impact on team ownership is less certain.
