← Pablo Torre Finds Out
Pablo Torre Finds Out
The Sporting Class: What the NBA and WNBA’s Record-Setting TV Deals Mean
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- [00:01]
A
Welcome to Pablo Torre finds out. I am Pablo Torre. And today we're gonna find out what this sound is.
- [00:06]
B
You represented everything that you've come to loathe.
- [00:14]
A
Right after this ad. You're listening to Giraffe Kings. I do want to acknowledge, David, that the real star of this show, the sporting Class, has been John Skipper's voice. It does a lot.
- [00:42]
C
I would not, I would not have said such a thing.
- [00:46]
B
Because of the tone or the content?
- [00:49]
A
Well, we can get to the content, but it is the draw a weapon, an allegedly weaponized draw that allows Jon to be every man and also the epitome of the subject of a rich guys only fans, which is what I call the sporting class.
- [01:06]
B
In reality, he's liked more because of his accent.
- [01:10]
A
Absolutely.
- [01:10]
C
I'm just channeling who you. Someone that almost no one who listens to this will remember. Senator Sam Irving, who was on the Watergate committee and used to start at least one question a day with, well, you know, I'm just a dumb country lawyer, but where I come from in North Carolina, we would just call that common sense. Well, I'm sorry, the. My distinguished friend from Florida does not approve of my method of examining the witness. I'm an old country lawyer and I don't know the fine ways to do it. I just have to do it my way.
- [01:45]
B
That's how you live your life. It's done well for you.
- [01:48]
C
Yeah, it's all I got. It's all I got. Rich Little's got a lot more. This is it.
- [01:54]
A
David, by contrast, has the voice of a president who is demanding that people break into a certain hotel, maybe to.
- [02:00]
B
Just not get caught. Yeah, that's a very big difference between me and others.
- [02:22]
A
So we gather, because a subject that we have covered more exhaustively and more deeply with more personal knowledge than any other sports business concern in our industry has come to a tentative finale, a conclusion which is the NBA rights deal has not been officially signed. John. But now we can talk about it with more clarity.
- [02:44]
C
We can. I'm just laughing about it being a tentative finale. Wouldn't again that be an oxymoron?
- [02:51]
B
You could have a firm finale, which is what you've known this deal to be the whole time.
- [02:56]
C
Not the case. In fact, we have no finale yet. We have what appear to be pins down. I read in something this morning which would mean that the deals are agreed to and that lawyers may be taking a last look. We do seem to know from the reporting that there will be five day period of time we don't know whether it started yet or not or Warner Brothers Discovery to look at whether they might try to assert a match. And I'm using assert deliberately simply because it's, it's, it's. As we've talked about before, David, it's not a simple, oh, we're matching. They have to match some set of terms and conditions. I think it's pretty clear now the NBA would prefer to have the partners they have agreed with. And I don't know what your point of view about is about or what you know about whether things have started or not started. Think the clock has started.
- [03:56]
B
So the, the NBA Board of Governors actually approved the media deals. And that's, that means there's no more lawyer tinkering and they've been delivered to Warner Brothers Discovery. And this matching period, they have five days to match. And that's in quotes. And I put it in quotes because it's not simply writing a memo. Dear Adam, we match. Here's our 1.8 billion. See you later, Amazon. We're back, baby. It doesn't work that way. So legally the way it works is they have to go provision by provision and show how what they are offering, what Turner is offering, is equal to what Amazon is offering. So you don't just erase the word Amazon and write the word Warner Brothers Discovery. It doesn't technically work that way. That would be a funny way to do it if that were the matching. But no, you actually have to have a proposal that you give back to the NBA that says, okay, we've matched this deal and here's how it matches. And what you heard Adam Silver do in his press conference this week was say, I'm not going to talk about this. But then you had sources and leaks.
- [05:02]
A
So what the sources and leaks indicate is that it is ESPN, NBCUniversal and Amazon, totaling $76 billion over 11 years, according to a sports business journal. Three sources telling them that. And I want to get your perspective on just the Amazon part of this right in specific, because, John, you literally were the person who signed the existing NBA rights deal when you were running espn. And, and David, as the former president of the Marlins, has a particular antenna up for what it's like to be on the other side of the table. And so when it comes to who you want here and who you don't want, Amazon versus Warner Brothers Discovery, what is there beyond the ego of I don't want to lose this. If you're David Zaslav, the guy seen at MSG during the playoffs with a very Stiff, almost suspiciously brand new New York Knicks cap on his head.
- [05:54]
C
Well, I think there's a lot too. He doesn't want to be the one to lose the NBA. But I think it clear that the NBA wants the international delivery of Amazon. I think they want to be with a technologically forward company. I think they entered into this believing they would renew the Warner Brothers discovery package that they had had before. I don't think they anticipated the assertion that the matching right could cover the digital because they specifically want a digital partner. And I think that's good business and a smart choice. So let's assume for Mr. Sampson's knowledge that the clock has started. It's five days. I'm assuming it's five business days. So today is. Well, I'm not supposed to say what day it is.
- [06:48]
A
Well, we're taping on Wednesday. I think we can disclose this inside of our secret layer here.
- [06:54]
B
I just was trying so hard to make it evergreen.
- [06:56]
A
I love you guys.
- [06:57]
B
You're just. You blew it four minutes in.
- [07:01]
C
It's true.
- [07:02]
B
I changed clothes from this morning. I did all these things. He's like, what day is it? Is it Wednesday?
- [07:08]
C
It was true. I just feel like we should be transparent. It doesn't really matter if, if we.
- [07:14]
B
Say it's with, but we're trying to, to do a show where it can be released Friday, let's say. And people will not be saying, oh God, that's old information.
- [07:22]
C
Well, you don't really throw out cheese after two days.
- [07:25]
A
True.
- [07:25]
C
And this is some fast. This is some hard cheese being thrown around here.
- [07:29]
A
And John Stewart is very Parisian as well. He knows from the fromage that he alludes to.
- [07:33]
C
So c' est la vie. I just don't know what c' est is the day. I'm not quite sure what.
- [07:42]
B
C' est la journee.
- [07:43]
C
Oh, say that your name.
- [07:44]
B
What was the question, Pablo?
- [07:45]
A
The point is, I believe the timeline, the clock has begun to tick.
- [07:50]
B
It's five days. Whether it started today, yesterday, two days ago, or two days from now. What's contained in the contract that John may or may not have signed at one point, may or may not be a five day matching period, which may or may not be done by Warner Brothers. But here's the question. If you're Warner Brothers and their board of directors, forget the ego of losing the NBA and Barkley calling you out, because apparently this is a thing now where talent calls out the bosses every day. Whether it's on Morning Joe, whether it's Pat McAfee, whether it's Charles Barkley. Apparently it's open season on media executives if you have a microphone. Luckily at Metal Arc we don't do that. We would never do that to you, John Skipper, but it certainly would appear to me.
- [08:33]
C
Has it been done already on this show?
- [08:35]
A
I think it's arguably been happening the entire time.
- [08:39]
B
Again, without being caught.
- [08:41]
C
Continue with the pretense.
- [08:43]
B
It's a very simple question. Is it economically intelligent for Warner Brothers to match? And at the end of the day you can talk about ego and people do. Do you want to be the one who lost the NBA? I'd rather be the one who lost the NBA than be the one who put my company in financially further dire straits and caused my company stock price to be relentlessly lower and lower. But I kept inside the NBA. That's not a trade that I would make.
- [09:08]
C
Well, I don't think it's about inside the NBA. I think that's something for fans to sort of talk about. I don't think anybody at wbd, no matter what any of the talent may say, spent a whole time, a lot of time worried about losing inside the NBA if they didn't have the NBA. I think the interesting thing here is at least reported was that WBD it offered about 2.1 billion. So you could argue, gee, we're getting a package for 1.8 from Amazon. It, if it prevailed and I don't see it prevailing, it wouldn't seem like a terrible move. I mean they're getting most of what they would have gotten or they're 2:1. I think most of it.
- [09:56]
B
Yeah. It's not all the assets.
- [09:58]
C
It's not all.
- [09:58]
B
The package is not as good as what Turner had currently.
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A
So let's just explain, John, the A, B and C packages here for people who are not initiated into this cult of people who really care about billion dollar sports rights. Because you got the A package and what does that mean versus the other ones?
- [10:16]
C
Well, it always meant when I was doing it, you got the best package right in the B package was the second best and the C was the third best. And they are. And there'd been some, some reporting before about how much money these packages cost. It appears now that ESPN is paying 2.6 for the a package. That and the, the big A there is the Finals. They have the finals. They have a conference final every year and they have more playoff games, I believe than anybody else. So the B package, the biggest difference is they don't have the Finals. I think they do have the All Star Game. And I, I, again, I don't know the number of games.
- [10:58]
B
So what leagues do. And it's funny because John has said that this is not something that he ever focused on leagues actually. Write down, you have a piece of paper of all of your assets. You've got seven finals games, you've got 14 conference final games. And this is if a series goes seven games, which is why there's provisions in the contracts for make goods on below for MLB packages. It was always out of 21 games of the LCS and the world Series. There's a promise, let's say of 17, where the, the fewest it can be is 12 and the most it can be is 21. Right. Four times three. So you, you agree that there's a number in your mind when you're bidding that when you're saying you don't do calculations, I'm saying the leagues do, they write down all the assets. And the packages are actually the assets split into three different buckets. And so of course, people with the A package pay more because they're getting the best assets and more of the best assets than the B package.
- [11:58]
C
And no disagreement.
- [12:00]
A
One clarification here, apparently, per Andrew Marsh. And there will be one year when ABC ESPN does not have a conference.
- [12:06]
B
Final because it's five. Five. And then there's the 11th year. It's when it became 11 years. And I believe that's what I had read.
- [12:16]
C
I have no idea. It seems I've never, I mean, I've seen that with the Super Bowls, right, that you have to have some odd number. But since they're getting it for 10 years, I don't understand. Oh, I guess it's because one of the other guys wouldn't get. Oh, it means one of the other 22. There's 22 means that they'll get 10.
- [12:38]
A
And somebody will get, so I believe, a conference final.
- [12:43]
B
So it's, it's funny the way you do that because that's how you prime the pump.
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A
And so why is it happening is the question.
- [12:50]
B
So leagues prime the pump with one playoff game or so.
- [12:53]
C
It's six apiece.
- [12:54]
B
Do you remember what the NFL did when they started with playoff games and they started. There were other networks that getting. We're getting one playoff game and it's still happening now. It's like priming the pump for when the next package comes. Hey, you're going to want more games. You paid 110 million for that game. But now you're going to get a later January game, let's say A division series gets, you know, you graduate to a conference championship. That's how you keep monetizing your assets.
- [13:20]
C
No, no, I understand the math now. There's 22 of them. ESPN gets 10 and the other two parties get six a piece.
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A
Amazon and NBC have six each, correct? Yep. And NBC, by the way, this is the new entrant, an old entrant from my childhood.
- [13:34]
B
Right.
- [13:35]
A
The NBA on NBC was what I grew up watching. And they get a package. The B package, worth $2.5 billion, includes a Sunday night basketball schedule following the NFL season, weekly Tuesday night games prior to the NFL season ending, and some other stuff. But all of this feels like it has a lot to do with the NFL. And so where are we with what NBC is trying to do, what the NBA wants now from an old school partner like NBC.
- [14:01]
B
So it's like when you try to buy Knights back. Back in our day you had networks were programming nights. Remember when it was sitcoms like Seinfeld and Cheers, or on Tuesday nights or Thursday nights. Amazon is trying to buy a night and it feels like they want to buy Thursday night where they're going to do an NFL game, then they're going to do an NBA game. And these are national exclusive games. So if you want to watch anything on a Thursday, you've got it. So what, what, what, what is funny about all of this to me is that you have an opportunity if you're the NBA where you're getting more and more national games. Because if you think about it, the NBA now could have national games seven nights a week after the football season's done. That's never happened.
- [14:48]
C
Well, in fact, I think that's the plan, isn't it? I thought I saw a chart somewhere that basically showed Monday through Sunday they will have a game every night. And that's remarkable. And that's, it's great. You're an NBA fan, you can watch a game every night.
- [15:04]
B
That's the goal.
- [15:05]
A
The big macro takeaway, though we've talked about what it would look like, what it could look like, we're almost at the place of saying this is what it looks like from the big picture perspective, John, about what this says about sports and the media economy. What does this deal signal in terms of the chart? When you zoom out on the modern.
- [15:24]
C
History of this, it still signals that sports rights are the most valuable content in the universe. And it works for everybody. It works for the traditional broadcaster, NBC. It works for the pay television behemoth espn, which is moving to some pay TV slash digital Hybrid. And it works for the technology, technology company that wants to get into the sports business.
- [15:55]
B
So I would disagree and say that we're actually learning that it doesn't work for everybody. And I would bring you back to a time when the Los Angeles Dodgers did a baseball deal, a local rights deal, where Fox decided, hey, this doesn't work for us. This number is so outrageous that we are a better. We're a better company, more financially stable if we don't do this deal. And, boy, did they turn out to be right. What Warner Brothers is saying is, wow, we're looking at these deals and we think that we. They're now, the NBC is paying a premium to get back in the game, which is the equivalent of a city needing to pay more money to get a team back after they don't build a stadium for an existing team and that team leaves. You always pay more. It's like paying more to get a new customer than to keep an existing customer. It's a very simple rule of business. And what NBC is doing, they're paying a hell of a lot to get back in the NBA game. And so I totally understand why Warner may not want to pay that amount of money. And from the NBA's perspective, as long as there's more bidders than packages, the chart goes up.
- [17:05]
C
And there were, and there were.
- [17:18]
A
There is a chart that I'm looking at right now. And we'll put this on screen, I hope, but it is a table that indicates just the percentage increase of all of these deals. And I'll pivot it to John, who is the most bullish of all of us on just where this is all headed. But look, the SEC package, plus 536%. That was announced December 2022. Sorry, that was announced December 2020. The NFL plus 79%. That's, of course, an over $10 billion deal. MLB plus 17%. NHL plus 233%. The Premier League, plus 177%. The Big Ten, or whatever it's called now, plus 160%. NASCAR plus 40%. Comfortable playoff, plus 117%. And I believe that is tennis. That looks like Roland Garros. The French Open. Plus 282%.
- [18:15]
B
So misleading to do percent arguments, because when you have a loan number, if you get still a low number, it could be a huge percent. So if you're getting 4 million for your games and then you get 8 million, you get to say, hey, look, it's 100% increase. Look at how cool we are. Well, you're still only getting, you know, $8 million where your competitor is getting $20 million. So I think percentage is not an indicator of health of an industry or of a trend.
- [18:41]
C
Well, I would. You can certainly pick out the one. If you pick out the biggest numbers. The reason the NFL only went up 79% is because they started a higher point. It still gives you directionally. Everything is up and everything ceiling.
- [19:00]
B
There's up a lot.
- [19:03]
C
I don't.
- [19:03]
A
So this is where we go next. Does this feel like a peak? Does this feel like there's not much more room for this chart to have bigger numbers?
- [19:14]
C
Every time that there's been the suggestion that there's going to be a correction in the United States, there are corrections right now outside the United States because most of the rest of the world is not quite as TV crazy or sports crazy.
- [19:28]
A
Oh, interesting.
- [19:28]
C
Or has the amount of a disposable income that our country has. But in the United States, there is no reason to suggest that rights are going to go down. I'm sure you can pick out something at some point. The XFL rights will go down 2.0from whatever they are right now. But ongoing, big successful sports. Are they going to. The rights are going to go down? I don't think so.
- [19:57]
B
Not calling for doom and gloo. I'm saying that everything's great till it's not. And when you see owners decide to sell their team and you see a price for a team, what's baked in is their view of media.
- [20:10]
A
And I was so the Boston Celtics have now been announced after winning the title, they are up for sale. Seemingly a sell. High logic there, David, but in that how much are you extrapolating from the very question we're trying to answer?
- [20:25]
B
I don't find Wick to be any smarter than Cuban.
- [20:27]
A
Wick Rack the owner.
- [20:28]
B
So Cuban sold his team knowing that media rights deal. This media rights deal is not a surprise. We didn't exactly break news on the sporting class. I like to say we did. But the fact that they were going up when John gives me trimmers. Right. I mean this is something that the market already. It's like when interest rates are adjusted by the Fed and the market doesn't move, everyone says, oh my God, what happened? Well, the market was already taken into account what the Fed was going to do. So there is a school of thought that owners take into account what the media rights deals will be. And so there are some who are bullish and some who are not.
- [21:01]
C
Yeah. I think the. I once saw a presentation where Somebody was trying to correlate the prices of teams going up with other economic indicators. And they were like, oh, it's up more than the S&P 500. Oh, it's up more than gold. It's up more than this. And I said, there is one chart that will be of you an exact correlation between the prices of teams, and that is the number of billionaires in the world. If you put it, if you do a chart of the number of billionaires, it looks almost exactly like the valuations of Tier one sports team.
- [21:37]
B
So again, I'll push back, John, but why do you think all these leagues are allowing private equity now? Because the number of billionaires, while you say it's increasing at a rate that makes you uncomfortable and sad for the country we live in, the fact is there are not enough billionaires to support the increase in asset value, which is why they're looking for other streams of capital.
- [21:53]
C
Well, I would say that is certainly true and probably true in some cases, not in other cases. In some cases, I think that I find that the people who are the most careful with their money are the people who have the most money. And, and I think most owners have discovered there's not really any benefit than of owning more than 50.1% of, of a team. You get all of the acclaim. You get to sit wherever you want to sit. You get to go in the locker room if you inappropriately want to. You get to do whatever you want to do. At 50.1, you don't need to spend down the rest of your capital.
- [22:30]
B
Well, your friend Bob, Bob Iger gets to do all that. Not for 50.1. He's the new owner of Angel City FC and they, he and his wife Willow bought below 50.1. So if you're the general partner of a partnership who owns a team, you get to do all those cool things.
- [22:44]
C
Then why not? I mean, why not? I hear you and it's why you're going to see, you do see values in NWSL teams going up. You see values in volleyball leagues going up. You see values in, you know, third division French, French League teams because people are having to scale down.
- [23:06]
B
Scarcity of assets.
- [23:07]
C
Yes, scarcity of assets.
- [23:08]
B
You can't get the F1. There's people who want to buy an F2 team or an F3 team.
- [23:24]
A
I want to get to a billionaire who is making noises in a way that indicates that maybe they don't all feel the same way about this current rights deal, and that is Jim Dolan, the owner of the Knicks So, David, how would you describe what Jim Dolan has been doing as a guy who used to work for a team in a market that certainly was not New York?
- [23:49]
B
We had a funny way of describing George Steinbrenner. George Steinbrenner would go to owner's meetings and he would vote against anything Bud Selig put to a vote, no matter what it was. Today is Tuesday. 29 to 1 was always the vote. Bud would get so angry that eventually the Yankees and George. George agreed not to go to any owners meetings, which was a big step. Then the Yankees agreed to abstain. So then the votes would just be 21 to 29 to 0. And people would say with the Yankees abstaining, Jim Dolan has become that the owner of the Knicks was unhappy with the TV deal that Adam Silver negotiated because he's unhappy with Adam Silver as a commissioner. So therefore he would vote no on Tuesday following Monday. And in fact, he did vote no on this TV deal. And the impact of his no vote, so we're clear, is zero. Literally, it has no impact on the operation of the league. Jim Dolan can write letters to anyone he wants, which he did. It has zero impact. He has no leverage whatsoever. He's trying to get a block to be with him, saying, we're too many national games, we're losing our RSNs. MSG networks worth, worth much less. Come with me, 29 to 1.
- [25:04]
C
Well, he's the only one who has an asset like msg, and it is a great asset.
- [25:10]
A
So explain John, his incentives here.
- [25:12]
C
His incentives are to continue to protect msg, which because of Yankee games and Knicks games and Ranger games, is worth more, I think, right now than any other standalone rsn. You think that's right, David.
- [25:28]
B
So the Yankees are on. Yes. So there is an argument that yes. And Nessen and MSG are generally looked at the Mount Rushmore minus 1 of networks, and they're local and they're of course local regionally owned sports networks owned by teams. But they're all in the crapper, is the truth.
- [25:46]
C
And, and again, Jim Dolan's family has been in the cable business for many, many years. He's trying to protect that asset. I'm sure he knows that he's not going to win the vote. He still has the right to register that he thinks his business would be better off with a different kind of deal with more local games. It is.
- [26:07]
B
He.
- [26:07]
C
He is an anomaly. Nobody else's local games, though. I think the Lakers get paid some tremendous amount of money for their local games. You know, he wants to take the advantages of being in New York City.
- [26:19]
B
I totally understand what Jim Dolan was trying to do and I don't blame him for attempting that. I never blamed the Yankees for being the Yankees. They're in New York. But the big difference that's going on now with team ownership is the entry prices have gone up so much. When you've got old time owners arguing George Steinbrenner in 1973, what was the number he paid for the Yankees? Let's say $7 million. Some out 70, some price. That was crazy.
- [26:46]
C
It was 17 or 17.
- [26:48]
B
It was this. There was a CB there somewhere. C. Yes, indeed. And this is back now 50 years ago.
- [26:55]
A
10.3.
- [26:56]
B
Amazing.
- [26:57]
A
Take the under on these estimates.
- [26:59]
B
So think about it. As opposed to Josh Harris who goes to an owner's meeting and sits there amongst people, Jerry Jones included, for what he paid for the Cowboys. He's sitting in a meeting saying, I just paid 6.5 billion. That's my basis. Jerry Jones basis when he bought I, what did he pay? 3, 370. Again, I don't know why that number's in my head, but that could have.
- [27:21]
A
Been what Dan Snyder paid $140 million in 1989.
- [27:25]
B
They're in the same meeting.
- [27:27]
A
Unthinkably low numbers, it turns out literally today.
- [27:31]
B
Yeah, it's unbelievable. So there's a difference in how Josh Harris views his investment in the Commanders versus Jerry Jones views. And it was manifested in his testimony in an antitrust lawsuit where Jerry Jones said, hey listen, don't let me go at this on my own because I'll crush you all knowing that the Cowboys are the behemoth that they are and he was playing a team game in that lawsuit. It's harder for Josh Harris to play a team game when his partners are in at a basis of 6.5 billion.
- [28:02]
A
Knicks, Rangers, Islanders, Devils, Sabers, Giants, Red Bulls, Riptide.
- [28:11]
B
Which Giants? Because it's not the New York Giants they own.
- [28:15]
A
Excuse me, the content of the New York Giants. Oh, the non games, but some fun retrospectives, perhaps some soft focus interviews.
- [28:24]
B
Can I do a one minute story? I'm so sorry. Stephen Ross, you know Stephen Ross, we.
- [28:28]
A
Wanted to Owner of the Dolphins.
- [28:30]
B
Yes. We wanted to put a network together in South Florida to try to get competition against Fox. Stephen Ross in the meeting says, listen, all we can bring to this network is pre and post. But the NFL pre and post is worth more than MLB and NBA and NHL regular season actual games. So we want to own a majority percentage of this network. It did not work well. So the pre and post is, is that worth a lot to you?
- [29:00]
C
No, no. Nobody watches. I mean, it's amazing.
- [29:04]
B
It's literally a joke.
- [29:05]
C
I just remember always hearing from the new owners. So we're going to make an interactive website and our fans want to communicate with our players and they want to, you know, they want to live it every day. I'm like, yep, that and the Games is about 99%.
- [29:24]
A
One lesson that I continue to find out on this show is what actually moves the needle for the guys negotiating in the room. And we will argue about Charles Barkley, we will argue about all of these other things. And yet it's like, so who owns these games?
- [29:36]
B
It's. It's so funny for me to hear some of the discourse that's out there. It's why I love doing the show and hearing from John and understanding my perspective too, of what matters. And there's a big gulf between what matters inside a room versus what matters to the media or to fans.
- [29:54]
A
In a previous episode, and this is how, how, how naive we are. In a previous episode of the show, John made the point that ratings don't even really matter of the games. And so it's like, okay, the games matter, but so explain what actually matters here, John. From a top line executive summary perspective, what actually counts? What moves the needle?
- [30:16]
C
I think it's greenbacks.
- [30:19]
B
He means a little bit of. He used to be subs.
- [30:22]
C
Yeah, it was a piece of paper with a little bit of chlorophyll.
- [30:27]
B
Rob Manfred had a quote this week that I think summed it up exactly perfectly. When he was talking about networks and, and RSNs, Rob Manford said it was a much better business when people were paying for things they didn't want. He actually said that.
- [30:46]
C
Well, it's a. It may be an slightly ineloquent way to put it, but what he meant was if you just let us put it all in one bundle and charge you 120 bucks right now, you'd be very happy. That, and that's not an untrue statement. And everybody who is selling the hokum of, oh, if you could just pay for what you wanted, you'd be better off. Anytime you. You're talking before about valuing assets at a club, you ultimately believe that if you break them up and sell them separately, you will get more money. Right. That's why there's an A and a B and a C package. If somebody said, I'd like to buy everything, the only reason for Them to do so would be to save money. So again, I think Rob Manford is correct. Again, I'm not sure. As, as his PR advisor, I would have suggested. He said they weren't paying for anything they weren't watching. They were paying for a whole bunch of stuff that they could choose for. And it's a misnomer to suggest that a la carte means you only pay for what you want.
- [31:57]
A
The quote. The RSNs were a great business. Lots of people paid for programming they didn't necessarily want.
- [32:03]
B
I was pretty close. I mean, that's. Yes, it's within shouting distance, isn't it? Off the top of my head, no.
- [32:09]
A
But also, but also, no. I say this to say that John has also said another thing that I'm going to be in shouting distance of which is that ESPN at the height of the cable bundle was the greatest business in the history of media.
- [32:25]
C
I think it was the greatest business model that has existed to date in all of media because it took advantage of the most valuable content at a moment when it was put into bundles. And nobody theoretically knew what they were paying for, how much. They didn't know what ESPN charged Comcast, they only knew what Comcast charged them for this packaging. And you, Pat, you put that together with a combination of 30 and 60 second spectacular branded advertising of which every advertiser knew they were wasting at least half their money. But we got to keep all the money. That was a great business at that time and by the way, still is in sports. In sports, you still have about the only business where you can still do those branded beautiful spots and reach millions of people concurrently.
- [33:21]
B
You represented everything that you've come to love.
- [33:30]
C
It may take me a few minutes to, to unpack that. As the young people, as the young people say today, when you were young, when you were thinking about unpacking something, it was suitcase. It was a suitcase or it was a holiday in a Baptist household. It was Christmas Day. I was unpacking my presents.
- [33:52]
A
What do you mean, David?
- [33:54]
B
I just, I laugh at John because he was in charge of a company that used leverage better than John. What, what people may not know about John, he used leverage better than any man I'd ever met and have ever met. And I'm. Look at me, Louie. I've met plenty of titans. You use leverage in a way, and you did it unabashedly, unapologetically. You did it sometimes rudely, and you did it in a way where you wanted everyone in the room to know the power that you represented. That's who you were. And you can deny it, but that's what we thought.
- [34:28]
C
Wow. I, I never thought I was rude about it. I thought. Once again, I thought I was using dismissive. I thought I was using this draw to suggest that, you know, you won't find a better tonic for anything that ails you than espn.
- [34:44]
B
It's funny, that's exactly what you would say. You want to win a World Series? I like your shiny ring. ESPN will help you.
- [34:52]
A
John Skipper unpacking his medicine bag. His apothecary. Yes. Full of tonics for you.
- [34:57]
C
Yeah, this will go hair on a bowling ball. Not anything anybody here needs, by the way.
- [35:07]
A
No, we're. We. We're strong.
- [35:09]
C
This is a strongly hirsute group.
- [35:12]
A
Jim Dolan said, quote, the NBA has made the move to an NFL model de emphasizing and depowering the local market. This feels like a thing the NBA should want, but obviously Jim Dolan doesn't feel that way.
- [35:25]
B
It's. It's really. They're trying to socialize which the leagues are doing. You start saw Don Garber do it with the package at mls. You NFL does it with all of their games. It's split evenly 32 ways. And what Adam Silver's trying to do, MLB's trying to do it, but they can't figure it out with all the teams right now with the big market teams being in the way. And the Knicks are what I would consider a big market team in the NBA. And he's unhappy with anything that takes away his ability to maximize his profit.
- [35:54]
C
I have a consistent point of view that the NBA will be advantage by being the second league to go totally national and forget regional games. That doesn't mean that. And by the way, it will create more value. I have no doubt that it'll create more value over time. The question is 1/30 of whatever Adam grows the league to because he does this, Jim may see some of his local revenue that if he'd put on top of the 1/30 he was getting before, he would have had more. A lot of clubs will have. Would have had less. And I think. Did you call it a socialist? I didn't know if you were socializing or you were socialisming.
- [36:41]
B
I was actually in this case you can use both because I think what, what Dolan wants to protect against in his mind is having anyone benefit from that which he has achieved.
- [37:05]
A
So I should point out that Jim Dolan made a choice that looks a bit different in the light now of this new NBA deal for A different reason, which is that Jim Dolan used to have the New York Liberty. Now that asset is owned by a different pair of owners. The people who own the Brooklyn Nets, Joe and Clara Wu Tsai. And the WNBA has been a thing that we have dissected and predicted and now we have some tentative answers. So David, do you want to recap your previous position on the WNBA's value while also explaining how it is that WNBA value is calculated as John laughs in your face.
- [37:45]
C
Well, no, no, I'm laughing straight ahead.
- [37:48]
B
What bothers me about this is you're setting me up to be wrong and look like I got schooled by When John was trading a on inside information. There's no other possibility that he got it exactly right there.
- [37:59]
A
What?
- [37:59]
B
He just pulled it out of the air from his friend Adam. The WNBA made an announcement that all of a sudden they are getting $200 million a year from the exact same partners who are spending 76 billion on the NBA. And we discussed this. The WNBA was not able to negotiate on its own, so they negotiated with the NBA and the NBA picked a number out of the blue sky that happens to be the number John said. It's really amazing. Out of all the numbers in the world, incredible. There's an infinity numbers and you had it perfect.
- [38:33]
C
Don't you remember when you do those things on the SAT and it would say 3, 9, 18. What's the next number in the sequence which is 30? And that's all that was. They were going to certainly give the WNBA the same or something approaching the same proportional increase that the NBA overall deal got.
- [39:03]
B
It's being held though as such a victory for the wnba. And I would just.
- [39:07]
C
It is a victory for the wnba. And again, I will semantically quarrel with you. The WNBA couldn't do this on their own. Certainly they could do it on their own. They, they with the NBA decided that they had a likelihood of getting more money this way and they did. And once again, I would tell you it's a great investment by who?
- [39:37]
B
By the networks.
- [39:38]
C
It's a great investment by the networks. It's a great investment by the NBA for the popularity of basketball.
- [39:44]
B
What's the. You say the investment. What's the downside? In order for an investment, there has to be downside risk. What's the downside risk? Would Amazon have been able to bid 1.8 minus what their percentage of the 200 million is? So let's pretend that they are at 70 out of the 200. Just for fun. Would they have done 1.8 minus 70 if they didn't get the WNBA games. Is that what you're presenting to me?
- [40:09]
C
No, that's not what I'm presenting to you. I'm presenting to you that that money going to the WNBA will create more value in basketball and basketball franchises and basketball popularity than taking that still fairly small amount of money and giving more of it to the 30 NBA owners. That, that money will be better spent here. If you're looking at the sport of basketball, look at the, look at the proportionality. It's what, what do we say, $200 million?
- [40:43]
A
Yeah, let's do.
- [40:44]
C
It's $2.2 billion out of 76. One out of 38. It's 2. Somewhere between 2 and 3%.
- [40:53]
B
That's the point. It wasn't enough to talk about, but we're celebrating as though it's the biggest victory.
- [40:57]
A
Let's do the before and after. People who aren't familiar with the previous predictions and the state of play. So before David, it was what, what was the WNBA getting in the previous deal?
- [41:08]
B
$40 million from the exact partners who had the rights to the NBA.
- [41:13]
C
And now, to be fair, I think they got $40 million from ESPN because I do not believe that TNT had a women's basketball package. So that would be proof that the NBA didn't force them to take a WNBA package.
- [41:34]
A
Right. And there was the plus, I believe $20 million or so.
- [41:37]
C
Disney, that's Ion, and CBS and Amazon, all three, I think. And I, I, I'm, I can't be sure I got that right. Have WNBA packages and didn't have NBA packages.
- [41:51]
B
I'm, I'm wrong, man. I didn't realize that ESPN separately negotiated the WNBA deal from the, that the NBA bifurcated it.
- [41:59]
C
No, we, as you pointed out, the leagues all value their assets. They presented us with a collection of assets that they said, this is what it's worth. Since I wasn't calculating it as specifically, I had said, here's what we want to buy. They said, here's what it costs. I said, how about this? They said, how about that? Mostly, as I've said to you before, we did more negotiating on what we got for our money than we did always on the money. Because when you have must have league rights, the league gets to assert their leverage by naming a price. We do. Other than with the NFL, we generally would get it down some, but then we'd also get a lot more, a lot more assets for that. We wanted the wnba, but I did not negotiate it separately.
- [42:53]
A
So here's the here's the accounting and full the league currently has media deals with ion, CBS and Amazon. As John indicated on top of the ESPN agreement, the deals including the ESPN agreement, are worth $60 million as presently constituted. When all these agreements are reached, however, the WNBA's average annual TV rights fee this all via Sportico, will be worth at least $260 million. And so multiples, David, multiples. Multiples. Multiples. And your suspicion based on just the framing of your jawline is unabated.
- [43:31]
B
This just continues the narrative that's a great narrative that that the WNBA is this league where Caitlyn Clark is women's sports, women's basketball. It's having a moment. Let's make the moment last. And the way we're going to m fake it till you make it is we are going to pin a number that is a the same multiple that the NBA got when there's not one underlying reason that the WNBA would have gotten the same increase at the NBA. I can't think of one business principle where with the performance of the WNBA would indicate that they should have that same increase that the NBA had.
- [44:02]
C
Can you you poke some holes in this and I would if I was you but the ratings are up more for the WNBA than the NBA.
- [44:09]
B
The percentage basis. Yes, WNBA was a slash but okay.
- [44:14]
C
The attendance at the games is going up.
- [44:18]
B
Total number of games, total number of people is a fraction of what the NBA gets.
- [44:22]
C
It is. But I would guess if you and.
- [44:24]
B
I'm not trying to be against the wnba, please don't paint me in a misogynistic light. I'm merely saying that a you've got an incentive for you have knowledge of how to be right on this argument we had and to make me look bad. B you also have a job where you are selling media rights to a woman's league. So this is very beneficial.
- [44:45]
A
You should disclose that that John is a part owner in a new which.
- [44:49]
B
Is an awesome league actually and he didn't invite us Pablo, we are not I noticed we did not get that email. It must have gone to our Metal Arc media.
- [44:56]
A
I was hoping to be the Jim Dolan of John Skipper's 3 on 3 women's basketball league and I am not.
- [45:01]
C
In a couple years you can buy a team. So far you can't because he owns.
- [45:05]
A
Them all and he's my boss which.
- [45:08]
C
Is a real it's not true.
- [45:09]
A
A real double binder.
- [45:11]
C
But it is correct that I should disclose that I am an investor in unrivaled the Three on three women.
- [45:18]
B
And do you think that unrivaled benefits from this number that the WNBA had got?
- [45:25]
C
It certainly continues an excellent narrative that.
- [45:30]
A
The DR's getting draw.
- [45:33]
B
Hold on. I just got hit in the eye with his tonic spray.
- [45:39]
C
Yes, that's why I should disclose that. I should disclose that.
- [45:43]
B
Try to catch you.
- [45:44]
A
No, no, no. People who listen to the show previously know all of this already. It's been previously disclosed. But the point is that John has been pouring over these numbers. He has them at the ready. And David, despite Caitlin Clark, despite these percentage increases, despite the atmosphere of these games, which is probably different to a casual consumer, you're saying, and yet the way you get to these numbers is. It seems almost offensively anti mathematical to you.
- [46:10]
B
It is exactly. That is exactly how I would put it. And it's not based on reason and I'm fine with it. Not. There's a lot of ego premiums in the world of sports and in the world of business. So I'm perfectly fine with that. I just don't like when things get mislabeled and I don't like when somehow we're confusing the WNBA's increase as though it's merit based versus being on the tail of the NBA. There is obviously better health in the WNBA today than yesterday. Of course. But to say that it's. That it merits the same type of attention that the NBA gets is not proper.
- [46:47]
C
Well, nobody's saying it has the thus far merited. We just pointed out that it's getting somewhere between 2 and 3% of the money. Is it worth. Would I sitting at ESPN think that the package is worth that two and a half percent? Yeah, I would. If you said you could buy, you could buy for 97 and a half percent of this money, you could have just bought the NBA. I would have said no. I'd prefer.
- [47:14]
B
I'm asking you to do it differently. Would you have paid $200 million as a standalone company in the open market without getting NBA games? Would you have spent 200 million on the WNBA?
- [47:25]
C
You buy a really expensive bicycle and they want to sell you the warranty. You had to decide if it's worth it or not. All three of the new partners decided it was worth it.
- [47:38]
B
You think they had a choice?
- [47:40]
C
I don't think. Nobody ever told me I couldn't get an NBA deal. And apparently TNT got an NBA deal without buying it.
- [47:48]
B
You were the A deal.
- [47:49]
C
We were the A deal.
- [47:50]
B
And that shows where the W, that's.
- [47:52]
C
Where we put that big value in the A deal. Exactly.
- [47:56]
B
You can be fooled by his. Draw all you want. And he's never going to admit any of this. And it's fine. It doesn't bother me anymore. I used to not sleep after we taped these shows on a Wednesday.
- [48:05]
C
I am happy to hear that you're sleeping perfectly well.
- [48:08]
A
But there is one more thing I want to find out about today because there is this clause that I want to cite to the Athletic that quote, there is an agreement between the league, the WNBA and the media partners to revisit the rights deals with good faith talks after three years that could replace them to reflect the league's growth. End quote. And so, Jon, what does that sentence indicate to you?
- [48:28]
C
What I think it means to me is that the wnba, on the trajectory they're on, were hoping to get paid for a continuation of that trajectory with more money. And that the partners decided there was a limit to how much they were willing to pay, but said, you know what, if it blows up the way it's blowing up and it's going up 100% every year for the next three years, we will have a good faith discussion about what that might mean for our rights payment.
- [48:56]
B
There is no greater legal eyewash than the two words good faith.
- [49:03]
C
Hard to disagree. It often makes people feel good to get it in a deal. But your lawyer will always tell you, won't they, that it actually means nothing.
- [49:12]
B
It means bad faith is what it actually mostly means.
- [49:16]
A
Said with a draw, in which case you're like, oh, this faith does sound pretty great.
- [49:19]
B
Comes with tonic.
- [49:20]
C
Now, I have to say in the contracts that I had good faith things written into I they have sometimes been cited and sometimes been used, but they actual if you go to court, it'll have no legal bearing.
- [49:33]
A
And David is just going to chuckle at the very idea that Faith in.
- [49:36]
B
This world headline makes me laugh.
- [49:38]
A
David Sampson, John Skipper. Two very different types of lawyers. Thank you for helping me find out a lot.
- [49:44]
C
Yeah, I'm a non lawyer. That's.
- [49:46]
B
That's the type.
- [49:46]
C
That's a type. That's a type. I'm a non lawyer lawyer.
- [49:52]
B
Thank you.
- [50:01]
A
This has been Pablo Torre Finds Out a Meadowlark Media production and I'll talk to you next time.
- [50:16]
C
Sam.