NHL Re-ups with NBC/Versus

NHL Re-ups with NBC/Versus

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The NHL and NBC/Versus have announced a 10 year broadcast and media rights agreement, valued at approximately $2 billion or roughly $200 million per year, a sharp increase from the $77.5 million arrangement currently in place.

On a short-term basis the deal, essentially a 150% per-year increase, is a good one for the NHL, which you may remember did even not have a US television deal in place coming out of the lockout.  Only six years later, an arrangement of this value represents a major coup for both Gary Bettman and the NHL as a whole. However …

… the 10 year length of commitment is somewhat concerning. One has to wonder what the market is going to hold in the near future, and whether the lack of negotiating flexibility created by a 10-year term will come back to haunt the league.  Simply: $200 million today will not be $200 million five years from now.  It is fair to ask if, in its rush to get a deal done, the league has potentially handcuffed itself to a set dollar figure when in five or six years they would otherwise be in position to negotiate a higher value (say, an annual rights fee of $300 – 400 million).

Absent of any details at this point as to whether any sort of out clauses or re-negotiation windows have been built into the contract, one could be forgiven for wondering if the NHL has in effect exchanged the possibilities for tomorrow for an immediate benefit today.  Even if it is the case that an out-clause or opportunity to re-negotiate prior to the ten year commitment has been built into the deal, the NHL is still undertaking a substantial risk with this length of term.  Certainly, much faith has been put into the continued development of NBC’s coverage (which to their credit, has been improving), with an eye toward the network’s — and the league’s — investments in future technological development across online & digital platforms.

Of course, there are certain benefits to the deal that the NHL undoubtedly would have found difficult to pass up: increased exposure with the number of regular season games broadcast doubled, every playoff game slated to be broadcast nationally via NBC-owned channels, a new Thanksgiving Day game, and the potential of further marketing platforms with NBC Sports securing rights for its games across all digital platforms and devices.

At the end of the day, the NHL’s arrangement with NBC is reflective of two points: (1) the overall U.S. popularity of the sport in comparison to the other major leagues (e.g. the NBA receives around $900 million from ESPN, TNT and ABC combined); and (2) the continued — and expected — growth of the post-lockout NHL in major/traditional U.S. markets (Versus has seen a 17% viewership increase this season over last; NHL TV ratings in the US have increased 84% over the last four years).

The question is, will the NHL’s continuing rise in popularity, reflected by both its television ratings and digital usage, increase its worth to the point where $200 million is substantially less than the the league could receive from a competing broadcaster five years from now? And if so, is the immediate gain now worth the trade-off of being handcuffed down the road, or will the continued development of the NHL’s own non-traditional marketing & media platforms serve to offset the difference?  Clearly, the league is banking on the latter with this agreement.

In the meantime, it appears as though hockey will remain a strong presence on NBC — and the soon-to-be rebranded Versus — through the 2020-21 season.  And that, in and of itself, is a good thing for the league.  Let’s just hope the league does not come to find, a few years down the road, that they sold themselves short in terms of potential revenues via the length of the agreement.

Looking forward to your thoughts as always,

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Twitter: @garrettbauman