A View Into the Miami Heat’s Local TV Deal

http://heathoops.com/2014/08/a-view-into-the-miami-heats-local-tv-deal/

That was Heat owner Micky Arison in July of 2012, describing the difficulties of sustaining a winning basketball team while maintaining some semblance of profitability under the auspices of the new and far more restrictive Collective Bargaining Agreement.

Local rights deals for sports franchises are in the midst of a tremendous boom in the television landscape that social media sculpts, as regional sports networks (RSNs) bid up prices to secure access to one of the few remaining DVR-proof properties. And when I say “boom,” I want to do more than just evoke the idea of growth: In 2011, the Los Angeles Lakers signed the richest local television rights deal in NBA history; the 20-year contract with Time Warner Cable included the launch of two new regional sports networks – one English channel and one Spanish channel – and averages a payout to the Lakers of approximately $200 million per year, for a total value of $4 billion!

Sounds great, huh? Read on;

To give you an idea of just how astronomical that is: It’s roughly 10x the $20 million payout the Heat currently generates from its own longstanding TV rights deal. In fact, the average annual payout on the Lakers’ deal is more than what the Heat currently generates in total revenues!

The Heat is at a substantial disadvantage when it comes to negotiating the payout on its TV rights deals. That’s because the size of a team’s local television rights deal is directly proportional to the projected number of television households tuned into its broadcasts. The Heat, by the NBA’s own definition, is a small-market team.

It may shock you to know just how small the Heat’s designated market area (DMA) truly is.

The Heat has just 1.66 million TV households in its DMA.(1) By contrast, the New York Knicks and Brooklyn Nets have 7.46 million in their shared DMA, the Lakers and Los Angeles Clippers have 5.67 million in their shared DMA, and the Chicago Bulls have 3.53 million. In fact, the Heat has a smaller TV market than even the Minnesota Timberwolves. Its DMA is good for just 17th overall, among the league’s 30 teams.

Read on at the link for more invaluable insight to the team's possible TV revenue future.