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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. This is a special

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Speaker 1: edition of the Bloomberg Business of Sports podcast, where we

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Speaker 1: explored the big money issues in the world of sports.

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Speaker 1: I'm Michael Barr, right on time for the start of

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Speaker 1: the NBA season. Our very own Jason Kelly, chief correspondent

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Speaker 1: at Bloomberg Originals, got a chance to sit down with

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Speaker 1: NBA Commissioner Adam Silver at the usc Next Level Sports Conference.

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Speaker 1: They spoke about the team's latest media deal, the rise

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Speaker 1: in sports betting, the w NBA's growth, and more. Here's

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Speaker 1: their conversation in its entirety.

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Speaker 2: All Right, Adam Silver, talk to me about the biggest

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Speaker 2: business goal for this upcoming NBA season.

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Speaker 3: The biggest business goal, I would say, is to work

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Speaker 3: through the transition from our current media relationships to our

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Speaker 3: new ones and to ensure that we're adapting to fit

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Speaker 3: the new technology. And it's amazing how quickly that change

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Speaker 3: is taking place. So that's a large part of it.

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Speaker 3: And then I'd say number two, to think more about

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Speaker 3: what the best way is to grow this game globally.

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Speaker 3: I mean, that's and that's always been a priority, and

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Speaker 3: it was for David cern and all the years I

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Speaker 3: worked under him, but I would say because of the technology.

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Speaker 3: I just referenced these global streaming services, the you know,

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Speaker 3: advancement and smartphones, the large availability everywhere now it creates

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Speaker 3: an opportunity that wasn't available to us historically.

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Speaker 2: So you mentioned media. Obviously the media deal drew tons

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Speaker 2: of headlines, a lot of attention. What's the biggest lesson

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Speaker 2: you take from that negotiation, either in terms of valuation

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Speaker 2: in terms of the players involved. What sticks with you?

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Speaker 2: What do you need to act on next?

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Speaker 3: What sticks with me is the marketplace is speaking loud

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Speaker 3: and clearly about the value of premium live sport content.

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Speaker 3: And I think to even surprise some followers of the marketplace,

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Speaker 3: I think, when I think of where sports ranks in

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Speaker 3: the hierarchy of called entertainment programming, we're clearly in a

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Speaker 3: place that we weren't historically. And now, just speaking specifically

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Speaker 3: for the NBA, one example is in our last set

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Speaker 3: of television deals in during the regular season, we had

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Speaker 3: fifteen broadcast exposures and now we have roughly seventy five.

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Speaker 3: And you know, go back further to when David Stern

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Speaker 3: first became commissioner, the marketplace didn't view our finals as

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Speaker 3: meriting primetime broadcast exposure. And so that's a historic change.

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Speaker 3: And I'd say number two, and I think not just

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Speaker 3: what we saw in the NBA negotiations, but just look

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Speaker 3: at the recent NFL deal with Netflix. You know, services

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Speaker 3: that were publicly saying they didn't necessarily see themselves as

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Speaker 3: being in the premium live sports business are now moving

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Speaker 3: into the sports business because presumably they're following their subscribers

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Speaker 3: and have very sophisticated data about what it is that

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Speaker 3: will create stickiness among those users and what they find

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Speaker 3: to be the most compelling programming. And so that's that's

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Speaker 3: something that you know, I'm particularly focused on, particularly because

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Speaker 3: I grew up in the NBA working in the television

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Speaker 3: production unit MBA Entertainment, and I just find a personal

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Speaker 3: fascination with what's the changes and the rapid rate at

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Speaker 3: which they're happening.

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Speaker 2: Well, obviously, you do a deal and then you have

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Speaker 2: to immediately start thinking about the next deal. How do

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Speaker 2: you think about that in terms of value, in terms

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Speaker 2: of the growth, So is such a level up? Are

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Speaker 2: we going to see another level up the next time

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Speaker 2: you come around?

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Speaker 3: By the way, I'm so used to having always been

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Speaker 3: the young guy. You know, it's the first time my

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Speaker 3: career when people talk about the next deal it's eleven

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Speaker 3: years from now. I'm like, oh, I don't know I'm

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Speaker 3: going to be here. But you're right, you know, we

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Speaker 3: should always be thinking about the next But it maybe

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Speaker 3: even more importantly that at least, and I hope our

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Speaker 3: partners have seen it this way over the years, that

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Speaker 3: of course you have to negotiate hard for a contract,

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Speaker 3: but then you put it, you know, metaphorically in the

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Speaker 3: file cabinet. I guess those don't exist anymore. But because

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Speaker 3: when you sit down with these media companies, no one

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Speaker 3: can predict what the next decade is going to look like.

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Speaker 3: Precisely that I like to think about the way we

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Speaker 3: operate with these partners is that every day we're sitting

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Speaker 3: down and saying, or do we need to adapt in

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Speaker 3: certain ways? What's happening that we didn't predict? What's the

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Speaker 3: best way to engage our viewers. I mean, just one

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Speaker 3: example right now is well, I think people saw the

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Speaker 3: climb was coming in cable and the impact potentially would

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Speaker 3: have on regional sports networks. I think if we were

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Speaker 3: doing this interview, even you know, two years ago or

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Speaker 3: may certainly four years ago and have said that we'd

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Speaker 3: now be sitting here when you know, eighteen of our

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Speaker 3: teams RSNS are either defunct or in bankruptcy. And so

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Speaker 3: there was a trend there, but then it got accelerated.

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Speaker 3: And to your earlier question about business challenges for us,

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Speaker 3: I mean that's something we're going to spend a lot

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Speaker 3: of time on this year, is you know, working with

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Speaker 3: our thirty teams and interested parties in the marketplace and

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Speaker 3: figure out what the future of local sports should be.

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Speaker 2: All right, so what happens next with expansion? Tell me

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Speaker 2: about the timeline. What are the things you're taking into

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Speaker 2: consideration as you think about what's on the table.

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Speaker 3: In terms of the timeline, what we told our teams

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Speaker 3: at the September board meeting is that we're going to

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Speaker 3: begin the process now, and that process will begin at

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Speaker 3: the league office, working with advisors and modeling, just as

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Speaker 3: any other business would be what it means potentially to

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Speaker 3: add two franchises and there. I think what's not intuitive

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Speaker 3: to some people who think of expansion is that you're

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Speaker 3: in essence selling equity in the league. So, for example,

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Speaker 3: we now one of the reasons we wanted to weigh

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Speaker 3: is we wanted to see what our next set of

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Speaker 3: media deals would be, and now that we know at

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Speaker 3: least what the principal deals are for the next eleven years.

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Speaker 3: It's a mathematical equation if you're selling one thirty first

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Speaker 3: or one thirty second, So it begins with the straightforward math,

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Speaker 3: but it's obviously more complicated than that, because how do

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Speaker 3: you calculate is we've talked a lot about the future

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Speaker 3: of the NBA in Africa. When you're selling you know,

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Speaker 3: a couple percentage points of that business, what's the value

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Speaker 3: of that and you can go market by market, continent

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Speaker 3: by continent. So there's that straightforward business view. Of course,

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Speaker 3: then you have to look at specific markets and whether

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Speaker 3: those would truly be additive. Presumably they would be if

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Speaker 3: we were expanding there. And lastly, dilution is a major issue.

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Speaker 3: And just to jump to another league, for example, there's

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Speaker 3: a tremendous interest in w NBA franchises right now and

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Speaker 3: I have no doubt that the commissioner Engelbert could sell

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Speaker 3: a dozen of them, you know, before the end of

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Speaker 3: the calendar year. If that's what the league chose to do.

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Speaker 3: But I don't think we're at the point yet in

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Speaker 3: terms of talent in women's basketball that we could keep

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Speaker 3: the level of competition we have now and add that

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Speaker 3: many teams can. We can we expand, absolutely, but I

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Speaker 3: think we have to be very careful to continue to

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Speaker 3: make sure that we're putting a really high quality product

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Speaker 3: on the floor. But in the NBA, I mean now

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Speaker 3: it's very different than we were having this discussion even

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Speaker 3: five years ago. That the continued development of the international game,

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Speaker 3: the continued growth in number of international players, mean the

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Speaker 3: pool of talent coming to league continues to grow at

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Speaker 3: a pretty rapid rate. So but dilution of talent will

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Speaker 3: be something we'll look at as well.

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Speaker 2: And how much does the Boston transaction affect both the

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Speaker 2: timeline and the valuations when it comes to expansion.

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Speaker 3: The Boston transaction just been to come along when it did,

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Speaker 3: and you know, as has been reported, that's with the

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Speaker 3: Grasspeck family made a decision that this was the right

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Speaker 3: time to sell. So yes, to the extent that anybody,

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Speaker 3: of course who's looking either either you're the sellery or

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Speaker 3: the buyer, it's going to be a clear data point.

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Speaker 3: And so to that extent it will be relevant, but

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Speaker 3: also you learn with these transactions. For example, the Celtics

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Speaker 3: don't have an arena. They're a tenant in somebody else's arena,

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Speaker 3: so that will be a factor. But I'm sure somebody

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Speaker 3: who's looking at the team would potentially be thinking, well,

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Speaker 3: maybe I'll build my own arena at some point. So

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Speaker 3: one thing, and it's what I've always loved about this business.

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Speaker 3: There's a lot that's unpredictable. And again, when you have

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Speaker 3: families that own teams, even if you were asked me,

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Speaker 3: then what's the next team that's going to be for sale?

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Speaker 3: I have no idea, and it's it's a very personal

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Speaker 3: decision in many cases.

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Speaker 2: So you mentioned the WNBA record setting season. Feels like

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Speaker 2: every week there's a new record set in terms of

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Speaker 2: attendance or viewership. So what's the business takeaway for you,

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Speaker 2: both for the w given that the NBA is an

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Speaker 2: owner of the league, and also for your own business

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Speaker 2: in the NBA. What are one or two lessons you

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Speaker 2: take away from what we've seen in.

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Speaker 3: The w I begin by saying I think that Commissioner

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Speaker 3: Angelbert and her team are doing a fantastic job. I

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Speaker 3: think that there are the core business practices, some of

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Speaker 3: which existed before they got there, others which they have

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Speaker 3: improved on or added. I think we've seen better marketing

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Speaker 3: around the WMA. That's been part of it. I mean,

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Speaker 3: part of it is just, you know, as the talent

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Speaker 3: level has continued to grow over the years. I think

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Speaker 3: about from the early days of the WMA and looking

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Speaker 3: at the game now, it's dramatically different. And part of it,

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Speaker 3: I think is because the WNBA existed and the fact

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Speaker 3: that therefore young girls could see there was a future

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Speaker 3: that could lead to a professional path. Young women using

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Speaker 3: what sport to play in college saw thought, well, okay,

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Speaker 3: if I excel at basketball, then there's a career you know,

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Speaker 3: after college to play. So that's part of the impact.

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Speaker 3: And I have no doubt too that some of these

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Speaker 3: incredible women as role models, convincing young women that may

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Speaker 3: have done other things with their lives like wow, I

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Speaker 3: want I want to play professional sports. So that's part

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Speaker 3: of it. I would say. Also, it's a there's been

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Speaker 3: a dramatic change in the power of the consumer, and

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Speaker 3: I think that's what in the way the Internet has

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Speaker 3: disrupted the media business, you know, to the point now

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Speaker 3: where I believe the most popular form of media is YouTube.

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Speaker 3: And that's because it's and it's not because Google sat

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Speaker 3: down and said, let's create high value content that we

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Speaker 3: think our users will want. It's because users, in essence

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Speaker 3: can choose anything they want, and they ultimately are demonstrating

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Speaker 3: that that's where the power exists. And as we've learned

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Speaker 3: in women's sports. And you know, I was saying this earlier,

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Speaker 3: that I was listening to Serena Williams this summer make

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Speaker 3: this point, and it's an obvious one, but when it

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Speaker 3: comes from Serena Williams, it really hits you in a

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Speaker 3: different way. And she said, you know, I'm not the

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Speaker 3: first great women athlete to come along. Women have always

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Speaker 3: been great athletes, just that I was given this opportunity

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Speaker 3: and now, and I translate that to my world, and

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Speaker 3: I think, well, okay, women's tennis, it wasn't she accelerated

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Speaker 3: the growth, but the foundation had been laid by Billy

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Speaker 3: Jinking and Chrissy Everett and Margaret Court and all these

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Speaker 3: great players that came before. And I think you're seeing

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Speaker 3: something similar in the WNBA. But in addition, the gatekeepers

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Speaker 3: didn't have the same power they had Historically, somebody wanted

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Speaker 3: to follow a great women's Asia Wilson, you know, whether

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Speaker 3: or not, and I won't mention any particular media platform,

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Speaker 3: but whether or not they chose to feature her, fans

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Speaker 3: could get her content and part of it because she

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Speaker 3: had the ability to dis intermediate certain media gatekeepers and

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Speaker 3: say I'm going to talk directly to my fans and

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Speaker 3: post the content that I think they're going to be

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Speaker 3: interested in. So it's like a lot of things, it's

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Speaker 3: a convergence of all these factors at once.

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Speaker 2: And does the success of the W change it all

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Speaker 2: the business plan for the W? Does it make you

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Speaker 2: think about spinning it out on its own? Does it

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Speaker 2: make you think about bringing on additional investors? What's the

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Speaker 2: immediate future in your mind? From a structural perspective, you know.

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Speaker 3: I'm not even exactly sure what's spinning it out onto

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Speaker 3: its own means. It's it's because it carries the NBA brand.

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Speaker 3: I don't envision something that carries the NBA brand operating

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Speaker 3: completely independently of the NBA. Maybe in the way you're asking.

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Speaker 3: Having said that, while it's integrated into the NBA, Kathy

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Speaker 3: Engelbert stands alone as the commissioner. There are lots of

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Speaker 3: people part of the league infrastructure who only work on

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Speaker 3: the WNBA. Will I'm sure we'll be adding to those

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Speaker 3: people absolutely. I mean, I you know, maybe I'm too

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Speaker 3: defensive on this, but certainly, having been in the women's

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Speaker 3: basketball business for twenty eight years now personally at the league,

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Speaker 3: I think the addition of the NBA has been incredibly

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Speaker 3: additive to And we've been at this for a long time.

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Speaker 3: But I'm open, you know, to changes, and I know

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Speaker 3: the team owners are as well. I Mean, what we're

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Speaker 3: seeing is a different culture emerging in the WNBA is

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Speaker 3: something I'm really proud of. At some point, whether independent

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Speaker 3: means they should physically be in a different office, for example,

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Speaker 3: I could imagine that. I mean, I think everyone wants

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Speaker 3: what's best for this league and the best way to

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Speaker 3: grow it. But at least right now, I firmly believe

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Speaker 3: that an integrated operation with the NBA and WNBA is

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Speaker 3: the best way to grow the sport of basketball and

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Speaker 3: women's basketball on a global basis.

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Speaker 2: So you were early in terms of welcoming in institutional

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Speaker 2: investors into the NBA ownership ranks. Now even the NFL

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Speaker 2: kind of belatedly as cutting into that business. What's your

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Speaker 2: biggest lesson from that? How do you see that evolving.

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Speaker 2: You've had sovereign wealth come in via I think Moneumental Sports,

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Speaker 2: which owns the Wizards. Do you see an increase in

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Speaker 2: those types of funds coming in, especially evaluations keep going up.

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Speaker 3: I think the biggest lessons so far, and something we

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Speaker 3: didn't exactly predict, is it's created a much better marketplace

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Speaker 3: for the limited partners and the teams. Those trades were

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Speaker 3: fairly rare before the advent of private equity in our teams,

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Speaker 3: and now with those funds buying and set up in

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Speaker 3: essence only to buy limited interests teams because our rules

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Speaker 3: don't allow controlling interests, it means that somebody who owns

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Speaker 3: a ten percent stake in a team has a much

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Speaker 3: more liquid market to trade. And I think that's actually

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Speaker 3: helped to increase the value of the overall team but

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Speaker 3: also those limited interests and has created a larger pool

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Speaker 3: of people willing to make those investments. I think we've

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Speaker 3: been pleasantly so prize by the relationship with those investment funds.

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Speaker 3: I think there was concern historically that potentially those investors

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Speaker 3: would be looking at a different time horizon, for example,

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Speaker 3: than the principal owners of the team. I think there

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Speaker 3: was concern from a competitive standpoint that they wouldn't be

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Speaker 3: engaged with you know, you know, the passionate fans in

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Speaker 3: the same way that an individual who runs a club would.

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Speaker 3: But actually what we've seen is something that also surprised

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Speaker 3: me more long term capital, you know, viewing sports as

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Speaker 3: an independent investment you know class, and one that has

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Speaker 3: long term growth opportunities, one that is viewed as an

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Speaker 3: alternative as an investment class. So from that standpoint has

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Speaker 3: been very successful. I mean, we only have one sovereign

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Speaker 3: wealth investment right now, so it's early days there. And

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Speaker 3: I think though, as the values of the franchises continue

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Speaker 3: to go up, you know, it's an enormous amount of money,

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Speaker 3: and there are only you know, so many individuals you

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Speaker 3: know who can write the larger check for control. But

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Speaker 3: then beyond that, the market then shrinks for people who

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Speaker 3: want to write large checks and not have control. And

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Speaker 3: I think that's where institutional capital becomes increasingly important.

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Speaker 2: All right, last question for you. You're also very early in

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Speaker 2: embracing legal gambling. That obviously the entire sports world has

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Speaker 2: now embraced it's inescapable. So what's the next big step there,

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Speaker 2: especially because we're inundated with that sort of data. It's

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Speaker 2: clearly very popular, But what do you do from a

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Speaker 2: business perspective to further that.

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Speaker 3: I think a couple of things. One is in terms

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Speaker 3: of use of technology to extent, and I understand it,

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Speaker 3: there's a segment of our fan base that frankly wants

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Speaker 3: nothing to do with sports betting. I think the Internet protocol,

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Speaker 3: television streaming will allow people to make an election that click.

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Speaker 3: I don't want to be inundated with sports betting advertising.

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Speaker 3: I don't want to see odds. It's just it's not

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Speaker 3: my thing. And so I think that'll be positive that

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Speaker 3: we'll be giving people what they want. Now. On the

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Speaker 3: other side of the spectrum, for people who do want

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Speaker 3: to engage in sports betting, I think AI ultimately is

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Speaker 3: going to be transformative because now if you want to

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Speaker 3: bet on a sporting match, first of all, so much

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Speaker 3: of the action is moved to what the industry calls

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Speaker 3: in play, so it's not a bet necessarily before the game,

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Speaker 3: where you're betting with a line or whatever else. The

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Speaker 3: game begins and you start betting on various things, but

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Speaker 3: it's still a menu, a pre selected menu of things

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Speaker 3: that you can bet on in the game. I think

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Speaker 3: what ultimately AI is going to allow people to do

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Speaker 3: is essentially just create permutations of things they want to

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Speaker 3: bet on, and instantaneously, you know, odds will be generated

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Speaker 3: and they'll make their bet. One thing I think is

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Speaker 3: important to point out in terms of the engagement that

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Speaker 3: comes from sports betting, the median bet on the NBA

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Speaker 3: is around five dollars, I think, which surprises a lot

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Speaker 3: of people. Now, having said that, of course, we have

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Speaker 3: to be very mindful of the potential for problem gamblers.

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Speaker 3: And now this goes back to why I've been an

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Speaker 3: advocate for legalized sports betting, that at least if there's

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Speaker 3: legalized sports betting and people are giving betting services their

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Speaker 3: credit cards and have to identify themselves to extent there's

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Speaker 3: aberrational behavior, they can spot it. Obviously, with illegal markets,

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Speaker 3: no one has any idea, and we've obviously seen examples

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Speaker 3: recently in other sports where a tremendous amount of money

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Speaker 3: was being bet and got picked up by wire taps

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Speaker 3: or other things because there was an independent investigation going on.

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Speaker 3: So it's like so many things to pay a lot

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Speaker 3: of attention to ensure that you know that the betting

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Speaker 3: remains it presented in an appropriate way, market in the

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Speaker 3: right way. But I think it's impossible to turn the

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Speaker 3: clock back. It's the technologies at the point now where

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Speaker 3: it's too readily available to people.

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Speaker 1: That's Bloomberg Original's chief correspondent Jason Kelly in a special

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Speaker 1: sit down with NBA Commissioner Adam Silver at the usc

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Speaker 1: Next Level Sports Conference recently. We thank Jason as well

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Speaker 1: as a special thank you to Bloomberg's Max Adler and

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Speaker 1: Sam Bittman of Annenburger Radio News to help make the

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Speaker 1: conversation possible. That does it for this special edition of

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Speaker 1: the Bloomberg Business of Sports podcast, make sure to subscribe

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Speaker 1: so you never miss a conversation like this one. You're

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Speaker 1: listening to The Bloomberg Business of Sports from Bloomberger Radio

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Speaker 1: around the world. Seven