Jim Dolan Actually Has a Point

Written By Tim Hanlon

@bypaul/With Paul via Unsplash

James Dolan, the often-controversial owner of the New York Knicks, has once again found himself at odds with the NBA's Board of Governors. This time, his dissent revolves around the NBA's new $74.6 billion media rights deal, which he argues undermines regional sports networks (RSNs) and exacerbates the league's revenue-sharing issues. While Dolan's grievances might initially seem like the usual complaints from a wealthy (and in New York, often reviled) owner, a closer examination reveals that he actually has a point. 

The New Media Rights Deal: A Double-Edged Sword

The NBA's new media rights deal with ESPN, NBCUniversal, and Amazon is undeniably lucrative, representing a significant increase from previous agreements. However, Dolan and other big-market owners are concerned about the deal's implications for local RSNs. The new agreement allows national partners to air nearly half of the regular season and all postseason games, reducing the number of exclusive games available for RSNs like Dolan's MSG Network. 

This shift poses a serious threat to the RSN model, which has already been struggling due to declining cable subscriptions and rising rights fees. RSNs have traditionally relied on exclusive local content to attract subscribers, but with more games moving to national networks, their value proposition diminishes. As Dolan points out, this could render the RSN model "unviable," potentially leading to significant financial losses for teams that depend on these networks for local revenue.

Revenue Sharing: A System in Need of Reform

Dolan's criticism extends beyond the media rights deal to the NBA's revenue-sharing structure. He argues that the current system disproportionately benefits smaller-market teams at the expense of more successful franchises. Under revenue sharing, a portion of the profits from media and sponsorship deals is redistributed from high-earning teams to lower-earning ones. While this system is intended to promote competitive balance, Dolan contends that it instead fosters mediocrity by guaranteeing financial stability regardless of on-court performance.

In his scathing letter to the NBA Board of Governors, Dolan likened the league's approach to the NFL model, where local markets are de-emphasized in favor of national revenue pooling. He warned that this shift would lead to a homogenized league where teams' only revenue concerns are ticket sales and merchandise, stripping away the unique advantages that big-market teams have historically enjoyed. 

The Fan Experience: A Hidden Cost

Beyond the financial implications for teams, Dolan's concerns also touch on the fan experience. With more games being broadcast nationally, local fans may find it increasingly difficult and expensive to watch their favorite teams. The new media rights deal requires fans to subscribe to multiple streaming services to access all games, which can be prohibitively expensive. For Knicks fans, this means subscribing to Amazon, ESPN, ABC, NBC, and still paying for MSG Network—a cost that can easily exceed $100 per month. 

This fragmented viewing experience not only strains fans' wallets but also risks alienating the very audience that sustains the league's popularity. As more fans cut back on streaming services due to rising costs, the NBA could see a decline in viewership, ultimately hurting the league's long-term growth. 

The Bigger Picture: A Call for Balance

While it's easy to dismiss Dolan's complaints as the grumblings of an entitled sports property owner protecting his interests, his arguments highlight broader issues that deserve attention. The NBA's pursuit of ever-larger media deals and its revenue-sharing policies must strike a balance between maximizing national revenue and preserving the viability of local teams and their markets. Without this balance, the league risks undermining the financial health of its teams and alienating their passionate fan bases.

As the historically lucrative business model of RSNs continues to fade and more exclusive game inventory shifts to national platforms (short-term, lesser revenue-generating local OTA broadcast TV packages notwithstanding), the league and its franchises will need to aggressively rethink how to maintain the unique advantages that make the teams in each market special, and fill in the revenue gaps that will undoubtedly be left behind.

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Tim Hanlon

Tim Hanlon is the Founder & CEO of the Chicago-based Vertere Group, LLC – a boutique strategic consulting and advisory firm focused on helping today’s most forward-leaning media companies, brands, entrepreneurs, and investors benefit from rapidly changing technological advances in marketing, media and consumer communications.

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