Former NBA Head David Stern on How Sports Betting Can Save TV Rights

As sports betting gradually becomes legal across the country, there may be one unexepected beneficiary: the league’s TV rights, argues former NBA Commissioner David Stern.

He expects the ratings for games to go up as people who have bets riding on the results tune in—even if they’re not necessarily fans of the teams. That’s just one of the factors that he expects to change the value of TV rights in the near future. He also expects the major tech companies (Facebook, Apple, Amazon and Google) to make a serious effort to pick up the rights when they’re up in 2025.

The Takeaway
Former NBA Commissioner David Stern talks about how sports betting could boost the value of TV rights for sports and how the NBA has turned itself into a sport with worldwide appeal.

Of course, Mr. Stern has some skin in the game. Although he hasn’t been the NBA commissioner since 2014, he has reinvented himself as an investor and adviser to sports-related startups. He works part-time as an adviser to venture capital firm Greycroft, occasionally co-investing with them on sports- and media-related startups. He’s also an adviser to PJT Partners, the boutique investment bank headed by Paul Taubman. That firm represents major Las Vegas gambling operations like Caesars Palace and MGM Grand. 

And he’s built up a portfolio of personal investments, which he handles through MicroManagement Ventures, managing it with former ESPN digital chief John Kosner. There he’s built up a collection of startup investments, including fubotv, a sports channel streaming service; LiveLike VR, a startup that makes a VR-driven platform for live sports; and ShotTracker a company that uses sensors on basketballs to provide real time scores and statistics during games.

After a 30-year career as NBA commissioner—helping to turn the league into a financial powerhouse but dealing with a series of controversies like disputes with the player’s unions that resulted in lockouts—he now watches from the sidelines. He was known for some hardline positions as commissioner, such as insisting on a dress code for players not in uniform and requiring players to be at least a year removed from high school before being eligible for the NBA draft, but he has since softened his views. 

In an interview with The Information on the day of the NBA Draft in late June, Mr. Stern reflected on where he’s changed his mind, why the league should be more permissive of marijuana and how the NBA has managed to turn itself into a sport with worldwide appeal. (This interview has been edited for clarity and length.)

The Information: What do you think about the future of sports rights? What’s going to happen when they come up for renewal again?

David Stern: The large technology companies basically sat out the last round of television negotiations, allowing the incumbents to extend the contracts well into the 2020s.

You don't think that's going to happen again?

Mr. Stern: It's sort of happening around the edges now. Amazon just announced it did the [Women’s Tennis Association] and Facebook has baseball games. NBA G-league is now on Twitch, but it’s got some games someplace else. But these guys are going to be watching because that's what people want to watch.

Do you think it’s possible when these rights are up again that you could see an aggressive and successful play by any of the big tech companies to get the rights?

Mr. Stern: If not exclusive, a big chunk thereof. 

You think Facebook could be more aggressive in bidding for sports rights?

Mr. Stern: I’m not saying they should be. My prediction is that they’re going to be.

What did you think of Sinclair buying the Fox regional sports channels?

Mr. Stern: I think it’s a very smart purchase by Sinclair.

Why? The ratings are down.

Mr. Stern: Because they see it in conjunction with another very important phenomenon, which is sports betting.

You think that is going to increase the value of sports rights?

Mr. Stern: Yes. It’s going to increase viewership. It’s going to expand viewership, it is going to increase sponsorship.

When that becomes broadly available, how do you monitor and regulate betting?

Mr. Stern: I think that each of the various [betting] services that are provided have sophisticated ways to detect any unusual activities in the betting space. And in fact, integrity services are going to be an important subsection of what’s going on. And remember, we’re coming from a place where 90-some odd percent of gambling is done illegally.

How do you monitor the manipulation of games? Can the league do that?

Mr. Stern: Based upon the betting, you can tell when there's been some unusual activity.

You’re an investor in Overtime, a company that helps hype up high school athletes. How do you feel about that practice?

Mr. Stern: I’m an adviser there. All I’ll say is that Zion Williamson [selected by the New Orleans Pelicans last month] had more Instagram followers than Duke did. I understand it intellectually, that Gen Z-ers are more interested in focusing on their high school athletes than watching a full-length game with all of its timeouts and its in between innings and lack of action. And it’s sort of a different kind of a knowledge base.

What do you think about the commercialization of these players at the young, amateur level?

Mr. Stern: You know, there was a time when I railed about it. Now it is what it is.

You feel less strongly about it?

Mr. Stern: No. I’m sort of accepting that we now live in an ecosystem that has professionalized high school sports or at least commercialized high school sports. These are kids whose traveling teams have sneaker deals of some kind or another. It’s sort of happened and it’s happened in a big way. And if you said “Zion” to any basketball fan younger than 17, they know exactly who you’re talking about and what he can do.

Do you think the league, whether it’s the NCAA or the NBA or anyone else involved, has done enough to protect these athletes from the forces of commercialization or it’s just a lost battle?

Mr. Stern: No, actually I think that the NCAA is exploiting them.

In what way?

Mr. Stern: They’re happy to bring them on and by promising them an education of some kind and to bring on players who will help the schools get money from the NCAA pool. And then the presidents allow the coaches to have such players, and then they do or don’t finish that first year. I’ve heard it said that these players don’t go to school after the tournament is over or after the first of the year or something like that.

Do you think it’s worse now than it used to be?

Mr. Stern: I think it’s more underground. You could go to colleges, in the old days, guys were driving around in fancy cars and doing things and there were alumni groups that did things on their behalf. I don't think those alumni groups are allowed to do that anymore.

But the ability for these players to market themselves through social media has never been stronger.

Mr. Stern: That’s the difference. They begin building their brands because they know. They’re scrubbing their Instagram accounts now if they think they’re close to being drafted. Schools look at their Instagram accounts or their Twitter accounts, and their Snap[chat] accounts, etc. So every kid who is picking it up from the pros. Imitation is a kind of flattery and they want to have their own following.

How has the NBA managed to break through the noise of fractured TV viewing and keep players as pop culture icons?

Mr. Stern: We began that decades ago, and you also want to encourage your players to have a voice. I think that Adam Silver is a great commissioner who does just that. And has focused the league so intelligently on social responsibility, digital relevance and global expansion. That’s where the NBA is, and it’s become a year-round pursuit.

At the NBA more so than other leagues, there’s a willingness to let players speak their minds on political matters, social matters...

Mr. Stern: And they were encouraged to. And that’s a good thing. They’re encouraged to be full people and use their celebrity well. When someone says “What’s the thing that you’re happiest about in your 30-year run?” I would say that when I began in 1984, which is ancient history, the reputation of our players on the celebrity charts was not that high up. It was in the basement of the pyramid. And now NBA players are at the top of the celebrity pyramid. And you know, if you got it, flaunt it. Use it well.

It makes an interesting contrast I think with the NFL, which is so terrified for business reasons of making any sort of political stance or upsetting people in large swaths of the country. How do you think those two leagues contrast from that angle?

Mr. Stern: You can’t get me into that. I decline to discuss it.

I’m not asking you to take a political stance, but the idea of allowing players to do it is interesting.

Mr. Stern: We grew up in an era of being considered and called the “Black League.” And we never fought that designation. That was just the fact that we had the largest majority of African American players in the world. That’s all. And our players were called upon to make statements on important issues and the like, and as their celebrity has increased, they felt an obligation to speak out on important issues, and no one has ever done anything but encourage them to do that.

Are there other ways you think the league can modernize and be more permissive of kind of changing times?

Mr. Stern: All leagues are revisiting the historic strictures about marijuana. As I’ve said publicly, the idea that medical marijuana is not widely available and that certain families with patients were required to move to different jurisdictions that permitted medical marijuana is not a good thing. I think that marijuana, CBD and THC are on the road to being a series of products that are going to be much less prohibited than they used to be.

Do you think the NBA or any sports can be kind of a leader on that and be more permissive?

Mr. Stern: I think all the leagues are going to wind up ultimately being in lockstep. I don’t see this as the one being ahead of the other. They’re all wrestling with the same subject. I don’t think that it’s in lockstep by design, but I think that the overwhelming public climate is changing with respect to marijuana.

What’s your view on the NBA’s expansion and brand internationally?

Mr. Stern: This is probably one of the stronger international leagues right now in terms of the product. Their TV arrangements are very extensive. I think we’re shown in something over 200 countries in 50-some odd languages, the NBA has offices all over the world, including at least two that focus on China, in Shanghai and Beijing. And they’re going to play two games this year again in China. They’re going to play two games in Mexico City, there are four teams playing there for the first time. And they’re going to have a regular season game in Paris this winter. Yeah. And they’re talking about the subject of when games should be scheduled, what time they should start as you begin to focus on your “TV audience,” which is now much more varied and geographically spread.

What about the possibility of having, other than Canada, an NBA team based in a different country?

Mr. Stern: I think given the intensity of the schedule, it would be very hard to have one team someplace else. If you said to me that can be a team in Mexico City that’s in the same or close time zone as San Antonio, Dallas, I’d say OK, because you can have teams in Las Vegas or in Seattle or wherever you decide you’re going to expand. I think the NFL is likely to be the first league to put a franchise at a distant geography because they only play once a week.

What do you think about esports?

Mr. Stern: Fascinating. And they’re growing very fast. And the nice part about them is that they weren’t born here. They’re coming here from Asia. And different enterprises are trying to find out the best way to monetize that interest, whether it’s Activision or Riot Games or people buying teams, sports teams buying teams, or the NBA doing 2K League, which I think is so smart of the NBA because that not only taps into the branding, but reinforces the brand of the individual teams. I haven’t made any investments in esports really, because I’m not sure I understand it fully.

Tom Dotan joined the Information in 2014 covering the media, advertising and streaming video businesses. He is based in San Francisco and can be found on Twitter at @cityofthetown.