The NBA deal is the key to Peacock's streaming success, according to NBCUniversal.

• The NBA and NBCUniversal agreed on a $2.45 billion annual broadcasting deal, which will commence in the 2025-26 season and last for 11 years.
• The NBA was convinced to bid aggressively for the upcoming playoffs due to research indicating that individuals who signed up for NBC's Peacock streaming service for the NFL Wild Card game remained and watched non-sports content.
• NBCUniversal is expected to profit from the NBA deal, according to Bank of America's estimate.

NBC Sports executives had long planned for the renewal of the NBA's media rights, with a goal of regaining the games lost to in 2002. However, it was only in January that NBC Sports President Rick Cordella became confident the company could make a significant bid.

On January 13th, Peacock, NBCUniversal's subscription streaming service, aired its first exclusive NFL playoff game, which saw the Kansas City Chiefs defeat the Miami Dolphins with a final score of 26-7. The game was highly anticipated and drew in a massive audience, with 27.6 million total viewers, according to Nielsen, making it the biggest live-streamed event in U.S. history.

After the game, NBCUniversal decided to invest $2.45 billion annually to distribute NBA games starting in the 2025 season, with the hope of making Peacock profitable as the pay-TV model declines.

According to research firm Antenna, Peacock gained 3 million new subscribers after acquiring the rights to an NFL game for $110 million. Out of these subscribers, over 70% remained with Peacock two months later, as stated by Antenna in March.

Cordella believed that NBA fans would continue to use Peacock after the season ended due to the low churn rate. However, it was not only the low churn that convinced him of the worth of popular sports, but also what the new subscribers watched after signing up.

NBC Sports executives believed that the millions of new Peacock subscribers would engage with other live sports on the platform, including "Sunday Night Football," golf, Premier League, WWE, and IndyCar. However, they did not anticipate how much subscribers would watch the platform's non-sports entertainment, such as movies and episodes of "The Office," "30 Rock," and "Parks and Recreation."

"Cordella stated in an interview that our highest video-on-demand usage occurred the week following the Wild Card game. The churn rates among new subscribers have been lower than the average. Sports fans are not a homogeneous group. NBCU is attracting a whole household to watch other forms of entertainment around its sports content."

NBCUniversal's acquisition of NBA rights will aid in its survival and growth amidst competition from streaming giants like Netflix, Amazon Prime Video, and Hulu.

Evidence suggests that sports fans who subscribe to a streaming service to watch a particular game will likely continue to use the service and watch other content after making the financial commitment.

"According to David Berson, the head of CBS Sports, having multiple genres of content on the same platform is advantageous, as fans who come to Paramount+ for sports spend 90% of their time in the service on entertainment programming, rather than sports content."

Staying power

The battle for viewership in the streaming industry has intensified, with companies employing advanced algorithms and user interface technology to retain customers. As Paramount+ prepares to merge with Skydance Media and Comcast explores potential mergers or partnerships, Peacock must maintain its engagement to secure a long-term future.

Peacock will have about 50 exclusive NBA games starting from the 2025-26 season, including national Monday night games and doubleheaders.

"The NBA is crucial for sports fans, and we must prioritize building Peacock for the future," Cordella stated. "Exclusive NBA games are essential for achieving our mission."

Peacock, a U.S.-only streaming service, has 33 million subscribers, significantly fewer than international platforms like Netflix (278 million) and Paramount+ (68 million). Despite being profitable for years, Netflix, and Disney's streaming services turned a profit last quarter, Peacock remains unprofitable, with losses of $348 million in the second quarter and $639 million in the first.

The NBA, including the playoffs, runs from October to June. Cordella hopes a steady stream of live sports content will help make the service an essential for sports fans no matter the season. Spending $2.45 billion per year on the service is a major risk.

Making the math work

Comcast has several options to ensure its investment is profitable, as acknowledged by Bank of America analyst Jessica Reif Ehrlich.

Ehrlich stated in a note to clients that there is a route to profitability for Comcast under the new agreement.

NBCUniversal will also depend on the NBA to increase retransmission fees and advertising revenue, in addition to consistent Peacock subscriber growth.

The NBA can aid in marketing NBC's other ventures, such as TV series, movies, and theme parks, although its viewership is significantly lower compared to the NFL. This was one of the reasons Warner Bros. Discovery opted not to compete with NBCUniversal for NBA rights when the price tag exceeded $2 billion per year. Despite "Sunday Night Football" attracting 21.4 million viewers per game last year across NBC and Peacock, NBA regular season games only drew an average of 1.6 million viewers last season across TNT, ABC, and ESPN.

Comcast may benefit from the NBA by driving broadband usage and potentially saving on future affiliate fee payments if Warner Bros. Discovery loses its NBA media rights.

NBCUniversal can leverage the NBA as a demonstration of its power in negotiations with other sports leagues and Hollywood creators when seeking streaming rights.

Comcast is expected to generate $192 million in incremental Peacock revenue from new subscribers in the first year of the NBA deal, with additional year one advertising revenue of $850 million for NBC and $160 million for Peacock's advertising tiers. By year four, the NBA deal is projected to bring in $420 million in incremental Peacock revenue.

Disclosure: Comcast's NBCUniversal is the parent company of CNBC.

NBA commissioner Adam Silver discusses the league's new $77 billion media rights deal.