The NBA has formed its largest international digital partnership through an expansion of its arrangement with Chinese Internet giant Tencent Holdings Limited, the league announced in a joint press release issued late Thursday night.
Tencent – a publicly-traded company with a current market capitalization of $163 billion, whose shares trade on the Hong Kong Stock Exchange (HKSE: 0700) and whose American Depository Receipts trade over-the-counter in the U.S. (OTC: TCEHY) – will become the league’s exclusive official digital partner in China.
The new five-year pact will provide Tencent the exclusive right to stream live games, original programming and highlights to hundreds of millions of active users across its online and mobile platforms, including Tencent QQ, Tencent Video, Tencent News and Weixin, the popular messaging app also known as WeChat.
The deal will provide Tencent the right to offer for the first time in China the NBA’s League Pass package, which allows subscribers to watch a full season’s worth of games live and on-demand. It also provides for interactive gaming and the sale of merchandise.
According to The New York Times, the agreement calls for the NBA to receive a guaranteed payout of $500 million over the life of the deal, with an additional $200 million more expected through a revenue-sharing arrangement. It will start on July 1, 2015, the first day of the 2015-16 NBA season.
By the league’s math, an estimated annual payout of between $100 million and $140 million itself increases the salary cap by $1.5 million to $2.1 million per year, respectively, and the luxury tax by $1.8 million to $2.5 million. It remains unclear as to how much of the revenues in this new deal would be incremental to those provided in its existing arrangement, but it figures to be substantial. Read more…