Welcome back to The Varsity, my twice-weekly private email on all the money and power behind your favorite teams. I am writing this email from my home office in Washington, D.C., but my travel schedule is about to take off, including a visit to New York next week for some upfront events followed by a BofA Securities media event in Montauk from June 3-5, where I’ll be moderating a panel on the sports marketplace with Jimmy Pitaro, Rich Paul, Cathy Engelbert, and David Levy.

Tonight’s issue is filled with news about NBC’s Kentucky Derby renewal, the Tom Brady roast, and ESPN’s Norby replacement search. I’ll also be digging into the latest twists in the NBA rights lottery. Click here to subscribe for full access to the newsletter. And if you insist on forwarding this to your colleagues, be warned we will sign you up for Marchand’s YouTube channel, where you can watch him train for a spot on the U.S. synchronized swimming team.

Here we go…

1. A Derby surprise: NBC stunned the sports media business on Saturday morning when it announced an extension to its Kentucky Derby media rights deal, which was due to end next year, and will now run through 2032. NBC and Churchill Downs quietly worked out the deal without allowing any of the other networks to kick the tires, which means it’s hard to nail down specifics on the financials—at least for the moment. In any event, the deal sends a clear signal that Churchill Downs is happy with its NBC relationship, which started way back in 2001.

   Had Churchill Downs taken the Derby’s rights to the open market, it would have found at least one willing buyer in Fox Sports. Two years ago, Fox poached the rights to the Belmont Stakes from NBC and has slowly been building out its horse-racing programming strategy. Around the time it signed the Belmont deal, Fox also became the official wagering partner of NYRA Bets, the wagering arm of the New York Racing Association. “We put together a new business model for horse racing on TV,” Fox’s Mike Mulvihill told me at the time, highlighting advertising and sponsorships, of course, but also gaming.

   Media rights for the Preakness Stakes are up next year, and Fox Sports is expected to be part of that bidding process as well. But NBC has aired “The People’s Race” since 2001 and will want to keep those rights, too, setting up another race to the winner’s circle.

2. Notes on Tom Brady’s big night: Netflix’s Tom Brady roast dominated my social feeds last night. But I was more interested in how much Netflix supported the event, which was carried live from The Forum in Los Angeles. The company’s top executives—from co-C.E.O. Ted Sarandos and chief content officer Bela Bajaria to sports head Gabe Spitzer, comedy V.P. Robbie Praw, and unscripted V.P. Brandon Riegg—all attended, which is something, since this raunchy evening wasn’t quite the Oscars. Everyone in sports wants to believe that the live event is part of some larger sports strategy that will lead to Netflix bidding on more live rights. Dana White, whose UFC will be negotiating a new media deal later this fall, was given a speaking role during the evening.

   If Netflix was truly interested in live sports, however, it would be trying to pick up an NBA package rather than conceding it to either WBD or NBC. So I asked my Puck partner Julia Alexander, who knows more about the streaming world than just about anyone, to explain what she thinks Netflix is up to. “This has less to do with Netflix’s ambition in sports, and more to do with Netflix proving that it can draw significant talent across different audience demographics, so that advertisers can throw their dollars behind the effort,” she said. “Netflix doesn’t need to prove it can carry out successful sports-adjacent programming. It routinely does that. Instead, Netflix needs to prove that it can draw big audiences across live events that star A-list talent appealing to all four quadrant audiences: young and old, male and female.”

   Julia reminded me that Netflix’s only discernible vulnerability these days is their sluggish advertising tier. And the company is relentlessly focused on creating cultural events to help monetize that band. “Remember, Netflix may have the largest subscriber base of any SVOD, but its ad-supported tier is smaller than its competitors,” she noted. “So if you’re Netflix, what better way to prove to advertisers—and yes, league executives—that you can draw sizable audiences than to bring out not only Brady but also Bill Belichick, Kim Kardashian, Kevin Hart, Will Ferrell, Peyton Manning, and other stars. We won’t know right away how much of it worked or how much of it proves to be a forgettable gimmick, but it certainly got people talking.”

3. Reinsdorf’s market moves: The chaos of Diamond Sports Group is having an impact on local rights for teams that are not even associated with the bankrupt R.S.N. owner. In the past two weeks, Jerry Reinsdorf’s White Sox and Bulls, plus the Chicago Blackhawks, whose collective deal with NBC Sports Chicago ends this fall, have been tied to the online sports site Stadium, rival Chicago R.S.N. Marquee, and now, according to The Athletic, Standard Media Group, a local broadcast group that’s not even based in Chicago. NBC Sports Chicago still wants to negotiate rights deals with Reinsdorf’s teams, but is pushing for short-term deals to get a better sense of how the overall R.S.N. market will shake out.

   The situation facing these Chicago teams is not unique. There’s no shortage of media companies looking to pick up local sports rights. The problem for MLB, NBA, and NHL teams, however, is that local broadcast groups will not pay as much for rights as regional sports networks. This means that teams will start to see a rollback in their media rights fees, which are generally their biggest revenue generator. Flat is the new up.

4. Norby succession games: Here’s what we know about ESPN’s search for a Norby Williamson replacement, based on conversations with several people who’ve had introductory calls with ESPN jefe Burke Magnus. ESPN is not moving off of its plan to keep the job based in Bristol—a decision that has already led several credible candidates to withdraw from consideration. As a result, the likely candidate will almost certainly not be someone who already has a top job at another network—people like Fox’s Brad Zager, NBC’s Molly Solomon, and CBS’s Harold Bryant, who are all based elsewhere. Indeed, it now seems likely that the position will be filled by an executive that’s a rung below the likes of Zager, Solomon, and Bryant on the corporate ladder.

   ESPN brass has targeted the beginning of football season as a deadline to have a new executive in place, but that timeline is written in pencil—they acknowledge that the hiring process will take a while. It’s also become clear that the new job will not be the same one that Norby left. After 40 years as a senior executive in Bristol, Norby’s portfolio was vast, too vast. ESPN is more concerned about finding someone who can fit into the Bristol culture, and then creating job responsibilities and an org chart around that fit.

5. Caitlinsanity, part 1,028: ESPN’s Brian Lockhart, Words + Pictures’ Connor Schell, and Omaha Productions’ Peyton Manning and Jamie Horowitz will be at the Tobias Theater in Indianapolis tonight for the premier of the four-part series Full Court Press, which followed Iowa’s Caitlin Clark, South Carolina’s Kamilla Cardoso, and UCLA’s Kiki Rice during the recently completed women’s college basketball season. ABC will carry the series May 11 and 12 and then hand it off to Hulu and ESPN+. Omaha and Words + Pictures produced the series in partnership with ESPN+. Lockhart greenlit it for ESPN. Everyone around the project has been buzzing about it for months.

   Other notables at tonight’s event include: Indiana Governor Eric Holcomb, South Carolina coach Dawn Staley, Iowa coach Lisa Bluder, ESPN's Holly Rowe, and Words + Pictures’ Kristen Lappas. Clark’s first professional regular season game tips off later this week.

This arrangement confirms the industry-wide speculation that ESPN is technically paying more for less—the network’s average annual fee will increase from $1.5 billion to around $2.6 billion over the next 11 years, despite cutting its regular-season slate in half. On some level, this is merely a reflection of both the league’s rising fortunes and also the unavoidable realities of modern media conglomerates as they subsequently seek to buttress their declining cable businesses while leaning into their D.T.C. futures. To wit: ESPN, which is launching two streaming services in the next 16 months, had little choice but to bid aggressively. And, for its part, the company will remain the NBA’s dominant TV partner during the playoffs. Every season, it will carry the NBA Finals and one conference final series.

Like ESPN, Amazon doesn’t yet have a signed deal, but it has agreed to carry weekly regular season games. According to sources, Amazon has been pushing for a Saturday night window, and that looks likely to happen. As part of its agreement, Amazon will carry the NBA’s In-Season Tournament—laying to rest a talking point in media circles that Netflix might yet hoover this up—and the postseason play-in games. Amazon will also get the rights to one conference finals series every other year, and some first- and second-round playoff rights. Amazon has told the NBA that it will pay an average annual fee of $1.8 billion for those rights over the next 11 years.

NBC’s pitch has its broadcast network running a regular-season game on Sunday nights once its Sunday Night Football commitment ends in January. It also would secure a package of regular-season games for its Peacock streaming service. Per the Wall Street Journal, NBC has committed two broadcast primetime windows to NBA games each week, but it’s not known whether those two windows would be on the same night (say, Sunday from 6-11 p.m. ET) or two different nights. WBD’s pitch is similar to its current structure: TNT would initially carry games on Tuesdays during the NFL regular season in order to avoid a conflict with Thursday Night Football, and then move to Thursdays thereafter. NBC has put in a bid with an average annual value of $2.5 billion over 11 years for this package. Both WBD and NBC have been meeting regularly with the NBA as negotiations have intensified.

One unanswered question is whether the NBA will continue to allow regional sports networks to carry first-round playoff games alongside the national broadcasters. If the NBA granted first-round playoff exclusivity to the national TV networks, those rights would become far more valuable to the league… even if it meant less local media revenue for the teams.

Over the past few days, several sports media sources have also suggested that the NBA could split the third and final package between WBD and NBC—thereby making it neither a third nor a final package. But multiple sources described that scenario as unlikely. Creating four packages, after all, would seem like a nice schoolyard gesture, but it would deprive both WBD and NBC of the bang for their buck. In short, there simply wouldn’t be enough inventory. NBC, in particular, has made it known that its bid is predicated on getting a big package with a lot of rights.

Regardless of how that shakes out, the NBA is sitting on a windfall—truly an amazing deal given the ever-tightening sports media marketplace, and a truly unfathomable accomplishment given the state of the league when David Stern took over a generation ago. The league is set to more than double its annual rights haul, from the $2.7 billion that ESPN and WBD currently pay, to around $7 billion. One can only imagine what the NBA will command in a decade or so, when streaming has remade the market, various mediacos have been vanquished, and the importance of global reach will make even the thought of regional sports networks seem quaint.

[Ed note: The NBA has been mum about WNBA League Pass subscriptions. But it’s a good bet that they’ve risen considerably.]

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