• by David Goetzl  @dgoetzl, October 28, 2011

With the NBA labor dispute continuing, a Wall Street analyst suggests that while ESPN and TNT would lose significant ad revenue from the lack of games, profitability might increase because the rights fees are so expensive. ESPN lost an estimated $25 million, and TNT lost an estimated $227 million last season on the NBA, according to a new report.

"In general, we estimate that the NBA is essentially a break-even or a loss leader for the TV networks, based on advertising revenue alone,” wrote Credit Suisse's Spencer Wang.

The figures are solely based on in-game ad revenues. They do not take into account advertising in shoulder programming, such as pre-game and highlight shows, which presumably will suffer during the lockout.

Also not meshed in is the benefit the NBA has in driving affiliate fee revenues for the networks. Wang says it is hard to pin down how much is collected due to a specific sport.

But sports are critical in keeping those payments coming and increasing.

The lost ad revenues this season from canceled games should only have a short-term deleterious impact, Wang writes. The major hurdle could be when the games return -- ratings may suffer from “fan backlash” hurting ad revenue, while rights fees would still be expensive.

On the flip side, Wang writes that if the league and players reach a deal that makes more teams competitive, the ratings could go up once the action returns.

During the current work stoppage, ESPN should not have to refund any affiliate fees due to lost NBA games, Wang notes, suggesting that replacement live programming should satisfy its contracts with operators.

In the 2010-11 season, using Kantar figures, Wang estimates the Walt Disney Co. (ESPN and ABC) posted $453.9 million in ad dollars from NBA games, up from $446.4 million the year before. At Turner, TNT posted $209.9 million, up from $173.3 million.

In rights fees, ESPN is estimated to owe $473.7 million this season and Turner $434.6 million. There are also production costs that total an estimated $190,000 a game last year, Wang writes.