Strikes, Carriage Disputes Could Mean Disney and Warner Bros. Discovery Will Have to Surrender Live Sports Rights
Hollywood executives had every chance to avoid this outcome. Warner Bros. Discovery filed paperwork with the Securities and Exchange Commission (SEC) this week, declaring that dual strikes by the Writers Guild of America (WGA) and Screen Actors Guild - American Federation of Television and Radio Artists (SAG-AFTRA) have negatively impacted their annual earnings.
WBD estimates it will make $300 to $500 million less in profit than originally forecast this season due to the strikes. That amount is likely far less than the company would have had to pay to meet the demands of striking actors and writers, but the Alliance of Motion Picture and Television Producers, which represents the studios in negotiations, decided to play hardball instead.
“While WBD is hopeful that these strikes will be resolved soon, it cannot predict when the strikes will ultimately end,” the SEC filing from WBD read. “With both guilds still on strike today, the company now assumes the financial impact to WBD of these strikes will persist through the end of 2023.”
Disney is in a similar financial pickle. In addition to lost revenue from strikes, the company is losing big money thanks to its carriage dispute with Spectrum, the second-largest cable provider in the United States. That dispute has blacked out 19 Disney-owned channels, including ESPN for Spectrum’s 14.7 million cable customers. It will end up costing Disney hundreds of millions of dollars per month to keep the channels dark on Spectrum TV, and though the two sides are still negotiating, no deal appears imminent.
This is not a great time for either company to be cash-poor, as the exclusive negotiating window with the NBA for its next broadcasting deal is already open. The league is reportedly seeking a big raise in its next contract, and since Disney and WBD are the current NBA rightsholders, they have until April 2024 to make new offers before any other company can submit a bid. ESPN and ABC broadcast NBA games for Disney, while TNT is WBD’s main outlet for offering the league.
If the exclusive window passes without an extension for Disney and WBD, other companies will jump at the chance to get in on the action. Apple and Amazon have both reportedly expressed interest in bidding on NBA games, and both companies have incredibly deep pockets thanks to the retail sides of their businesses. According to Front Office Sports, some Wall Street analysts are concerned that legacy media companies could be boxed out thanks to their current financial positions.
“The issue facing Warner Bros. is a scenario where the networks segment remains in decline and the [streaming] segment collapses due to no original [entertainment] content for months,” said Stone Fox Capital. “At the same time, Netflix, Amazon, and Apple can all afford to absorb any losses and continue investing when the strikes end.”
Max has a huge library of high-profile legacy shows that will likely keep it from “collapsing” unless strikes carry well into the future, but a full collapse of the platform might not be needed to prevent WBD from fully jumping into NBA negotiations. CEO David Zaslav said last November that his company doesn’t “have to have” the NBA on TNT going forward, but other comments from him have suggested that those words were merely intended to give his company leverage in negotiations.
Indeed, WBD is gearing up to launch a new tier of Max that offers live sports before the end of 2023. NBA games will almost certainly have a presence there, and the higher cost to customers will mean WBD has to do everything it can to keep users subscribed, which obviously includes holding onto NBA rights if at all possible.
Disney is still trying to put an ironclad strategy in place for the demise of cable, and the rollout of a streaming version of ESPN’s full offerings that doesn’t require a cable subscription to watch. All of that will require significant financial investments, which is why the company is already looking to partner with tech companies to create an ESPN streaming platform. It’s safe to say that a new drag on Disney’s monthly revenues like its carriage dispute with Spectrum will not help those plans come to fruition.
There is potential for the WGA and SAG-AFTRA strikes to end relatively soon, but negotiations are still ongoing. Disney’s carriage dispute with Spectrum could likewise be resolved quickly, but every day those issues continue making it more likely that WBD and Disney might not be able to commit to live sports like the NBA financially the way they have in the past.
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