Will Losing the NBA Cause Warner Bros. Discovery’s Cable Channels to Collapse?
The two sides are due to negotiate new carriage rates for Turner channels at the end of 2025, and it could be a figurative bloodbath.
Throughout discussions of how Warner Bros. Discovery would get on if TNT lost its NBA rights in 2025, one of the most common talking points has been the carriage fee that the company charges distributors to carry the channel. WBD charges roughly $3 per customer for TNT from cable and satellite companies, but distributors may have difficulty justifying paying that rate without the NBA rights. A new report from John Ourand of Puck News says that the carriage negotiation coming between Comcast and WBD next year could get very rough, and could potentially lead to the eventual disintegration of WBD’s cable channels entirely.
Key Details:
- Comcast saw a potential lowering of carriage fees for TNT as an incentive to pursue its new deal with the NBA.
- The NBCUniversal parent was also reportedly unhappy about the creation of Venu Sports.
- A huge portion of WBD’s affiliate revenues come from its Turner networks.
When Comcast and NBCUniversal laid out a $2.5 billion-per-season bid to acquire the NBA’s “B” package of rights starting in 2025, word quickly filtered out that WBD thought that was an overpay. WBD is willing to commit $1.8 billion per year for the “C” package that was earmarked for Prime Video by the league and is currently suing the NBA over a matching rights provision written into its last contract which it says were improperly rejected.
According to Ourand, one of the reasons that Comcast was so interested in acquiring a package of NBA rights was because they knew pulling them off TNT would allow them to pay less to carry the channel in Xfinity TV cable packages. Comcast executives also weren’t thrilled about the Venu Sports platform being created “behind their backs” according to Ourand; Venu is a joint venture that will incorporate sports channels owned by WBD, Disney, and Fox.
Those factors could add up to what Ourand describes as a “spectacularly bitter” carriage dispute when TNT and TBS have to negotiate new carriage deals with Comcast in late 2025. Comcast isn’t afraid to stand its ground in such disputes; Bally Sports regional sports networks were restored for Comcast cable customers this week, but not before a monthslong carriage battle in which Comcast steadfastly refused to allow the channels to stay on its lowest-priced tier of service.
Will Comcast Pull Turner Channels in 2025?
I agree with Ourand when he says that he doesn’t foresee a future where Comcast pulls the Turner networks off its cable plans permanently. But even being forced to accept lower carriage rates for the channels could be a huge financial blow to WBD, and observers could get a preview of the fight brewing later this year when Discovery and its fellow networks are up for negotiation with Comcast.
The T-Nets make up 70% of WBD’s domestic affiliate revenue, meaning that they are a key piece of the company’s financial puzzle, especially as it tries to manage a transition from linear entertainment to digital. Max isn’t quite ready to take on the mantle of the main revenue generator for WBD, despite the modest profits shown by the streamer at the end of 2023. A lowering of carriage rates for the Turner networks and other WBD-owned channels could be a serious setback indeed, according to MoffettNathanson analyst Robert Fishman.
“With the loss of the NBA, not only do we think the 70 percent from Turner is at risk; so too would be the 30 percent from Discovery,” Fishman wrote. “We would expect TNT to have far less leverage in these affiliate negotiations, perhaps even seeing rollbacks in rates, even after factoring in the new sports rights acquired over the past few months. We can see the damage extend to other parts of WBD’s cable portfolio, as the company would no longer be able to use the NBA on TNT as a hammer to push rates on its slew of other domestic cable networks.”
The loss of the NBA wouldn’t cause WBD’s cable business to collapse overnight. The company has been pursuing a host of alternate sports deals, and has won the rights to Big East basketball, Mountain West football, College Football Playoff games, and the French Open tennis tournament in recent months. But a lowering of carriage fees for a company with tens of billions in debt and no clear path to recoup that revenue could be a gut punch WBD never truly recovers from.
It’s not a sure thing that WBD won’t be able to claw back a package of NBA rights, and if it does it will gain instant leverage in all carriage negotiations once again. But if it does not, look for cable distributors to try to start lowering the boom on TNT and its sibling channels, a move which could have devastating consequences for WBD in the long term.
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