With Five Days to Exercise Contractual Rights, How Is Warner Bros. Discovery Going to Try to Keep Its NBA Rights?
With Five Days to Exercise Contractual Rights, How Is Warner Bros. Discovery Going to Try to Keep Its NBA Rights?
WBD is widely expected to try and match Amazon’s $1.8 billion offer for the new “C” package of games.
The NBA’s ball is about to bounce into David Zaslav’s court. The NBA Board of Governors is set to meet on Tuesday, July 16 to vote on a new series of national broadcasting contracts that will see the league collect $76 billion over the next 11 years. As of now, that money will come from three rights packages: the “A” package, which see Disney pay $2.6 billion per season to air games on ABC and ESPN; the “B” package, which will go to NBC — and by extension Peacock — for $2.5 billion per season; and the “C” package, which is earmarked for Prime Video and will cost $1.8 billion per season. But Zaslav and his company Warner Bros. Discovery aren’t out of the running just yet. The Board of Governors’ vote kicks off a five-day period in which WBD can match NBC or Amazon’s offer, and reports are starting to circulate about just what that process might look like.
Key Details:
- WBD’s argument could hinge on its ability to combine the reach of its streaming service Max with its cable channels.
- The NBA could tout Prime Video’s larger subscriber total and higher ratings as a way to circumvent WBD’s matching rights.
- MoffettNathanson says WBD’s new sports additions are likely enough to maintain TNT carriage fees, though its affiliate fees may suffer.
WBD has the right to match a third-party offer for NBA rights written into its last contract with the league. A report from Sports Business Journal indicates that the league nearly wrote that clause out of the contract in 2014, but it was so eager to accept big-money offers from WBD and Disney that it simply went ahead with the deals as they were.
The NBA is widely expected to say that a simple dollar-for-dollar match on WBD’s part won’t be enough to satisfy the clause, because Prime Video has a global reach that WBD cannot match. WBD’s solution to this argument is to tout its own streaming service Max, combined with the reach of cable channel TNT, which is available in more than 200 countries around the world.
The league will likely counter that Prime Video has 200 million global subscribers, more than twice as many streaming customers that WBD around the world — 99.6 million following the first quarter of 2024. As measured by Nielsen, Prime Video accounted for 3% of all TV watched in May, whereas Max was responsible for just 1.2%. Prime Video also has a great deal of programming flexibility and has already considered shifting the start date of the NBA Cup in-season tournament to avoid competing with its NFL obligations on Thursday nights during football season.
NBA fans may want to learn the name Bill Koenig because he could become a very important figure in the coming weeks. Koenig is the league’s lead media rights negotiator, and it could fall to him to defend the NBA against WBD’s matching rights efforts.
“Bill Koenig is a lawyer’s lawyer,” one of his acquaintances told SBJ. “Listen, Bill runs every scenario out. Like, if it’s a 3% scenario, he runs it 100%. With Bill, that’s how prepared he is.”
Many around the sports broadcasting world have said that the NBA already thinks of its relationship with WBD as dead and buried. Zaslav’s comments from 2022 saying that his company didn't “have to have” the NBA are partially responsible, but NBA commissioner Adam Silver is also convinced that Prime Video represents the next generation of video platform, and while Disney has made significant strides to make its sports products more available via streaming, WBD has not matched those efforts in his eyes.
Despite WBD’s uphill climb to keep the NBA past the 2024-25 season, the company has been mostly willing to go it alone. Puck reports that the company never reached out to CBS or Fox to try to partner in a joint venture bid to make some games available on free broadcast channels, nor did it seriously consider an approach from YouTube executives about teaming up for a bid.
Have Other Sports Deals Helped WBD in the Eyes of Investors?
In recent months, WBD has lined up a wealth of new sports programming for TNT. Many analysts are interpreting this as an effort to save face if the NBA takes its talents elsewhere, but WBD officials have pledged repeatedly that these deals would have happened regardless of the status of its negotiations with the Association.
The deals started with a lucrative offer to sublicense a package of College Football Playoff games from ESPN. In quick succession, more deals followed; in the past few months, WBD has made deals to offer Big East basketball, Mountain West football, and the French Open tennis tournament.
Analysts are not convinced that the new additions will help WBD prop up revenues from its cable networks if the NBA does depart. SBJ cited a MoffettNathanson analyst who summed up these concerns succinctly.
“If Warner Bros. Discovery ends up losing the NBA rights, from an investment community standpoint, what needs to still be determined is whether the incremental sports rights they’ve acquired is enough to offset the pressure they will likely see from a distribution standpoint,” said Robert Fishman, senior research analyst at MN.
Adding these sports rights, especially College Football Playoff rights could help ad sales stay around where they were during the NBA heyday on TNT. But affiliate fees, which are another key part of the revenue equation, could drop significantly, even with the addition of new offerings.
A company with a debt load the size of WBD’s has to ask itself if it can afford to pay $1.8 billion per season for NBA rights, but its internal answer to that question will become clear soon enough. Once the NBA’s board of governors approves the league’s new broadcast deals on July 16, WBD will have five days to decide if it will fight for its right to air NBA games or not.
Max
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