NEW YORK—The saga for rights to NBA games continues, with Warner Bros. Discovery filing a lawsuit in state court in New York against the NBA. The lawsuit claims that WBD’s TNT Sports had the right to match any offer for a package of NBA names and that the league improperly rejected WBD’s matching offer for a package of rights.
“As an `Incumbent,’ TBS has the right to match any “Third Party Offer” for future NBA telecast rights. TBS timely exercised these matching rights by accepting a Third Party Offer on the same material terms and conditions that the NBA was willing to accept from Amazon. The NBA, however, has breached the Agreement and deliberately refused to honor TBS’s rights, forcing TBS and WBD to seek judicial intervention.”
The lawsuit filed in “Supreme Court Of The State Of New York, County Of New York; Commercial Division” comes after WBD issued a matching offer on July 22 for rights but was not awarded a package when the league announced $77 billion worth of new contracts with Disney, NBCUniversal and Amazon on July 24. The new contracts take effect in the 2025-26 season and would end a decades long run of NBA games on Turner Broadcasting System (TBS).
The publicly available copy of the lawsuit is redacted, with dollar amounts for the rights blacked out but the suit claims that “TBS has a vested interest in maintaining these distribution rights and its carefully developed 40-year brand. On top of the billions of dollars it pays the NBA for the distribution rights, TBS has invested hundreds of millions of dollars in production and talent, including its award-winning Inside the NBA program with Ernie Johnson, Charles Barkley, Shaquille O’Neal, and Kenny Smith. TBS’s productions have been widely acclaimed for their best-in-class content and quality and have won over 20 Sports Emmys.”
Barkley has in the past loudly criticized WBD’s management for their handling of the negotiations and some analysts have highlighted the risks of filling suit against the NBA.
A note to investors called “We Do Not Understand Warner Bros. Discovery’s NBA Strategy” by LightShed analysts Richard Greenfield, Brandon Ross And Mark Kelley noted that “For the past couple of years, Turner talked about how they would only renew their NBA contract if the terms made financial sense. They said that the NBA was not a must-have for Turner and they raised the broader issue that licensing (renting) sports rights was not as compelling as creating content that they owned and controlled” even though “investors have been increasingly concerned that without the NBA, Turner was at risk of carriage drops or meaningful reductions in sub fees.”
The analysts noted that in contrast to WBD, ESPN, who also had to renew their contract, repeatedly talked about their love of the NBA and the importance of the product” and Disney was able to land a new contract.
The analysts also stressed that WBD was negotiating with the NBA “without the key members who negotiated the last Turner/NBA deal and without senior executives that had a long-standing NBA relationship (due to personnel changes when AT&T took over and as a result of WBD merger)” and that the company failed to come to a deal during the “during the exclusive window. We believe all parties were ready to sign off on Turner maintaining the NBA for the next 11 years for several hundred million less than NBCU is now committed to paying. Turner walked away from the deal and let the exclusive negotiating window expire, creating an opportunity for NBCU. NBCU seized the opportunity and never looked back.”
The analysts also questioned whether the WBD lawsuit would be successful. “It is hard to understand what legal footing WBD has to sue the NBA, given that WBD wants to air the Amazon package of games on linear (Turner) and streaming (Max) versus on streaming-only as Amazon plans” and noted that even if the suit is successful, “Turner will be an 11-year partner with the NBA, with both sides hating each other.” In addition, “Amazon will be furious, with Amazon the single largest distribution partner for Max via Amazon Channels. Hard not to see how this will come back to hurt Max in the future.”
“Now, let’s say, WBD goes to court and loses,” the note concluded, which would “irreparably destroy their relationship with NBA and send a negative signal to other leagues who might want to do business with WBD/Turner.”
