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Warner Bros Discovery (WBD.O) and its sports division, Turner Broadcasting System, filed a lawsuit on Friday against the National Basketball Association (NBA) in New York, challenging the league's refusal to accept its matching bid for media rights. The media company contends that the NBA's decision violates its agreement with Turner Broadcasting.
"We strongly believe this is not just our contractual right, but also in the best interest of fans who want to keep watching our industry-leading NBA content," TNT Sports stated. However, NBA spokesperson Mike Bass dismissed Warner Bros Discovery's claims as "without merit."
On Wednesday, the NBA announced an 11-year, $77 billion deal granting media rights to Walt Disney's (DIS.N) ESPN, Comcast-owned (CMCSA.O) NBCUniversal, and Amazon.com (AMZN.O). The NBA rejected a last-minute offer from TNT Sports, citing that it fell short of Amazon's proposal, effectively ending nearly four decades of partnership with Turner after the upcoming season.
Turner argues that it has a substantial investment in the NBA, having spent billions on distribution rights and hundreds of millions more on production and talent, including its acclaimed "Inside the NBA" show featuring Ernie Johnson, Charles Barkley, Shaquille O'Neal, and Kenny Smith. The media company claims that NBA games are "unique assets" driving significant viewership and ratings, impacting advertising revenue and competitive positioning with other leagues.
The dispute centers on Turner's right to match the terms offered to Amazon for streaming 64 regular season games and at least 30 playoff games. Turner contends it agreed to match Amazon's offer in a letter sent on Monday, aligning with "the same material terms and conditions."
The lawsuit's outcome may hinge on the court's interpretation of matching rights. Emarketer senior analyst Ross Benes noted, "Warner Bros Discovery claims it can match Amazon's price. The NBA claims the Amazon portion is for streaming distribution, not linear," highlighting the unsettled precedent on digital versus traditional TV rights.
Douglas Arthur, an analyst with Huber Research, questioned the financial viability of Turner's new deal, which represents a $700 million increase from its current contract. "To make money on the step-up, subscriber fees would have to go up a lot and WBD would have to hope that ad contracts would increase as well," Arthur commented in an investor note on Friday.
As the lawsuit progresses, the media and sports worlds will be watching closely to see how the interpretation of matching rights and the evolving landscape of digital versus linear media distribution will influence the outcome.
