Warner Bros. Discovery's attempt to stay in the basketball business hasn't been a cakewalk.
The media companies have indicated to the NBA in recent days that they would like to discuss potentially carving out a smaller game-rights package in addition to rights already negotiated with Disney, Amazon and NBCUniversal, according to people familiar with the talks. The NBA's current media rights are owned by Disney and Warner Bros., but those deals expire after the 2024-2025 season, so the league has been in talks with media companies for weeks about new deals.
Although Warner Bros. Discovery and the NBA failed to reach new terms during their recent exclusivity deal, Warner wants the NBA to consider a “fourth package” proposal, according to people familiar with the matter. This could be to prevent Warner from imposing what it believes it has a right to do with terms agreed to with competing bidders for games it currently controls. Such a maneuver would likely slow down the NBA's current efforts and hinder Disney, NBC and Amazon from making production plans.
Executives at Warner Bros. Discovery and the NBA declined to comment.
Warner's efforts could be met with accusations of impropriety from the league and other media, and one of the people familiar with the negotiations said there was no way to create a fourth package without removing games from the other three.
The NBA, like the NFL before it, is seeking to strike a long-term deal that reflects the value of sports in today's media ecosystem. In an age of rapid streaming video adoption, sports is one of the few genres that can continue to draw large simultaneous audiences that advertisers, distributors and the leagues themselves covet. Disney could pay about $2.6 billion a year in a new, 11-year deal for a smaller number of games than it currently does, according to people familiar with the negotiations. Amazon could pay about $1.8 billion a year for a new package that gives the NBA a new foothold on the major streaming platforms that have already expanded the NFL's reach to broadband viewers. And NBCU could pay about $2.5 billion a year under terms that appear close to approval at this point.
The league doesn't necessarily feel the need to maintain its old business model that relies heavily on cable television. “Traditional cable isn't going away, but it is declining,” NBA Commissioner Adam Silver said during remarks during Game 1 of the NBA Finals on Thursday night. “And streaming platforms are accelerating their growth, especially around premium live sports. We're looking to be aggressive in all of those areas.”
Warner Bros. Discovery relies heavily on cable networks, including TNT, TBS and Food Network, for the majority of its revenue. The company is trying to grow revenue from its streaming service, Max, by adding subscription sports services and new live streaming news packages. The company does not own broadcast networks, but many sports leagues believe they are still valuable because they can attract a wide audience.
Warner's bid for the smaller game package shows how the company's relationship with the NBA has deteriorated in recent years. Its cable networks have aired NBA games for more than three decades, dating back to 1989, but NBA executives have focused their efforts on engaging with Warner over the past two years since the company was formed in 2022 when Discovery merged with AT&T's WarnerMedia division.
The league is not happy, according to a person familiar with the matter.
The NBA has been disappointed by the departures of some of the company's top sports executives over the past few years, including Renee Daniels, former president of Warner's sports division. Daniels left the company in November 2022. She was viewed by NBA leadership as a trusted partner. Tara August, head of sports talent, left in early 2023. Following her is executive vice president Tina Shah, who played a key role in negotiating the company's sports rights deals.
Warner also laid off dozens of its sports staff as part of a cost-cutting effort and deleveraging of its massive debt. The move may have helped the company's financials, one person said, but it created the impression that Warner didn't see value in investing in game production or its venerable studio show, “NBA on TNT.” Indeed, Warner signed most of its studio hosts, including Kenny Neal, Ernie Johnson and Charles Barkley, to new long-term contracts for 2022.
Warner Bros. Discovery has been frugal since its inception, but NBA games have driven much of the company's revenue. All of TNT's top broadcasts in 2023 were NBA broadcasts, and NBA games likely accounted for the majority of the cable network's ad revenue in the second quarter of last year, according to Nielsen data. What's more, Warner's NBA packages were set to play a key role in Venu, a new streaming sports joint venture that Warner, Disney and Fox are set to launch in the fall.
The NBA is finding new value in streaming. “If you look at where the viewer's eye is going, and I think that's true for everyone in this room, we're all turning to streaming services for premium programming,” Silver said. “Streaming offers so many additional capabilities in terms of viewing the game, personalization, customizing the game, multiple feeds, multiple dialects, multiple languages, different camera angles. It gives fans so many more options that they don't get with traditional TV.”
Perhaps Warner believes it can still get by with a smaller package: Keeping some games on the air gives it a reason to keep showing “NBA on TNT” with Barkley and Shaquille O'Neal, and the scarcity could help it retain clout with cable and satellite providers and command higher advertising rates.
But a deal like this requires goodwill from both sides. And there has always been goodwill in the past few years — Warner helps run the NBA's cable network and plays a key role in managing its digital assets — but in recent months, a lot of that goodwill has seemed to have evaporated from the relationship.
