NBA Commissioner Adam Silver addresses the media at the Thomas & Mack Center on July 16, 2024, in Las Vegas.
Mick Akers | Las Vegas Review-journal | Tribune News Service | Getty Images
Discovery by Warner Bros sued the NBA on Friday as it tries to retain broadcast rights for a live game package.
“Given the NBA’s unjustified rejection of a third-party bid match, we have taken legal action to enforce our rights,” the company’s TNT Sports unit said in a statement. “We strongly believe that this is not only our contractual right, but also in the best interest of fans who want to continue to watch our industry-leading NBA content with the choice and flexibility we offer them through WBD’s widely distributed video-first distribution platforms — including TNT and Max.”
The media company is seeking to prevent the NBA from ceding the rights to Amazon, whose Warner Bros. game package. Discovery has tried to match or aims to win monetary compensation.
The NBA announced Wednesday that it has reached an agreement with Disney, Comcast‘s NBCUniversal and Amazon in three different game packages, ending its nearly 40-year relationship with Warner Bros.’ Turner Sports. Discovery. The 11-year media rights deal is worth about $77 billion — a huge increase over the previous deal as the value of live sports soars.
In response to the lawsuit, NBA spokesman Mike Bass said that “Warner Bros.’ Discovery are baseless and our lawyers will fight them.”
Warner Bros. Discovery said earlier this week that it filed paperwork with the league to match one of the packages, which people familiar with the matter identified as the $1.8 billion-a-year gaming group slated for Amazon. The tech giant’s deal includes regular season games, in-season tournaments and some playoff games.
The NBA granted matching rights to Warner Bros. Discovery when he signed his previous media agreement in 2014. The provision is intended to give an incumbent the right of last refusal to retain its position as a media partner.
However, the decision of Warner Bros. Discovery matching Amazon’s package, instead of the $2.5 billion-a-year NBCUniversal deal, prompted the league to say Wednesday that the matchup rights are void. The offer from Warner Bros. Discovery for this package includes the broadcast of NBA games on its TNT cable network and their simultaneous broadcast on the Max streaming service. That’s not an apples-to-apples comparison to Amazon Prime Video, which is a streaming-only service, the league argued.
Warner Bros. Discovery argued in a court filing Friday that matching rights should still apply to the Amazon package because many of the games in that package were previously shown on cable TV.
“The MRE (Matching Rights Exhibit) further provides that, “[i]In the event that TBS matches a Third Party Offer that includes Cable Rights” and no other incumbent, then TBS will have the exclusive right and obligation to exercise the Cable Rights set forth (and on the same terms set forth) in the Third Party Offer “, Warner Bros. Discovery wrote in its court filing. “That’s exactly what happened here: Amazon made an offer for the Cable Rights as stipulated in the MRE, and TBS matched it. But in violation of the Agreement, the NBA refused to honor the TBS game.” TBS is a cable television network owned by Warner Bros. Discovery.
In a letter sent by the NBA to Warner Bros. Discovery on Wednesday, the league pointed to the contractual language of the 2014 matching rights as the reason for rejecting the offer.
The NBA cited the clause: “In the event that an incumbent matches a third-party offer that provides for the exercise of game rights through any particular form of combined audio and video distribution, that incumbent shall have the right and the obligation to exercise those the gaming rights only through the specified form of combined audio and video distribution (eg if the specific form of combined audio and video distribution is Internet distribution, the respective provider cannot exercise such gaming rights through television distribution).”
CNBC’s David Faber on Thursday reported that Warner Bros. Discovery had moved to sue the NBA.
The value of the NBA for Turner
In 2022, Warner Bros. CEO Discovery, David Zaslav he said his company “shouldn’t have had the NBA” if the finances weren’t good.
“With sports, we are tenants,” Zaslav said in one November 2022 Investor Conference. “It’s not such a good job.”
However, Friday’s lawsuit addressed the value of the NBA to Turner Sports. Owning NBA rights is valuable to the health of Warner Bros.’ cable business. Discovery, which has suffered in recent years as millions of Americans ditch traditional pay TV in favor of a slew of streaming services.
“NBA games increase viewership and ratings as consumers are more likely to watch games live, in real time. This, in turn, affects the price TBS and WBD can charge their advertisers and downstream distributors who license TNT to broadcast to their customers,” the company wrote in the complaint. “Thus, the NBA’s distribution rights allow both TBS and WBD to grow their brands and reach a larger group of consumers who they only bring NBA games. The NBA’s telecast rights also give TBS and WBD a competitive advantage over other programmers, particularly when negotiating with other leagues for sports rights.”
Warner Bros. Discovery argued that the NBA brings “intangible and incalculable benefits” to the company’s businesses and sought “preliminary and permanent injunctive relief to prohibit the NBA from licensing these unique and irreplaceable rights. [to Amazon]”, while adding that if “equitable relief is not granted”, he expects “monetary damages” from the NBA.
Disclosure: NBCUniversal is the parent company of CNBC.
WATCH: Warner Bros. Discovery is suing the NBA for matchup rights
