NBA Faces Uncertainty in Media Partnership Breakup
The National Basketball Association (NBA) and Warner Bros. Discovery’s Turner Sports have had a successful 40-year partnership, but it now faces uncertainty as Comcast’s NBCUniversal attempts to swoop in with a $2.5 billion per-year offer for the league’s games. The NBA recently ended its exclusive window to renew its deal with Disney and Warner Bros. Discovery and has set a framework to renew with Disney and bring in Amazon as a new third partner. The league is also considering selling its other package to either Warner Bros. Discovery or NBCUniversal. This move could triple the total aggregate dollars of a new deal from $24 billion to $76 billion or more.
Despite ongoing discussions with the NBA, Warner Bros. Discovery may not be able to retain the rights. The league is more likely to sign papers with NBCUniversal, which would trigger a contractual option for Warner Bros. Discovery to match the offer. However, there is ambiguity in the contractual wording, leaving it uncertain if the NBA can reject a potential match. If Warner Bros. Discovery chooses to match and the NBA still chooses NBCUniversal’s offer, the two parties may end up in a lawsuit. Nevertheless, there is a possibility that Warner Bros. Discovery won’t match NBCUniversal’s bid, avoiding any potential conflict.
Concerns have been raised about Warner Bros. Discovery’s ability to handle spending $2.5 billion annually on the NBA. With a market valuation of $20 billion and an enterprise value of $60 billion, including $43.2 billion of gross debt, Warner Bros. Discovery’s balance sheet may not be strong enough. In contrast, Comcast has a market capitalization of $154 billion and an enterprise value of $244 billion, with a lower leverage ratio of 2.5.
NBA officials are more confident in Comcast’s ability to pay for the package due to its higher market capitalization and lower leverage ratio. Warner Bros. Discovery had been paying $1.2 billion per year for NBA games, and the new package includes fewer games as the NBA is likely to introduce Amazon as a third partner. While the fate of the partnership remains uncertain, the NBA plans to introduce a new sports streaming platform called Venu, jointly owned by Warner Bros. Discovery, Disney, and Fox. However, if Warner Bros. Discovery loses the NBA, it will diminish the value of the service for consumers as NBCUniversal and Amazon are not partners in the product.
Despite these potential setbacks, Warner Bros. Discovery still has licensing rights to other sports, such as Major League Baseball, the National Hockey League, and the National Collegiate Athletic Association’s March Madness. Additionally, the company will have the NBA next year regardless of the outcome, as the new rights deal doesn’t take effect until the end of the 2024-25 season. If Warner Bros. Discovery loses the NBA, it could use the saved money to invest in other sports properties, such as more MLB games or bidding for the renewal of UFC rights in 2025.
In conclusion, the NBA’s longstanding partnership with Warner Bros. Discovery is on shaky ground as Comcast’s NBCUniversal attempts to secure the league’s games with a lucrative offer. While Warner Bros. Discovery continues to have discussions with the NBA, it remains uncertain if they can retain the rights. The league is more likely to sign with NBCUniversal, potentially leading to a lawsuit if Warner Bros. Discovery decides to match the offer. Concerns about Warner Bros. Discovery’s financial stability have also been raised. Nevertheless, the NBA plans to launch a new sports streaming platform called Venu, jointly owned by Warner Bros. Discovery, Disney, and Fox. The loss of the NBA would diminish the value of this service for consumers. However, Warner Bros. Discovery still holds licensing rights to other sports and could use the saved money to invest in different properties.
