Warner Bros. Discovery Warner Bros. announced Monday that it has informed the National Basketball Association (NBA) that it intends to use its matchmaking rights for a package of games intended for another company. Warner Bros. Discovery is eyeing the deal reached For Amazon Prime Video, according to a person familiar with the matter.
“In an effort to continue our long-standing partnership, during both the exclusive and non-exclusive negotiation periods, we acted in good faith to present strong offers that were fair to both parties. Regrettably, the league notified us of its intent to accept other offers for the games in our current rights package, allowing us to proceed under the equivalent rights provision, which is an integral part of our current agreement and the rights we have paid for under it,” Warner Bros. Discovery said in a statement.
“We have reviewed the offers and have matched one of them. This will allow fans to continue to enjoy our unparalleled coverage, including the industry's best live game productions and our iconic studio and talent shows, while continuing our proven 40-year commitment for many years to come,” the company said. “Our matching documentation was submitted to the league today. We look forward to the NBA executing our new contract.”
The NBA “has received the proposal from Warner Bros. Discovery” and is “in the process of reviewing it,” according to a league spokesperson.
Warner Bros. Discovery acquired the equalization rights as part of its previous deal with the league, which expires at the end of next season. Those rights allow the company to match the payout for any of the games that aired on TNT under the current agreement.
The question for both the NBA and Warner Bros. Discovery is whether the rights will extend to a full streaming package, as has been planned for Amazon. Warner Bros. Discovery also owns a streaming service, Max, which it could use to stream games.
Still, Amazon Prime Video has more than twice as many global customers (more than 200 million versus Max’s roughly 100 million), which may make the service a more attractive platform for the league. The streaming rights are global, though Warner Bros. Discovery is only bidding for the U.S. rights, according to people familiar with the contract language.
Amazon is also on stronger footing as a standalone company, with a market capitalization of nearly $2 trillion. Warner Bros. Discovery’s market valuation has fallen to about $20 billion, and CEO David Zaslav has repeatedly spoken of his interest in more mergers or partnerships, putting the company’s future in doubt. That presents a potential additional headache for the league, which wants stability in its streaming partners.
The league has also signed agreements with Disney and from Comcast NBCUniversal for two more gaming packages. Both Disney and Comcast have market valuations of more than $150 billion.
If the NBA rejects Warner Bros. Discovery’s right to match the price of Amazon’s package, it’s unclear what will happen next. It’s possible that Warner Bros. Discovery will sue the NBA. It’s also possible that the league will reach a settlement with the company. It’s unclear whether the NBA will ask Amazon to pay more money for its package.
One unlikely possibility is the work of a fourth package of games, according to people familiar with the matter. Over the past two months, the NBA has considered the possibility of working out a fourth package, but those talks fell apart because there were already deals with Disney, Comcast and Amazon, and those partners didn’t want to give up inventory, the people said. All three partners plan to pay more money for fewer games than the league is currently receiving from Disney or Warner Bros. Discovery in its current deal.
Disney will pay about $2.6 billion a year for its package, and NBCUniversal about $2.5 billion a year, CNBC previously reported. Amazon’s deal is worth $1.8 billion a year. The cheaper price is why Warner Bros. Discovery has chosen that bundle of games for its corresponding rights, according to people familiar with the matter.
The NBA also hasn’t wanted to create too many bundles because it’s sensitive to consumer confusion and limiting the number of services fans must subscribe to, the people said. While Amazon plans to include NBA games with its Prime subscribers at no extra charge, Max’s sports strategy includes an additional $9.99 per month fee to access live games on top of a basic Max membership. Warner Bros.
Discovery has not decided whether to include NBA games in its basic tier or its sports tier, according to people familiar with the matter.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
