NBA Commissioner Adam Silver speaks to the media during a press conference as part of the 2022 All-Star Weekend at Rocket Mortgage Fieldhouse on February 19, 2022 in Cleveland, Ohio.
Jason Miller | Getty Images
It’s not easy to break up a 40-year partnership, whether it’s a marriage between two people or a company and a sports league.
NBA and warner bros discoveryTurner Sports has been in business together for nearly 40 years. As the relationship is currently in crisis, comcastAs CNBC previously reported, NBCUniversal is looking to steal the gaming package with a $2.5 billion annual offer.
On April 22, the league ended exclusive renewal terms with its current media partners, Disney and Warner Bros. Discovery. Since then, the league has renewed its agreement with Disney and set up a framework to welcome Amazon as a new third partner. Other packages are being sold to Warner Bros. Discovery or NBCUniversal, according to people familiar with the matter. The league plans to triple the total value of new contracts, from about $24 billion to more than $76 billion.
According to sources, Warner Bros. Discovery is continuing to discuss retaining the rights with the NBA. The league could decide to simply renew the contract with its current partner, but that is unlikely, said two people, who requested anonymity because the negotiations are private.
A more likely path forward would be for the league to sign paperwork with NBCUniversal and formally secure a bid. If that happens, Warner Bros. Discovery will trigger contract options that match that offer.
This could be a tricky issue.
The NBA and Warner Bros. Discovery have begun taking a closer look at the legal language to determine whether the league can deny potential games, according to people familiar with the matter. Sources said the contract language is vague and it’s unclear whether the NBA has full discretion to pull out of Warner Bros. Discovery if the bid is accepted.
If Warner Bros. Discovery decides on a matchup and the NBA moves to select NBCUniversal’s offer, the two sides could face litigation. Warner Bros. Discovery believes it is fairly well protected by the language of the contract, one of the people said.
However, for now, that remains a hypothesis. It’s also possible that Warner Bros. Discovery won’t match NBCUniversal’s bid, which would avoid a potential conflict.
Some league officials are concerned that Warner Bros. Discovery’s balance sheet won’t be able to support the NBA’s $2.5 billion annual spending, according to people familiar with the matter. Warner Bros. Discovery’s market valuation is approximately $20 billion, and its enterprise value is approximately $60 billion, including a total of $43.2 billion at the end of the first quarter. The company’s leverage ratio (net debt to adjusted earnings before interest, taxes, depreciation, and amortization) was 4.1.
Warner Bros. Discovery CEO David Zaslav has talked publicly and privately about the importance of financial discipline for the company.
Comcast, the parent company of NBCUniversal, has a market capitalization of approximately $154 billion and an enterprise value of $244 billion. Comcast’s leverage ratio is approximately 2.5x.
NBA officials are relieved that Comcast will be able to pay more than double the package’s previous price, according to a person familiar with the matter.
Warner Bros. Discovery was paid $1.2 billion a year to air NBA games. The new package will also include fewer games than the current package, as the NBA will likely bring in a third partner. Amazon.
Spokespeople for Warner Bros. Discovery and the NBA declined to comment.
The fate of Vinu
Warner Bros. Discovery, disney and Fox They announced Thursday that they plan to name their new sports streaming platform Venu, taking inspiration from where live sports take place. The new joint venture, one-third owned by each media company, will offer bundles of sports networks and ESPN+ at an unspecified price that will be cheaper than traditional cable. CNBC reported earlier this year that the fee could be around $45 or $50 a month. The companies say the service is scheduled to debut in the fall.
The three companies have not yet formally signed documents for the venture as they await regulatory approval. If Warner Bros. Discovery loses to the NBA, the service will be less valuable to consumers because NBCUniversal and Amazon are no longer partners in the product.
Warner Bros. Discovery licenses rights to other sports leagues and groups, including MLB, the NHL and the National Collegiate Athletic Association’s March Madness. The new rights deal also doesn’t begin until the end of the 2024-25 season, meaning the company will host the NBA next year no matter what.
If Warner Bros. Discovery loses the NBA, there have been no discussions about shutting down the business before it even launches, according to people familiar with the matter. Still, without the NBA, Disney and Fox would contribute the bulk of the service’s sports content. Unlike Warner Bros. Discovery, Disney-owned ESPN and Fox own both college football and NFL packages. The three companies plan to split the revenue from affiliate fees associated with the linear network.
Warner Bros. Discovery could use the money it saves by not acquiring NBA rights on other sports, such as increasing the number of MLB games or a bid for the UFC. There is a high possibility that renewal negotiations will begin.
ESPN plans to launch its own “flagship” streaming service in the fall of 2025.
Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.
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