NBA Commissioner Adam Silver addresses the media during the 2022 All-Star Weekend press conference at Rocket Mortgage Fieldhouse on February 19, 2022 in Cleveland, Ohio.
Jason Miller | Getty Images
Whether it’s a marriage between two people, a business or a sports league, it’s not uncomplicated to break up a 40-year relationship.
National Basketball Association i Warner Bros. DiscoveryTurner Sports has been operating together for almost forty years. The relationship is now at risk because ComcastAs CNBC previously reported, NBCUniversal is trying to steal its gaming slate with a $2.5 billion-a-year deal.
The league has ended its exclusive window to renew its contract with its two current media partners, Disney and Warner Bros. Discovery, April 22. The league has since set a framework for renewing its deal with Disney and bringing in Amazon as a novel third partner and has sold its second stake to Warner Bros., according to people familiar with the matter. Discovery or NBCUniversal. The league is expected to triple the total dollar amount under the novel agreement from approximately $24 billion to $76 billion or more.
According to people familiar with the matter, Warner Bros. Discovery continues to be in talks with the NBA about retaining the rights. The league could still decide to extend the contract with its current partner, but that is unlikely, said two people who asked not to be identified because the talks are private.
A more likely route would be for the league to sign documents with NBCUniversal formally securing its offer. This would mean a contractual option for Warner Bros. Discovery of matching offers.
This is where things can get complicated.
Both the NBA and Warner Bros. Discovery has begun considering legal language to determine whether the league can reject a potential match, the people said. The wording in the contract is vague, and it’s unclear whether the NBA has full discretion to withdraw from Warner Bros. Discovery if it matches the offer, sources say.
If Warner Bros. If Discovery decides to match and the NBA chooses NBCUniversal’s offer anyway, both sides could take the matter to court. Warner Bros. Discovery believes it is fairly well protected by contractual language, one of the people said.
However, this remains a hypothesis for now. It’s possible that Warner Bros. Discovery will not meet NBCUniversal’s offer, avoiding a potential conflict.
According to people familiar with the matter, some league officials fear that Warner Bros.’ balance sheet Discovery won’t be able to handle the NBA’s $2.5 billion annual spending. Warner Bros. Discovery has a market valuation of about $20 billion and an enterprise value of about $60 billion, including $43.2 billion in gross debt, at the end of the company’s first fiscal quarter. The company had a leverage ratio (net debt to adjusted earnings before interest, taxes, depreciation and amortization) of 4.1.
CEO of Warner Bros. Discovery, David Zaslav has both publicly and privately preached the importance of financial discipline for the company.
Comcast has a market capitalization of approximately $154 billion and an enterprise value of $244 billion. Comcast Leverage Ratio is approximately 2.5.
NBA officials are happier that Comcast can pay more than twice the price for the package. Warner Bros. Discovery paid $1.2 billion a year to broadcast NBA games. The novel package also includes fewer games than the current one, as the NBA will likely introduce a third partner – and that will most likely happen Amazon.
Spokespeople for Warner Bros. Discovery and the NBA declined to comment.
The fate of Venus
Warner Bros. Discovery Disney AND Fox announced on Thursday I plan to name it their novel sports streaming platform Venu, drawing inspiration from the places where live sports events are played. The novel joint venture, one-third owned by each media company, will offer a bundle of sports networks and ESPN+ at a yet-to-be-determined price that is cheaper than established cable television. CNBC reported earlier this year that the price could be around $45 to $50 per month. According to the companies, the service will 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 will lose the NBA, it will reduce the value of the service to consumers because NBCUniversal and Amazon are not partners in this product.
Warner Bros. Discovery licenses rights to other sports, including Major League Baseball, the National Hockey League and the National Collegiate Athletic Association’s March Madness. No matter what, the company will also have the NBA next year, as the novel rights deal won’t take effect until the end of the 2024-25 season.
According to a person familiar with the matter, there was no discussion about terminating the venture before launch if Warner Bros. Discovery will lose the NBA. However, without the NBA, Disney and Fox would provide the lion’s share of sports content for the service. Unlike Warner Bros. Discovery, Disney-owned ESPN and Fox own both college football and NFL packages. The three companies plan to split revenues in proportion to affiliate fees associated with their linear networks.
Warner Bros. Discovery could utilize the money saved by not getting the NBA rights to spend on other sports, such as more MLB games or making offers to the UFC, which will likely begin contract renewal talks with media companies in early 2025.
ESPN plans to launch its own “flagship” streaming service in fall 2025.
Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.
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