If you’ve followed the NBA’s upcoming TV rights deals, we’ve been in a holding pattern for a few weeks now with insiders having already reported the following:
- ESPN/ABC is going to keep their “A” package of games with a reported pricetag of $2.6 billion a year
- Amazon getting a newly created “C” package of games for $1.8 billion a year.
- Comcast/NBC/Peacock is rumored to be the favorite to displace WBD/TNT for a slimmed down “B” package of games for $2.5 billion a year. The NBA reportedly wants WBD to pay $2.8 billion to keep the B package.
The buzz for the last week has been around WBD’s “matching rights,” a clause in their current TNT rights deal that allows them to match any offer that would see them displaced. Unlike ESPN, who more or less got out of their exclusive negotiating window with a handshake deal for an extension, WBD was unable to do the same. Not long after that window closed, Amazon and NBC entered the picture with their official offers to the NBA.
Those who couldn’t imagine WBD moving away from the NBA stressed not to worry because at the end of the day, the matching rights would allow other companies to take a crack at gaining NBA rights, but it was likely WBD would just match whatever offer came around. Basically, they could negotiate with a safety net below them.
But as the process has unfolded, we’ve learned these matching rights seem to be not very explicit, or at the very least WBD and the NBA are not in agreement about the extent of those rights.
“NBC has made their bid, and they’re not budging,’’ a media industry source said. “So it’s over, right? And Warner Bros. is saying, ‘We’ll match it,’ and (Commissioner Adam Silver) is probably saying: ‘It’s not matched.’ ’’
…“There’s no mystery to this,” the source said. “It’s pretty blatant what’s happening. [WBD CEO] David Zaslav realizes he has to have this and doesn’t want to pay more than $2.5B. And Adam’s saying, honestly, it’s not matched at $2.5. And [Zaslav] goes, ‘Yes, it is,’ and they’re going back and forth.’ And so that’s where we are. How do you let [WBD] down? Is there a way? Or does Zaslav come up with more money? Because then it doesn’t have to be matching because David’s paid more.”
If you’re confused why the NBA would take NBC’s money and not WBD’s the disagreement here would be that NBC’s proposal includes games on a broadcast channel (NBC) which the league is keen on. WBD can pay the same amount of money but because they don’t own a broadcast network, the NBA does not see it as an equal offer due to unequal exposure.
WBD boss David Zaslav seems to have accepted this reality and has pivoted away from matching NBC and mentioned on WBD’s earnings calls last week that they could look to match Amazon’s offer instead of NBC’s.
There has been an assumption that TNT's NBA matching rights apply only to NBCU's offer but Warner Discovery CEO David Zaslav made a point of saying on earnings call that TNT's matching rights apply to third party offers. That would include Amazon's offer.
— Joe Flint (@JBFlint) May 9, 2024
This was a new development as people didn’t think WBD would be interested in the “C” package of games that had seemingly been carved out specifically to Amazon’s preferences. So maybe that’s where all of this would land? Not so fast my friend, as John Ourand threw cold water on this idea last night in his latest newsletter.
On an earnings call last week, Zaz surprised my sources when he floated the idea that WBD’s matching rights also pertained to Amazon’s $1.8 billion-per-year bid for the “C package,” which includes the in-season tournament, play-in games, annual alternating conference finals, and some early-round playoff series. I’m not sure what Zaz’s lawyers are telling him, but my industry sources with knowledge of these matching rights say that they do not apply to Amazon’s bid. Regardless, a bunch of well-paid lawyers will have to hash this all out over the next several weeks.
One thing everybody can agree on is that the contractual language around these matching rights is convoluted. Various parties suggest that the NBA will clean that language up in the current deals.
It’s not quite clear why WBD cannot just match Amazon’s offer. There are whispers that WBD is now thinking about potential litigation given that these matching rights to be candid, are totally worthless. As Jon Lewis of Sports Media Watch noted:
“WBD would seem to have three options: lose the NBA, sue the NBA or be fleeced by the NBA. In the best-case of those scenarios, a successful lawsuit against the league, WBD would still be paying $2.5 billion/year and for the added price of presumably bitter feelings.”
These are all very bad options and probably why news of the NBA’s next TV deal has stalled out as WBD looks at picking what terrible option is the least terrible option. Either way, these matching rights that apparently don’t mean anything (at least to the NBA) either need to be stripped out entirely or need to be meticulously outlined better than the last version. WBD seems to be headed towards a massive hit in value simply because they thought they had a safety net underneath them as they negotiated with the NBA. It appears that net is in fact not there, never was, and they are dangerously close to going splat. What a potentially ugly way to end such a fruitful long term partnership.
