WBD CEO David Zaslav (L) and NBA commissioner Adam Silver at a 2023 NBA game. WBD CEO David Zaslav (L) and NBA commissioner Adam Silver at a 2023 NBA game. (Ross Keith on Twitter/X.)

David Zaslav wanted to make one thing clear before Warner Bros. Discovery’s earnings call this morning: he wasn’t going to talk about the NBA. 

The NBA is reportedly in the final throes of TV renewal talks that will see games distributed after next season likely by ESPN and Amazon; with NBC/Peacock and WBD duking it out for the final package.

“I want to mention a topic I know is top of mind for everyone,” WBD CEO Zaslav told the analysts and investors. “And that’s the NBA. We’ve enjoyed a strong partnership with the NBA for almost four decades. We’re in continuing conversations with them now. And we’re hopeful that we’ll be able to reach an agreement that makes sense for both sides. We’ve had a lot of time to prepare for this negotiation. And we have strategies in place for the various potential outcomes. However, now’s not the time to discuss any of this, since we are in active negotiations with the league. And under our current deal with the NBA, we have matching rights that allow us to match third party offers before the NBA enters into an agreement with them. With that in mind, please understand that this is as much as we’re prepared to say about this topic today.”

One analyst, Steven Hall of Wells Fargo, tried his best, pointing out there is concern in the investment community that WBD, whose stock is near all-time lows, will pay too much to keep the NBA. Hall asked other questions too, so Zaslav in his response answered those and did not mention the NBA (an old lesson from journalism school is only ask one question, don’t give the interviewee the option of choosing from multiple questions and choosing which ones they wish to answer).

WBD is stuck between a rock and a hard place. Its core linear TV business is in secular decline, a big reason quarterly revenues fell 7 percent to under $10 billion. But if it loses the NBA, cable carriers may be less willing to carry TNT, which WBD packages with its other channels in selling to distributors. It also affects the yet to be launched sports streaming service planned by ESPN, Fox and WBD, which could no longer market it has all national NBA games.

“The knee jerk reaction is going to be panic among investors, if they don’t get it,” Lightshed media analyst Rich Greenfield told CNBC this morning. “But again, overpaying, like let’s just say you pay two and a half to three billion to beat out Comcast, that may not be a very good financial option, either.”

In the end, Greenfield speculated the NBA may be concerned with WBD’s financial health and want the stronger Comcast to win.

“It’s one of the things that certainly gives Adam Silver pause when he thinks about where the NBA rights are going to go,” Greenfield said of the NBA commissioner as he surveys the rapidly changing media landscape. “NBC, which is, you know, yes, you have your challenges with your own linear TV business, but you’ve got broadcast, and you’ve also got the sort of financial fortitude of the Comcast cable business, that broadband business that Warner Bros. Discovery just doesn’t have. And I think that’s, you know, increasingly problematic for their chances of retaining the NBA.”

As Zaslav confirmed, WBD has matching rights to whatever a third party bids, so Silver and the NBA might not have the flexibility to choose the partner they want. And while Greenfield is correct that Comcast, whose stock over the last 12 months has fallen 3.5 percent versus a 43 percent decline for WBD, is the healthier of the two corporations, there are other reasons the NBA might want the rights to stay put.

TNT’s Inside the NBA studio show is arguably–and maybe not even arguably–the best studio show in all of sports, acting as a tremendous promotional platform for the league.  The show would break up if the rights moved after next season, as Ernie Johnson wants to stay put.

Also, WBD is showing some life in its streaming business, adding subscribers to Max, with nearly 100 million now globally. WBD reported streaming advertising revenue surged 70 percent, and earnings rose to $86 million.

WBD is all in on bundling, with the unnamed sports streamer, and yesterday announcing a bundle with Disney of Max, Disney + and Hulu.  Zaslav has long said he believes bundling streaming services in an effort to replicate the decaying cable bundle is the path forward.

“For consumers in the U.S., I think it’ll be a really positive consumer experience, and gives us a, you know, I think a real advantage and opportunity when you look at the marketplace,” Zaslav said.

Critics point out that these streaming bundles do not come close to replicating the cable bundle. The sports streaming service to be offered by WBD, ESPN and Fox account for only 55 percent of televised sports, and that figure declines if WBD’s NBA games are lost.

Greenfield mockingly describes Zaslav’s approach as an affliction called “bundleitis.”

“It is a disease,” Greenfield told CNBC. “And it is something where you think that bundling these services together is going to save you. It’s fixing the wrong problem. The problem is you have high churn, the reason you have high churn is that you’re not creating a service that has enough daily engagement, where people want to keep paying for it. And so they need to fix the root problem, the root problem they’re suffering from is not enough usage, not enough great content, to drive people to use it every single day. Of course, bundling is the wrong fix.”

[Image from Ross Keith on Twitter/X]

About Daniel Kaplan

Daniel Kaplan has been covering the business of sports for more than two decades. A proud founding reporter of SportsBusiness Journal, he spent the last four years at The Athletic.