NBA Seeks Dismissal of Warner Sports-Rights Lawsuit

Posted by Larita Shotwell on Monday, July 22, 2024

This game may never start.

The NBA moved Friday to shut down Warner Bros. Discovery’s ambitious legal effort to force the league to restore some portion of its media rights to the company. In documents filed in the Supreme Court of the State of New York, the NBA sought dismissal of the case, alleging that Warner had in fact failed to match the terms of a package of games that have been earmarked for Amazon‘s Prime Video, detailing in a letter how the company, its former longtime sports-media ally, had tried to craft an alternate deal that did not in fact offer the same things that Amazon did.

Spokespersons for the NBA were not able to respond immediately to queries seeking comment. The NBA said in its filings that it intended to move for dismissal at an October 4 hearing in New York City.

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“We maintain our position that the NBA’s actions are unjustified, and we strongly believe we have fulfilled our contractual right to match the third-party offer. Not only is it our contractual right, but it is in the best interest of the fans who want to continue to enjoy our industry-leading NBA content with the choice and flexibility we offer them through our widely distributed platforms including TNT and Max.” Warner Bros. Discovery said in a statement. “We will file our opposition in the coming weeks.”

The NBA in July awarded new 11-year rights deals to Disney, NBCUniversal and Amazon, rejecting a bid by Warner to stay in its circle of media partners after a relationship that has lasted around three decades. The new pacts go into effect after the next NBA season.

One of the documents filed is a July 24, 2024 letter from William Koenig, the NBA’s head of media distribution to Luis Silberwasser, the president of Warner’s TNT Sports. In the missive, Koenig says that Warner’s efforts to match Amazon’s package “does not qualify” because the deal hinges on distribution via streaming only and Warner’s bid included both the TNT cable network and the Max streaming service.

“ln its purported match of the Amazon Offer, TBS also changed – and thereby failed to accept – numerous other substantive terms of the Amazon Offer, with each of these changes representing an independent basis for concluding that it has failed to make a proper Match,” Koenig said.

Warner Bros. Discovery needs the games — and badly. They are a critical component of the TNT schedule, generating the live simultaneous audiences that both advertisers and cable distributors crave. Warner earlier this month took a $9.1 billion write down on its cable portfolio, citing the looming loss of the NBA games as one of the main factors in its decision.

Koenig also offered details of how Amazon agreed to make sure the league would by paid, citing “the establishment of a rights fee escrow account, into which the licensee is required to deposit and maintain three seasons of rights fee payments on a rolling basis and from which rights fees would automatically be
disbursed to the NBA on the agreed-upon payment schedule (thereby avoiding the potential for late payments).” Amazon also “committed to maintain a credit rating above investment grade, with the failure to meet this commitment giving rise to a termination right in favor of, and a related termination payment to, the NBA.”

Meanwhile, said Koenig, Warner did not match those terms, instead offering “to provide the NBA with letters of credit as an alternative form of security,” and would make them accessible only if it first “failed to make a rights fee payment on a timely basis (thereby adding delay before funds could be received by the NBA).”

The NBA executive also noted that Amazon promised to promote NBA games in its broadest-reaching sports properties, including “Thursday Night Football,” while Warner Bros. Discovery “substituted an
obligation to promote the NBA in any “Major Sporting League” distributed on TNT or Max, a defined term which TBS expanded to include NASCAR and certain college sporting events – making this promotional commitment less valuable to the NBA.

Warner has in recent weeks worked to shore up its sports portfolio by acquiring rights to the French Open and a handful of college sports. “WBD has been on a sports rights buying spree as of late, securing rights to certain College Football Playoff games, French Open, Big East college basketball, and NASCAR, but we remain cautious that these will be enough in the eyes of linear distributors to offset the NBA loss,” said Robert Fishman, an analyst with the independent MoffettNathanson firm, in an early-August research note.

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