Earlier this afternoon, representatives from Warner Bros. Discovery told NBA executives that they would—on the
fifth and
final day of their matching rights window—indeed be tendering an offer to match Amazon’s $1.8 billion bid for the NBA’s “C” package. I don’t want to equate this endless NBA rights auction with the
very significant events currently reshaping our politics and this election cycle, but I will just point out a few facile and obvious similarities here: The seemingly
interminable NBA rights auction has also, between fits of tedium and unprecedented surprise, been shaped by the disparity between public and private conversations, and colored by complex rivalry and personal relationships.
Most recently, WBD C.E.O.
David Zaslav decided to exercise his matching rights despite the fact that many people in the industry and on Wall Street assume that the NBA would far prefer to cut a deal with a fresher, pure-play
$2 trillion market cap streamer than a debt-saddled legacy media conglomerate. (Even though, as my partner
Bill Cohan brilliantly noted yesterday, WBD’s debt stack consists of
long-dated maturities.)
As I have noted for weeks, the NBA clearly wants to be in business with Amazon, and structured its deal in such a way that it believed WBD couldn’t match.
Bill Simmonsfirst noted on my partner
Matt Belloni’s podcast,
The Town, that Amazon even offered to put the first three years of its contract in escrow immediately. (In its matching rights document, sources say that WBD included a letter of credit that is able to match this deal point.) “It’s exceedingly clear that the league is trying to pivot to broadcast and digital, and trying to get as far away from cable networks as fast as possible,” LightShed Partners’
Rich Greenfield told me late this afternoon, delineating how the NBA is following the NFL’s well-worn path.
Elections are usually about a contrast between the past and the future. On some level, however, so are modern sports rights media auctions. As was first evident in the NFL’s most recent rights deals, which kicked off last season, and has become increasingly apparent during these NBA negotiations, sports leagues are focused on nailing the balance between where audiences access their product today (linear TV) and where the next generation is headed (streaming). Some entities, like the now defunct Pac-12, turned down an Apple TV+ opportunity, in part, because school administrators feared that such a deal would deprive the league of the mass audience it needed to succeed. MLS’s exclusive deal with Apple TV+ certainly is transformative—but the jury is still out on whether it is transformative for Apple or the MLS. Either way, the desire to manage scale and fees is real and complex.
One factor that has simplified the process, at least in the past, is the streamers’ willingness to pay
handsomely for rights. DirecTV lost money on Sunday Ticket for years. But YouTube TV stepped up last year and paid even more (about $2 billion a year) to secure the package starting last season.
Thursday Night Football was a money-loser when Fox carried it for around $660 million per year. But Amazon came in and paid $1 billion per year to pick up those rights. “There’s a clear trend when you want to dislodge the established ecosystem,” Greenfield said. “How do you get a league to be comfortable with the shift from linear to digital? Digital’s got to flex and use the strength of their balance sheets to overpay. Matching isn’t good enough.”
One senior sports media executive put it even more succinctly to me. “It’s like the whole chessboard has been shaken up,” they said. “Now you have the richest companies in the history of the planet—ones that have other core competencies—that have decided to get involved. A billion dollars to Amazon versus a billion dollars to WBD are very different things.”
And yet, here is Zaslav, attempting to match not only Amazon’s cash but also its reach. The NBA said it’s reviewing WBD’s proposal and offered no timeline for a decision—it could take days; it could take weeks. It’s clear that the NBA would rather be in business with Amazon, but league executives will pore over the contract to see if WBD has a legitimate claim with its matching rights.
Comcast vs. WBD
By any measure, the NBA’s 11-year, $76 billion deal with Disney, NBCU, and either Amazon
or WBD is a windfall. And it has led to questions about how these media companies can afford such lucrative deals. Just five years ago, linear TV networks made money off these deals through affiliate fees and ads. Now, the calculation is more complex. NBCUniversal executives thought about a lot more than affiliate fees and ad revenue, I’m told, when they bid $2.5 billion per year for the NBA “B” package. Part of NBC’s strategy was predicated on making money in other areas.
For example, by potentially keeping WBD from carrying games, executives at parentco Comcast believe that they will save money when TNT comes up for renewal on Xfinity systems. Also, by filling two primetime windows with NBA games, NBCU would presumably spend less on entertainment programming. Plus, by making sure that NBC carries the bulk of its NBA games, Comcast can keep premium sports in the cable bundle, hopefully slowing cord-cutting.
The NBA has long maintained that WBD can only use its matching rights on the “B” package, since it includes linear TV games, that Amazon’s package is considered a streaming-only package, etcetera. But WBD believes it is entitled to bid on Amazon’s package since it includes games that are currently on TNT. Plus, it believes that it can match Amazon’s streaming proposals with Max.
WBD clearly feels that its matching rights give it a lot of latitude, but the company’s counter also leaned heavily on TNT’s history with the league, which dates back to the 1980s. And WBD reminded the league of the widespread fan reaction when word leaked that it might lose the rights during the NBA playoffs—particularly the funereal agony over the prospect that TNT would shutter the
Inside the NBA studio show.
I expect the NBA to be diligent in its response. NBA executives are cognizant of the threat of a lawsuit should the league decide that WBD’s matching rights aren’t comprehensive enough for Amazon’s package. Indeed, this NBA auction truly has reached unchartered territory.
