Okay, I know that a Manhattan jury just convicted the former president of the United States on 34 felony counts, but the sports media world continues to scrutinize every new tea leaf in another story of our time: the interminable and increasingly agonizing NBA rights auction. After all, this whole ordeal has been more suspenseful and heavily plotted than an episode of Perry Mason.
First, there was the exclusive renegotiating window, then the handshake deals with Pitaroand Jassy, then the grinfukking Journal leak of the $2.5 billion-per-year NBCU bid, and the ensuing WBD sell-off. More recently, there’s been the matching rights phase and all the attendant Zazology about whether the Warner Bros. Discovery C.E.O., with his $39 billion in corporate debt and $50 million in executive comp, should just throw in the towel and make do with some CFP licenses and UFC ambitions.
Alas, we’ve reached the stage in the drama where financial analysts, at least, think it’s time for Zaslav to move on. “Either way, it’s going to hurt,” said Michael Nathanson, a senior research analyst at MoffettNathanson. “Given the pressures on linear, he has to have a more flexible cost base. His company doesn’t have the scale of Disney or Comcast, so he can’t compete at those prices. He just can’t.”
In fact, LightShed Partners media and technology analyst Richard Greenfield believes Zaslav has already made his decision to walk, even if he hasn’t said so publicly. “For Zaz, the problem is that spending $2.5 billion or more versus $1.2 billion for half the number of games and a substantial reduction in playoff games—the math is so problematic,” Greenfield said. “Saying no to the NBA makes sense as long as you believe it doesn’t lead you to being dropped. The multibillion-dollar question is: Does Zaz have enough confidence that he can convince cable operators not to drop his channels.”
Zaz Brain
Zaslav put on a brave face at today’s Bernstein conference, hyping WBD’s other sports assets: March Madness, MLB playoffs, NHL playoffs (including the Stanley Cup Finals every other year), NASCAR, College Football Playoffs, and U.S. soccer. WBD, it would seem, has enough popular sports to prevent cable and satellite operators from dropping them in the immediate future, or cutting their payouts to WBD significantly.
Even with all the other sports that it has, however, WBD’s executives cannot be Pollyannaish about this turn of events. Historically, company executives have believed that the distributors valued the NBA far more than the other sports—and paid for it—because they did. “The working assumption for the people who are at Turner, and the old Time Warner analysts like myself, was that the NBA was a key feature of their negotiating clout,” Nathanson said.
Nathanson even hypothesized that Comcast may be playing four-dimensional chess—outbidding WBD for the NBA so that they can eventually save some money in distribution fees to carry its pay TV networks on their cable systems. Still, the financial community is concerned that WBD’s pay TV relationships will suffer if they lose the NBA. “Does Comcast have a deeper motive here?” Nathanson asked.
This is one area where Zaslav has a ton of experience, of course. Before he stepped into his role as a media mogul, Zaslav spent his days mired in Excel spreadsheets, heading up NBC’s cable and satellite relationships. dikk Ebersolhas credited Zaz with convincing cable and satellite companies to pay a surcharge for NBC’s channels back in the 1990s as a way to help NBC afford Olympic rights.
But Nathanson also dismissed the idea that Zaslav would be able to use any money saved to buy more rights. UFC rights are up next year, sure, and ESPN seems likely to exercise an out in its MLB deal. But most rights fees—including the highly rated NFL and college football—are tied up into the next decade. “If they walk from the NBA, TNT is going to miss six weeks of playoffs that drive some of cable’s biggest audiences. That’s really where the heat is,” he told me. “I don’t know what they can do to replace those six weeks. There’s not a lot you can do right now, except pick up some sports rights around the edges and negotiate when the distributors’ bills come due.”
When I asked Greenfield what advice he’d give Zaslav, he suggested cutting sports on streaming to protect the distribution relationships as much as possible. “Making it so that you could get the NHL, NASCAR, and college football on Max only puts them in a more precarious position,” he said. “They should be doing everything humanly possible to protect their distribution relationship.”
Indeed, Zaz is doing the opposite by leaning into Venu and building out the Bleacher Report package. Greenfield also said that he would make the UFC, whose deal with ESPN ends next year, his number one focus. “UFC’s pay-per-views could work well for WBD,” Greenfield said. “The transactional model of pay-per-view works very nicely with how Max is set up, and it’s not competitive with the bundle.”
on WBD’s matching rights because the current ESPN deal he made with the NBA didn’t have it and they doubt if they do exist it would exist for a brand new package like the Amazon one. They also believe Zaslav was never going to keep the NBA and will try to justify that the NBA is not worth it at this price to his shareholders. They also say ratings never matter in these media deals.
