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Warner Bros. Discovery and the National Basketball Association recently reached a settlement to end legal disputes pertaining to the 11-year media rights deal that will place games on platforms owned by The Walt Disney Company, Comcast Corporation’s NBCUniversal and Amazon’s Prime Video. Yet an investor of Warner Bros. Discovery is now suing the media conglomerate, alleging that it lied about potential fallout that could be associated with losing NBA rights.
The investor complaint, which was filed in New York federal court on Monday and requesting class action status, accuses Warner Bros. Discovery of “making public misrepresentations or failing to disclose material facts during the Class Period.” Furthermore, this lawsuit implicates an issue with Warner Bros. Discovery failing to disclose the consequences of losing the NBA, such as having to “significantly reevaluate its business and goodwill.”
Following the fiscal second quarter, Warner Bros. Discovery took a $9.1 billion non-cash goodwill impairment charge that was related to the depreciation of the value of its television networks. This decision was announced as the company fell short of expected revenue and loss per share metrics during the period.
At the moment, the class-action certification has yet to be granted, leading the lawsuit to be attributed to one Plaintiff. Warner Bros. Discovery chief executive officer David Zaslav and chief financial officer Gunnar Wiedenfels are listed as Defendants, in addition to the media conglomerate as a whole. The lawsuit contends that the Defendants took part in business that “operated as a fraud and deceit upon Plaintiff and the other members of the Class.”
Moreover, it claims that the scheme was intended to deceive the investing public, artificially inflate and maintain the market price of its securities and “cause Plaintiff and other members of the Class to purchase or otherwise acquire WBD securities and options at artificially inflated prices.” The lawsuit states that the Plaintiff and members within the Class “are entitled to a presumption of reliance upon the integrity of the market.”
Warner Bros. Discovery is currently in the midst of its final season with NBA U.S. live game broadcast rights, but it will continue to work with the league under content and licensing deals, including rights to NBA highlights and select international NBA broadcasts. The company’s Turner Sports division had been in business with the league since 1984 when it started to air live game broadcasts on TBS.
The award-winning studio program, Inside the NBA, will continue to be produced by TNT Sports next season but instead air on ESPN surrounding marquee NBA matchups as part of an agreement between both companies. Additionally, the company is reportedly exploring an Inside Sports show that would broaden the conversation beyond the NBA with Ernie Johnson, Charles Barkley, Shaquille O’Neal and Kenny “The Jet” Smith.
