Warner Bros. Discovery recently presented its fourth-quarter financial earnings with $10 billion in revenue and an opportunity to reach 150 million streaming subscribers by the next calendar year. Over the three years since the entity has been a standalone company, it has successfully paid down $19 billion of its debt load despite a diminished stock value amid rising market indexes. Yet the media conglomerate will be losing U.S. broadcast rights to the National Basketball Association (NBA) beginning next season, failing to come to terms on a new deal as the league expands its distribution to more broadcast and streaming entities.
The 11-year media rights deals with The Walt Disney Company, Comcast and Amazon’s Prime Video are estimated to be worth a collective $77 billion, and they will officially take effect in the fall. Warner Bros. Discovery sued the league over the summer, alleging that it had violated a matching rights clause in its current deal with the TNT cable network. The two sides, however, reached a settlement in the fall that grants the company international rights to the league and the ability to display league content on Bleacher Report and House of Highlights.
On top of that, the company reached a sublicensing deal with Disney for its award-winning studio program, Inside the NBA, allowing it to continue producing the studio show and airing on ESPN and ABC surrounding marquee events. David Zaslav, the president and chief executive officer of Warner Bros. Discovery, recently reflected on the rights negotiations and aftermath during an interview at the Morgan Stanley Investor Conference.
“We’re really happy that we’re back in business with the NBA, and that deal is really going to work for us,” Zaslav said. “We have House of Highlights for the next 11 years globally, and we think that’s going to be a place that’s growing pretty significantly. A lot of young generations don’t want to watch the whole game – they want to go to one place. It’s almost like a RedZone for basketball, and so we think that’s a great growth engine.”
Within his discourse, Zaslav acknowledged several of the film and television franchises over which Warner Bros. Discovery has ownership, including Superman, Wonder Woman and Harry Potter. In this regard, the company is able to make money by conveying joy and excitement through content but also monetize other areas of the business, such as merchandising.
Conversely, he argued that sports is “a rental business,” requiring the company to analyze the market and ask whether or not it would be able to make money. Zaslav and his team have added sports rights since failing to reach a deal with the NBA, including NASCAR, the Big East Conference and Roland-Garros among others.
“We’re money good on virtually all of our sports, and we’re not going to pay more than we think we can afford or we can make money on,” Zaslav said. “We’d rather invest – if we saved a huge amount of money by not doing the NBA, it’s more money that we can spend on the quality content that we can make global that we think can strategically help us.”
Warner Bros. Discovery reached new carriage distribution agreements with Charter Communications and Comcast Corporation that were viewed as being better than expected for the company. Zaslav expressed that the company has done deals with five of the six largest distributors in the country at overall increases, and he conveyed that the company has never been this stable. As someone who started his career running retransmission consent for NBC, he understands distribution and has been in business with the companies for many years, and he is curious to see how the company will be modeled at year’s end.
“We have a very strong lineup of sports in the U.S. and around the world, and I said, ‘Our job is to make sure we have enough quality sports so that we’re creating real value for the distributors,’ and I think it turns out not doing the NBA was a great decision for us,” Zaslav said. “We picked up college football playoffs, we picked up NASCAR in the summer, we have a great lineup globally, and we saved a huge amount of money.”
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