The National Basketball Association’s (NBA) 11-year media rights deal just took an unexpected turn. Warner Bros. Discovery (WBD) has made a last-minute attempt to retain games on its TNT network, an American basic cable television channel owned by WBD. The company has used its matching rights to make a new bid, aiming to block a package of games previously awarded to Amazon’s (AMZN) Prime Video.
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The NBA is currently reviewing WBD’s new bid. It should be mentioned that WBD could pursue legal action to enforce its rights if the league rejects its offer, potentially creating a lengthy legal battle. This could also delay the start of the new broadcast agreement.
Brief Background
Interestingly, WBD has been broadcasting NBA games since the 1980s. Currently, the company is paying $1.4 billion per season under the existing nine-year agreement, which is set to expire after the 2024-25 season.
Last week, the NBA’s board of governors approved a new deal worth about $76 billion with Disney’s (DIS) ESPN, NBCUniversal’s Peacock and NBC, and Amazon Prime Video. Following the approval, WBD matched Amazon’s offer to pay $1.8 billion for the media rights.
The counteroffer from WBD was unexpected and delayed the league’s final decision.
High Potential in NBA Deal
WBD’s decision to match the offer stems from recognizing the significant value the NBA adds to its portfolio. While viewership numbers for basketball have declined somewhat compared to peak years, NBA games continue to attract a loyal fanbase.
This gives cable distributors the bargaining power to use NBA content as a reason to charge about $3 per month per subscriber. Thus, losing the NBA would be a major blow to WBD’s program lineup and its ability to attract and retain cable subscribers.
Is WBD a Good Buy?
WBD has recently secured other sports rights, such as the College Football Playoff and French Open, to bolster its sports programming. However, losing the NBA could still be a major setback for the company.
Overall, Wall Street analysts are cautiously optimistic about WBD. It has a Moderate Buy consensus rating on TipRanks based on 10 Buys, six Holds, and one Sell assigned in the past three months. The analysts’ average price target on Warner Bros. stock of $12.50 implies a 46.2% upside potential. Shares of the company have declined 18.9% over the past six months.
