The NBA has asked a New York Supreme Court to blow the whistle on a lawsuit brought on by Warner Bros. Discovery related to the company’s rejected attempt to match a media rights agreement that the league granted to Amazon.
The National Basketball Association on Friday filed a motion seeking to dismiss the WBD (and its Turner Broadcasting unit) lawsuit with prejudice, asserting the media company isn't entitled to matching rights against Amazon’s offer that involves streaming-only distribution of live national NBA games on Prime Video - and even if it is, WBD’s offer failed to equal – or match – the exact terms of Amazon’s.
WBD filed the lawsuit July 26, shortly after the NBA announced new separate 11-year media distribution rights deals with Disney, NBCUniversal and Amazon, which start with the 2025-26 season. The move boxed out WBD, which through Turner Broadcasting (TBS) and TNT had been a long-time NBA rights holder.
Under an existing contract between the NBA and WBD’s Turner, WBD said it had the right to match third-party offers in order to continue broadcasting the professional basketball games after the end of the 2024-2025 season. It submitted a matching offer to Amazon’s agreement, which the NBA then rejected. The lawsuit stems from that rejection, a move which WBD contends violated terms under its prior agreement for which it's seeking court enforcement of matching rights.
Analysts have previously told StreamTV Insider that Warner Bros. Discovery badly needs the NBA rights, as alongside attracting viewers and advertisers, they’re key to the TNT linear lineup and play into carriage renewals, serve as a valuable live sports component of the Max streaming service, and were one component to be included in the planned Venu Sports streaming service joint venture with Fox and Disney (which separately has been temporarily blocked by a U.S. District Court judge in an antitrust lawsuit brought on by virtual MVPD Fubo). But analysts also earlier noted a lose-lose situation for WBD, where the lawsuit itself, even if successful, could hurt its relationship with the league.
Debt-laden WBD is working to create a profitable streaming business and in the most recent quarter took a $9.1 billion write down on its linear pay TV networks business, citing the loss of NBA rights as a factor.
Court documents filed Friday shed some light on details around the NBA’s stance, which it seeks to make in oral arguments at a hearing requested for October 4. WBD’s response to the motion to dismiss is due September 20.
The NBA raised several points as to why WBD’s compliant should be dismissed – the crux of which revolve around Turner’s existing rights and the fact that Amazon’s agreement is limited to internet-delivered streaming-only distribution of NBA games, versus WBD’s attempted match that would allow for distribution on linear cable networks, streaming, or both.
The NBA, in filings, also contends that WBD’s Turner failed to match exact terms of Amazon’s agreement, including related to promotional efforts, and asserts it substantially changed language and core aspects of the agreement that mean it doesn’t equate to “matching” of Amazon’s offer. In filings, the NBA suggested WBD could’ve attempted to match a pricier package secured by NBCU that allowed for linear distribution.
Entitled to match?
Off the bat, the NBA claims the earlier NBA/TBS agreement doesn’t allow for WBD to try and match Amazon Prime Video’s because the language limits matches of third-party offers to game distribution rights that TBS enjoys under the current contract – which, per the NBA, is for distribution on linear cable television via TNT and certain TBS-owned networks, not on a standalone streaming SVOD basis that’s unbundled from the cable programming lineup as the Prime Video deal enables.
So the league appears to argue that the existing NBA/Turner contract doesn’t allow WBD to exercise matching rights against Amazon’s streaming-only deal because the earlier agreement does give TBS rights to distribute NBA games via streaming when they’re part of its linear TNT cable network alongside all other TNT programming (such as distribution on a virtual MVPD) but not as standalone games in an SVOD environment. Therefore, Amazon’s agreement isn’t within Turner’s matching rights purview as the latter didn’t have those digital streaming rights to begin with.
That said, WBD does already distribute NBA games on the Max SVOD streaming service through simulcasts as part of its Bleacher Report Sports add-on. However, rights allowing for that distribution by WBD were made under a separate digital rights contract between WBD’s Bleacher Report subsidiary and NBA Media Ventures that doesn’t include matching rights, according to the NBA.
And even if WBD’s Turner is entitled to match Amazon’s, it didn’t have the right “to fundamentally change the method of distribution required by Amazon’s offer,” the NBA said, which again comes back to Prime Video being the NBA’s first streaming national media rights agreement.
In court documents, the NBA highlighted language of the matching rights clause, which said in matching a third-party offer that provides games in any specified form of combined audio/video distribution “such Incumbent shall have the right and obligation to exercise such Game Rights only [emphasis NBA’s] via the specified form of combined audio and video distribution.”
By allowing WBD to “match” with other forms of distribution, the NBA asserts it could deprive the league of benefits it was seeking, such as broad reach in the case of Amazon’s Prime Video SVOD.
The NBA seems to indicate, in part, that WBD/Turner’s entitlement to match would’ve had to have been against an agreement that aligns with its existing rights, namely linear pay TV. But also suggests WBD’s offer couldn’t be considered a match against Amazon’s as it also allows for the option of linear cable distribution.
WBD’s matching offer, to that end, sought to give itself rights that provided the option to distribute over the internet (aka streaming), cable linear TV, or both. If it wanted linear TV in the mix, the NBA suggested WBD could’ve done so by trying to match a different offer that would’ve come at a higher price tag.
“If TBS wanted linear television distribution rights, it could have matched a separate, more expensive third-party offer from NBCUniversal…but TBS elected not to do so, attempting instead to save billions of dollars by combining Amazon’s lower price with the linear television rights granted to NBCU,” wrote the NBA in court filings. “The MRE [Matching Rights Exhibit] did not give TBS that option.”
Essentially, the NBA on one hand seems to argue that WBD didn’t have streaming SVOD rights for games to begin with so couldn’t sue over the league’s rejection of a matching offer it wasn’t entitled to make. On the other, if it was allowed, its offer needed to match with the same distribution method required.
WBD, meanwhile, had argued that the contract language requiring matching offers exercise game rights through a “specific form of combined of audio and video distribution” related to the way content was viewed by the end consumer (aka television, where TNT, Max and Prime Video can all be viewed) compared to the NBA’s interpretation that it refers to the way content is transmitted (aka over cable wire versus the internet). The NBA called WBD’s viewing vs transmission argument “baseless.”
Reached by StreamTV Insider, Warner Bros. Discovery in a statement stood by its stance that it has a contractual right and matched Amazon's third-party offer.
“We maintain our position that the NBA’s actions are unjustified, and we strongly believe we have fulfilled our contractual right to match the third-party offer. Not only is it our contractual right, but it is in the best interest of the fans who want to continue to enjoy our industry-leading NBA content with the choice and flexibility we offer them through our widely distributed platforms including TNT and Max," stated WBD. "We will file our opposition in the coming weeks.”
In a note to investors regarding the motion to dismiss, analysts at LightShed Partners said WBD using Bleacher Report’s contract to stream NBA games on Max “appears problematic for Turner’s matching rights lawsuit” since the NBA agreements distinguish between linear cable and SVOD.
“If the distribution in the Amazon contract were written from the consumers’ perspective—meaning where content was watched, such as on a television, as WBD’s lawsuit claims—there would be no reason for the Max add-on to be called Bleacher Report. WBD would have used the Turner/TNT brand or even the Max Sports brand,” wrote analysts led by Richard Greenfield. “WBD presumably had to use the Bleacher Report brand because Turner’s NBA contract did not grant them SVOD streaming rights to live games. The NBA questions that if Turner never had SVOD streaming rights to live games, how can WBD sue for matching rights to stream linear live games?”
WBD changes to Amazon offer
The NBA also told the court WBD’s complaint should be dismissed because Turner failed to match each term of Amazon’s offer.
It contends WBD’s attempted match made “substantive revisions” to Amazon’s offer, including changing subsections and defined terms, and striking and adding words, all which it ultimately asserts changed rights and obligations of the agreement. Here’s a link to the list of changes to offer terms, filed by the NBA.
One of the most significant revisions, according to the NBA’s court fillings, was WBD changing core terms including a provision in Amazon’s offer that stated it was the NBA’s “first ‘streaming-only’ package” to instead say “includes ‘streaming’ distribution.”
Again, here the NBA indicates that WBD made changes to the fundamental nature of the Amazon deal by eliminating the requirement to be streaming only and allowing for distribution on NBA games on the TNT linear cable network and/or streaming – therefore invalidating its claim of matching, in the NBA’s view.
New York law “forecloses TBS’s attempt to rewrite the terms of Amazon’s offer and then ‘accept’ those rewritten terms,” argued the NBA in filings. “Far from accepting each term of Amazon’s offer TBS’s revisions constituted a counteroffer that the NBA was free to reject.”
The NBA also pushed back against WBD’s allegation that the league acted in bad faith by negotiating particular terms with Amazon and NBCU. For example, the league’s filling called out WBD’s issue with a provision that saw the NBA agree with NBCU that it wouldn’t license any games to more than one other linear programmer (which is Disney/ESPN). WBD claims this was a bad faith effort, “even though the NBA/TBS Agreement contains essentially the same limitation for TBS’s benefit,” wrote the NBA.
Where WBD didn’t match
The NBA motion called out a few other aspects where it claims WBD’s offer failed to match exactly that of Prime Video.
For one, how the NBA would get paid.
The NBA took issue with WBD’s method to ensure billions of dollars of rights payments over the 11-year term are made, asserting it does not come close to Amazon’s. Specifically, it said TBS eliminated protection included in the deal with Amazon that agreed to maintain an escrow account from which right fees would automatically be paid to the NBA as they become due. Instead, Turner gave itself the option to serve the NBA syndicated letters of credit that the league could only access if TBS payments were late.
It also claims Turner changed promotional terms where Amazon agreed to promote the NBA games during its telecasts of the popular Thursday Night Football games on Prime Video. In its match attempt, WBD instead said it would promote NBA games on a range of other major sporting leagues events on TNT and Max. Per the filing, with those changes “TBS would be free to substitute advertising on TNT’s telecasts of NASCAR races during the summer for advertising on primetime NFL game telecasts during (or just before) the NBA season.”
As LightShed pointed out, the NBA also said WBD changed Amazon deal language related to clauses that allowed the league to terminate rights agreements if the company’s credit rating is downgraded below investment grade, from either Moody’s or S&P to both. LightShed analysts said S&P recently put “WBD on credit watch negative.”
“Worth noting that a debt downgrade of any NBA media rights licensee below investment grade by either Moody’s or S&P has a real cost to the NBA, as it impacts the cost of the league credit facility (used by NBA teams),” wrote LightShed.
And finally, the NBA claims WBD’s lawsuit should be dismissed because it’s not a party to the NBA and TBS agreement and therefore can’t sue over contractual rights related to its subsidiary.
Uphill battle
There is still uncertainty about how losing the NBA could impact WBD, but analysts at LightShed think the NBA could come out successful in its effort to shut down the lawsuit.
“If the NBA can demonstrate legitimate business reasons for each of the items spelled out in the Amazon contract (regardless of how onerous they are for WBD to match), WBD faces a steep uphill battle to enforce its matching rights,” wrote Greenfield. “WBD will need to show substantial case law to support its attempted match, which nullifies all the NBA’s matching issues, otherwise a [dismissal] feels likely before year-end 2024.”
The analysts went on to say they continue to believe “WBD should withdraw its NBA lawsuit and focus investors on how much its earnings will benefit from significantly reduced sports costs” partially offset by lower advertising revenue, alongside maintaining pay TV provider distribution with small to modest decrease in affiliate fees.
Article updated with statement from Warner Bros. Discovery.