Warner Bros. Discovery’s NBA Hopes May Hinge on Elusive ‘Fourth Package’ of Games

Warner Bros. Discovery’s bid to stay in the business of basketball is anything but a slam dunk.

The media company has signaled in recent days to the NBA that it would like to discuss the prospect of carving out a small package of game rights to go alongside those already negotiated with Disney, Amazon and NBCUniversal, according to people familiar with the talks. Current NBA media rights are owned by Disney and Warner, but the contract behind them lapses after the 2024-2025 season, and the league has been in discussions with media companies for weeks over new contracts.

Warner Bros. Discovery and the NBA did not reach new terms during a recent window of exclusivity, these people said, but Warner would like the league to consider the idea of a “fourth package” — potentially to keep Warner from pressing what it believes are its rights to match the terms struck with any rival bidders for the games it currently controls. Such a maneuver would likely delay the NBA’s current efforts and keep Disney, NBC and Amazon from making production plans.

Warner Bros. Discovery and the NBA declined to make executives available for comment.

Warner’s effort may have the league and other media outlets crying foul. There is no way to create a fourth package of games without taking them out of the other three, according to one of the people familiar with talks.

The NBA, like the NFL before it, is looking to strike long-term deals that reflect the value of sports in the current media ecosystem. In a fast-growing era of streaming video, sports represent one of the few genres that continue to lure the large, simultaneous crowds that advertisers, distributors and the leagues themselves crave. Disney could pay approximately $2.6 billion per year under a new 11-year contract for a smaller passel of games than it currently enjoys, according to people familiar with the talks. Amazon could pay around $1.8 billion per year for a new package that would give the NBA a new foothold with a major streaming platform that has already expanded the NFL’s reach among broadband audiences. And NBCU could pay around $2.5 billion per year under terms that appear to be all but ratified at this point.

The league doesn’t necessarily see the need to sustain old business models that rely heavily on cable TV. “Traditional cable, it’s not going away, but it’s continuing to decrease,” said Adam Silver, the NBA Commissioner, during remarks made Thursday evening at the first game of the NBA Finals. “And then streaming platforms are seeing accelerated growth, particularly around premium live sports. We’re sort of trying to put foot, hand, finger in sort of every one of those buckets.”

Warner Bros. Discovery relies heavily on cable networks like TNT, TBS and Food Network for the bulk of its revenue. The company is trying to boost the fortunes of its Max streaming service, in part by adding a subscription sports tier to the offering and a new package of live-streamed news. The company does not own a broadcast network, which many sports leagues still see as valuable because they can lure broad audiences.

Warner’s bid for a small package of games shows just how much its relationship with the NBA has deteriorated in recent years. While the company’s cable networks have been showing NBA games since 1989 — more than three decades — NBA executives have been focused on their interactions with Warner in the past two years, since the company was formed in 2022 after Discovery Inc. merged with the WarnerMedia unit of AT&T.

The league, according to people familiar with the matter, has not been pleased.

The NBA has been dismayed by an exodus of Warner’s top sports executives in past years, including Lenny Daniels, the former president of the company’s sports division, who left in November of 2022. He was seen as a trusted partner by NBA leaders. Tara August, the head of talent of the sports division, left in early 2023. She was followed by Tina Shah, an executive vice president who played a key role in negotiating many of the company’s sports rights deals.

Warner also laid off dozens of sports staffers as part of a bid to trim its costs and reduce its massive debt. While the move may have helped the company’s finances, one person said, it created the perception that Warner didn’t see value in investing in the production of games or its venerable “NBA on TNT” studio show. To be sure, Warner in 2022 struck new long-term deals for most of its studio hosts, including Kenny Neal, Ernie Johnson and Charles Barkley.

Warner Bros. Discovery has put a premium on frugality since its launch, but NBA games have driven a lot of its revenue. All of TNT’s top broadcasts in 2023 were NBA broadcasts, according to data from Nielsen, and NBA games appear to have driven the bulk of ad sales for the cable network in the second quarter of last year. What’s more, the Warner NBA package was to play a key role in Venu, a new streaming sports joint-venture set up between Warner, Disney and Fox that is supposed to launch in the fall.

The NBA sees new value in streaming. “If you watch where the eyeballs are going, and I’m sure it’s true for people in this room, as well, we’re all moving into watching premium programming on streaming services,” Silver said. Streaming “allows for tremendous additional functionality when it comes to watching games, personalization, customization of games, multiple feeds, multiple dialects, multiple languages, different camera angles. It really gives the fan enormous additional choice that you don’t have through traditional television.”

Perhaps Warner believes it could still make a go of things with a smaller package. Keeping a tranche of games would give it reason to continue to broadcast “NBA on TNT” with Barkley and Shaquille O’Neal, potentially with more scarcity that might help it drive up ad rates while maintaining its leverage with cable and satellite carriers.

And yet, setting up such an arrangement would require good will. In years past, it was always present. Warner helped operate the NBA’s cable network and took a significant role in managing its digital properties. In recent months, however, much of it seems to have drained out of the relationship.