Warner Bros. Discovery shares fell over 6% during Thursday’s trading session following news that the NBA had rejected its matching proposal and would move forward with 11-year agreements with Amazon, NBC and Disney.
On Thursday, WBD stock was downgraded from “outperform” to “neutral” by Macquarie Research analyst Tim Nollen, who argued that the company is now losing a “core content asset” for its linear networks and Max streaming service.
The deals, which are reportedly worth a collective $76 billion, start in the 2025-26 season and run through 2036. Some 75 regular-season games will be on broadcast TV each season, up from the minimum of 15 games under the current agreement.
“NBA rights were important in our view to the future success of the Max streaming service. The loss may hasten the downturn in linear networks too,” Nollen wrote. “Max’s sports offering will now be weaker without the NBA, which is second only to the NFL in viewership in the US. Major League Baseball, NHL hockey, March Madness college basketball (for 3 weeks each year) and other sports do still have value, but not like the NBA.”
Nollen expects the company’s ad revenues to drop sharply starting in the fourth quarter of 2025 and warned that Warner will lose bargaining leverage on cable affiliate renewals going forward.
Nollen pointed out that while WBD could save a lot of money by not having to pay for the NBA, that would be overshadowed over time by the lost subscriber and ad revenue. Additionally, Nollen said that Warner “may now accelerate” plans for a possible break-up, which was reported last week by The Financial Times.
He also warned that while WBD intends to litigate the NBA’s decision, which it may be entitled to do, it’s “hard to see an amicable endgame.” He argued that such a move would “only extend the uncertainty, with the stock likely not reacting positively unless and until a decision is overturned, which appears unlikely at this point.”
“Even if WBD were to win, the costs may be prohibitive,” he added. “WBD stock is very cheap already, but we don’t see a good fundamental investment case now.”
On Wednesday, the NBA said that WBD’s proposal did not match the terms of Amazon’s offer, prompting it to enter into an agreement with the tech giant. It added that its primary objective during media rights negotiations was to “maximize the reach and accessibility of our games for our fans.”
The new arrangement with Amazon “supports this goal by complementing the broadcast, cable and streaming packages that are already part of our new Disney and NBCUniversal arrangements,” the league continued. “All three partners have also committed substantial resources to promote the league and enhance the fan experience.”
In a letter sent to Warner, the NBA cited a provision that states an existing media partner can exercise its matching rights “only via the specific form of combined audio and video distribution.” (If it’s Internet distribution, a matching incumbent may not exercise such games rights via television distribution.)
WBD didn’t see it that way. In a statement, TNT Sports said that the NBA “grossly misinterpreted” its contractual matching rights and said it would take “appropriate action.”
“We have matched the Amazon offer, as we have a contractual right to do, and do not believe the NBA can reject it,” the network said. “In doing so, they are rejecting the many fans who continue to show their unwavering support for our best-in-class coverage, delivered through the full combined reach of WBD’s video-first distribution platforms — including TNT, home to our four-decade partnership with the league, and Max, our leading streaming service.”
While the company has lost the NBA, it still maintains rights to NASCAR, the National Hockey League, Major League Baseball and the March Madness college basketball tournament, and has acquired the U.S. rights to the French Open starting in 2025.
WBD has also been in renewal negotiations with All Elite Wrestling, which AEW president Tony Khan has called “really productive.”
Under current terms that run through the 2024-25 season, ESPN pays the NBA about $1.4 billion annually while WBD pays about $1.2 billion per year.
WBD shares have fallen 24% in the past six months, 31% year to date, 36% in the past year and 67% since the April 2022 merger.
