Warner Bros. Discovery plans to sue the National Basketball Association in New York after the NBA rejected an even-bid for television rights, a person familiar with the matter said on Thursday.
The NBA said Wednesday it rejected a proposal from Warner’s TNT Sports division, ending a 40-year partnership and signing new, 11-year, $77 billion deals with Walt Disney Co.’s ESPN, Comcast Corp.’s NBCUniversal and Amazon.
Warner Bros. Discovery and the NBA did not immediately respond to Reuters requests for comment.
Shares have fallen more than 7%, and the company, which was formed in 2022 from the merger of WarnerMedia and Discovery, is set to lose more than $1 billion in market capitalization if losses continue.
Following the loss of NBA rights, Macquarie Equity Research downgraded the company’s shares to “neutral.” “We believe the NBA rights are important to the future success of the Max streaming service,” the analysts said, adding that the loss could also hasten the decline of linear networks.
Some analysts said suing the NBA could hurt the company’s competitiveness in the long run.
“When the rights come up to other leagues, they will be mindful of how messy the NBA’s relationship with WBD was when they accepted WBD’s bid,” said Ross Benes, a TV and streaming analyst at eMarketer.
“WBD is so desperate that it will pursue every possible opportunity to retain the NBA. Litigation would take the end of the partnership from awkward to hostile.”
Rosenblatt analyst Barton Crockett said losing the NBA could pressure Warner to be more open about dividing up its assets.
Analysts at Bank of America Global Research said in July that Warner’s current structure as a combined public company is not working to its advantage and recommended a strategic overhaul that could include a sale to increase shareholder value.
CNBC first reported the news. Warner sued the NBA.
