By Dawn Chmielewski
(Reuters) -Warner Bros Discovery and its sports division, Turner Broadcasting System, filed a lawsuit on Friday against the National Basketball Association in New York over the league's rejection of its matching bid for media rights.
The media company accused the NBA's refusal to honor its right to match offers from a third party violates its agreement with Turner.
"We strongly believe this is not just our contractual right, but also in the best interest of fans who want to keep watching our industry-leading NBA content," TNT Sports said in a statement.
NBA spokesman Mike Bass said Warner Bros Discovery's claims are "without merit."
The NBA announced on Wednesday that it had awarded Walt Disney's ESPN, Comcast-owned NBCUniversal and Amazon.com rights to carry NBA games in an 11-year deal valued at $77 billion.
The NBA rejected a last-minute offer from TNT Sports, which it said fell short of Amazon's proposal, ending a nearly four-decade relationship with the media company after next season.
Turner argues it has a vested interest in retaining the rights to carry the NBA's games, saying it has invested billions of dollars for the distribution rights and hundreds of millions of dollars more in production and talent, including its Emmy-winning "Inside the NBA" show with Ernie Johnson, Charles Barkley, Shaquille O'Neal and Kenny Smith.
The media company argues the NBA games are "unique assets" that can't easily be replaced, driving "significant viewership and ratings." That, in turn, affects the price Turner can charge advertisers and lends competitive advantages in negotiating rights with other leagues, the company claims in its suit.
Turner said the NBA presented Turner with the deal terms it was willing to accept from Amazon for the rights to stream 64 regular season games, and at least 30 playoff games. On Monday, the media company responded with a letter stating it would match Amazon's offer and would agree to "the same material terms and conditions."
It said the NBA refused to honor Turner's match, prompting it to bring the suit.
The lawsuit may well hinge on the court's interpretation of matching rights, said Emarketer senior analyst Ross Benes.
“Warner Bros Discovery claims it can match Amazon's price. The NBA claims the Amazon portion is for streaming distribution, not linear,” said Benes, using the industry term for traditional television distribution. “The precedent on digital versus linear rights is not settled so the outcome will be in the eye of the beholder.”
Douglas Arthur, an analyst with Huber Research, questioned whether Turner could make money under the NBA’s new deal, which would represent a $700 million increase from its current contract with the league.
“To make money on the step-up, subscriber fees would have to go up a lot and WBD would have to hope that ad contracts would increase as well,” Arthur wrote Friday, in an investor note.
(Reporting by Harshita Mary Varghese and Dawn Chmielewski in Los Angeles; Editing by Shilpi Majumdar, Kirsten Donovan, Nick Zieminski and Marguerita Choy)
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