Discovery to sue NBA

Discovery will sue the National Basketball Association (NBA) in New York after the league rejected its matching bid for TV broadcasting rights, a source familiar with the matter said on Thursday.

The NBA on Wednesday rejected an offer from Warner’s TNT sports division — ending four decades of partnership — and announced new agreements with Walt Disney’s ESPN, Comcast-owned NBCUniversal and Amazon.com in an 11-year deal worth $77 billion.

Warner Bros Discovery and the NBA did not immediately respond to Reuters requests for comment.

Shares fell more than 5% and the company that was formed in 2022 when WarnerMedia and Discovery merged was set to lose over $1 billion in market value, if losses hold.

After the loss of NBA rights, Macquarie Equity Research downgraded the stock to “neutral”. “NBA rights were important in our view to the future success of the Max streaming service,” its analysts said, adding the loss may hasten the downturn in linear networks too.

Some analysts said suing the NBA could hurt the company’s competitiveness in the long run.

“When other leagues have rights come up, they will keep in mind how tumultuous the NBA and WBD relationship became when they accept WBD’s bids,” said Ross Benes, television and streaming analyst at eMarketer.

“WBD is desperate so they will pursue all possibilities to retain the NBA. A lawsuit would make the end of the partnership shift from awkward to hostile.”

Rosenblatt analyst Barton Crockett said losing the NBA could pressure Warner to be more open about breaking up their assets.

The current composition as a consolidated public company is not working in Warner’s favor, BofA Global Research analysts had said in July, while suggesting a strategic review, including sale, to unlock more shareholder value.

CNBC first reported that Warner has sued the NBA.