As much as talk about the impending loss of TNT’s NBA rights package was largely sidestepped during Warner Bros. Discovery’s third-quarter earnings call Thursday, the results at the cable networks segments went a long way toward underscoring why the league has been such a crucial part of the company’s programming strategy.
WBD’s global TV division generated $1.49 billion in advertising revenue on the quarter, which marked a 13% year-to-year drop, as domestic sales fell 21%. And while the third-quarter declines can be chalked up to a soft stateside ad market, the contrast with the results of the April-June quarter perhaps best demonstrates the value of the NBA property.
During the second quarter, when TNT televised 42 NBA postseason games—a slate that included the five nights of the Western Conference Finals—WBD whipped up $2.21 billion in ad revenue, or $724 million more than it earned in the subsequent, non-NBA quarter.
The same dynamic played out a year ago, as WBD cranked out $2.45 billion in ad sales during its big NBA playoff quarter, a haul that overshadowed the following July-September period to the tune of $739 million. As much as it should probably come as no surprise that the period which coincides with the NBA’s playoff push is always WBD’s strongest ad sales quarter, that annual bonanza is expected to dry up after next year, when Comcast’s NBC Sports pushes TNT out of the arena.
At the same time, the demise of WBD’s longstanding relationship with the NBA will save the company a bundle on rights fees. Under the terms of its legacy contract, WBD will pay the league more than $1.2 billion to carry its final season of pro hoops.
Last month, NBA commissioner Adam Silver suggested that the lack of a “longtime relationship with the people currently running Warner Bros. Discovery” may have contributed to the dissolution of the partnership. In other words, things may have gone in a quite different direction if former Turner Sports boss David Levy, who’d fostered a long and mutually rewarding alliance with Silver and his precursor David Stern in his three decades at the company, hadn’t flown the coop following AT&T’s acquisition of Time Warner in 2019.
Wall Street analysts mostly left any talk of the NBA on the bench during the call, but when asked how the league’s impending defection might impact WBD’s upcoming carriage talks with Comcast’s pay-TV division, CEO David Zaslav seemed confident that his company will be able to hold its own during those negotiations. “We don’t talk about timing or really about specific deals, but [Comcast chairman and CEO] Brian [Roberts] and I have been in business together for almost 40 years,” Zaslav said. “We’ve done all kinds of deals … in order to create value for both companies. … [and] I expect that we’ll be doing a lot more stuff together in the future.”
Many analysts believe Roberts will look to squeeze Zaslav on WBD’s affiliate rates when the company’s carriage deal with Comcast comes up for renewal at the end of next year. In the absence of six months of NBA programming, WBD may struggle to justify the high rates it charges operators to carry its signals; TNT alone boasts a fee of $3 per sub per month, which adds up to some $2.43 billion in passive annualized revenue. (As a caveat, many of these Wall Street projections seem to be predicated on painting Roberts as an almost cartoonishly Machiavellian figure, an assessment that doesn’t quite square with observable reality.)
While WBD has filed a breach of contract lawsuit against the NBA, in which it claims to have been unrightfully pushed aside by newcomer Amazon Prime, that legal wrangling is unlikely to have a material impact on the league’s media partnerships after TNT’s final season wraps this spring. Per the terms of Amazon’s 81-page contract with the NBA, the streamer/online retailer will begin carrying at least 60 regular-season games starting in October 2025, as well as a generous allotment of playoff games.
All told, the NBA will extract some $75.9 billion from rightsholders Disney, Comcast and Amazon over the course of the 11-year deal, which will run through the 2035-36 campaign.
WBD’s networks unit saw revenue improve 3% on the quarter to $5.01 billion, although the stateside business faced not-insignificant headwinds. Distribution revenue fell 7% to $2.6 billion, driven by a 9% drop in domestic linear pay-TV subscribers, a loss that was partially offset by a 5% gain in U.S. affiliate rates. Ad revenue dropped 13% to $1.49 billion, which marked a loss of $219 million versus the year-ago period, as domestic TV ratings plummeted 21%.
At the direct-to-consumer unit, revenue increased 8% to $2.63 billion, as the streaming platform Max added a record 7.2 million customers, bringing its global sub count to 110.5 million. The U.S. market accounted for 52.6 million of those subscribers, with WBD commanding an ARPU of $11.99. (By comparison, Max’s international subscriptions generated an average return per user of $4.05.)
