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Advanced talks with NBC, Amazon and ESPN spotlight the staggering value of sports rights and could portend industry changes

The National Basketball Association entered its first TV negotiations in a decade with a problem: Its main business partners seemed to be on shaky footing.

TNT parent Warner Bros. Discovery WBD 0.73%increase; green up pointing triangle was saddled with more than $40 billion in debt, while ESPN parent Disney DIS -1.77%decrease; red down pointing triangle was battling a Wall Street activist over its slumping stock. Each company was reluctant to pony up the full premium the league wanted. But the NBA had quietly laid the groundwork with two other potential partners, Amazon AMZN 1.08%increase; green up pointing triangle and NBC, which pounced as soon as they got the chance.

Now, with negotiations progressing as the Boston Celtics and Dallas Mavericks prepare to face off in the NBA Finals, the league is on track to score big: It is closing in on deals with NBC, ESPN and Amazon that would bring in about $76 billion in media revenue over 11 years, people familiar with the discussions said.

The NBA sweepstakes has turned into a defining moment for the TV industry, highlighting the anxieties of traditional media companies about the collapse of cable and their uncertain financial futures in the streaming world. It has put front and center the paradox that sports content is outrageously expensive but also critical to own in an industry in which it is one of the few reliable ways to draw in audiences.

“Entertainment is a swamp, and sports is the only firm ground,” said former Fox Sports chief David Hill.

NBC is near an accord with the league to pay an average of $2.5 billion a year, people familiar with the deal talks said. It would show around 100 games per season, with about half airing exclusively on the Peacock streaming service, reflecting a major bet on the future of streaming. Games would air on NBC on Tuesdays and Sundays when there isn’t a conflict with NBC’s “Sunday Night Football.”

Amazon’s $1.8 billion-a-year package would include regular-season and playoff games, the new NBA in-season tournament, and the “play-in” games in which teams compete for the final playoff spots. It also would have a share of the conference finals, which the media partners would split in a rotation, the people familiar with the terms said.

Disney would retain an NBA package and would continue to air the NBA Finals, with payments averaging about $2.6 billion a year, people familiar with the terms say, up from $1.5 billion under the current deal. Disney would get fewer games than under its current deal. ESPN’s deal will allow the company to air games on its direct-to-consumer streaming service, which is set to launch in 2025.

Warner, led by Chief Executive David Zaslav, still has a right to match a rival package, and the league could always carve out a new package for the company in the final stretch, but its options are limited.

The deals would go into effect after the 2024-2025 season and would include rights to WNBA telecasts, as that league grows in popularity with the rise of rookie sensation Caitlin Clark. Owners must approve the deals, and any announcement could still be a few weeks away.

The deals are clarifying the media industry’s pecking order and could set the table for big mergers down the road. For the league, the deals would translate into a windfall that would help fund blockbuster contracts for stars such as Jayson Tatum and Luka Doncic in the coming years.

The NBA is on track to increase its annual fees by more than 2.5 times under the new deal, to an average of nearly $7 billion. The NFL roughly doubled its fees under its last deal to around $10 billion a year. The NBA has much lower average ratings than the NFL, but it has more games and a young audience that is important to advertisers. It is very popular abroad, which is a big motivator for Amazon’s Prime Video.

“Yes, there’s risk at these fee levels given recent ratings, but they are also looking at the downside of the games being on competing services. Which is worse?” said Brent Magid, CEO of media consulting firm Magid.

Bringing in Amazon

TNT and ESPN each had a chance to renew their NBA deals in a monthslong negotiating period that ended April 22. Though the negotiations during that time were supposed to be exclusive, the NBA had the networks’ blessing to reach out to Amazon to put together a streaming package, people familiar with the talks said.

Adding a streamer to the mix, and shifting some games out of the TV packages, was an obvious way to hold down costs for ESPN and TNT. And for streamers, just like TV networks, sports have become an anchor to help bring in subscribers.

By the time Disney CEO Bob Iger met NBA Commissioner Adam Silver at a mid-April event hosted by veteran media mogul Jeffrey Katzenberg in Montecito, Calif., the two sides were each clear that ESPN would wind up remaining a league partner, people familiar with the situation said.

The situation was different at Warner. The company had a chance to commit around $2.2 billion a year for a deal but walked away, unhappy with the price relative to the value of the package, say people close to the talks.

In Warner’s view, the league has taken too much valuable content, including playoff games and the play-in tournament, out of its potential package to put in Amazon’s.

When the April 22 deadline passed, Amazon already had the outlines of its deal in place. Comcast’s NBCUniversal, meanwhile, had long ago signaled that it was interested. The company quickly submitted a $2.5 billion-a-year bid for the other TV package.

The parties spent weeks haggling over details—NBC wanted the Finals but fell short.

NBC’s coming cuts

Executives inside NBCUniversal differ over the wisdom of the deal, with some saying spending so much on the NBA is a bad idea and others saying it will supercharge NBC’s streaming business. The long-term value of NBA rights will hinge partly on how many subscribers Peacock is able to sign up.

Pricing is also a factor: NBC would likely raise prices for Peacock once it has the NBA, a person familiar with the planning said, to boost revenue as sports costs grow.

NBC entertainment executives are bracing for significant budget cuts. NBC won’t need as much prime-time entertainment content, with the NBA taking that real estate a few days a week, and Peacock’s original content budget will likely be reduced significantly, entertainment executives said.

Other potential areas to mine for savings include Peacock’s content deals for movies and TV shows with the Universal studio.

The potential deal has created some tensions between the units overseen by Mark Lazarus, chairman of the NBCUniversal Media Group, which is leading the NBA charge, and Donna Langley, who oversees movie and television entertainment in her role as chairman of NBCUniversal Studio Group and chief content officer, people familiar with the situation said.

The company envisions that the NBA will ultimately help Peacock, which lost $639 million in the most recent quarter, on its path to profitability.

Beyond the financial benefits, taking the NBA away from TNT would weaken an NBC competitor and, in so doing, deal a blow to Venu Sports, a sports-streaming venture being planned by Warner, Fox and Disney.

‘They screwed this thing up’

Warner’s Zaslav, whose rocky tenure has been marked by steep cost cuts and a sliding stock price, faced a quandary in the NBA talks.

Without those broadcasts, the company’s TNT network, which has counted on basketball to drive ratings and revenue since 1988, could take a major hit. Cable distributors likely wouldn’t be willing to pay as much to offer TNT. When The Wall Street Journal first reported NBC’s $2.5 billion-a-year bid on April 29, Warner’s shares fell about 10%.

But Zaslav and his top lieutenants calculated that the ratings performance of the NBA on TNT didn’t justify a major increase in fees for a smaller package of games, say people close to the company.

Zaslav maintains that Warner can match either NBC’s or Amazon’s deal. Enforcing those rights might require a legal battle, and Warner might wind up paying a higher sum than it passed up in April.

“Turner decided they wanted to take a risk with an auction,” said Patrick Crakes, a sports media consultant and former senior executive at Fox Sports. “That made the rights more expensive.”

Warner is already plotting how to use the potential savings from not being an NBA partner to buy other sports content. It recently cut a deal with Disney’s ESPN to sublicense some college football playoff games. Warner executives note that TNT also has rights to Nascar, the National Hockey League, Major League Baseball and the March Madness college basketball tournament.

Warner would relish the opportunity to acquire CBS from Paramount Global as that company explores a sale that could eventually result in asset sales, say people familiar with the situation. That would help Warner consolidate ownership of March Madness, which it now splits with CBS, and it would make Warner a partner of the NFL.

The departure of the NBA would be a huge blow to the people involved in producing the games for TNT and the content that surrounds it, including the acclaimed show “Inside the NBA,” which features retired stars Charles Barkley, Shaquille O’Neal and Kenny Smith.

“These people I work with—they screwed this thing up, clearly,” Barkley said on “The Dan Patrick Show,” referring to company leaders involved in the NBA talks as “clowns.”

He criticized Zaslav’s remark at an investor conference in November 2022 that the company didn’t need the NBA to prosper. “Well, he don’t need it. But the rest of the people…who work here, we need it,” Barkley said.