Investors are calling foul over Warner Bros. Discovery’s loss of its NBA media rights deal.
A lawsuit filed this week in New York federal court alleges that shareholders suffered “significant losses and damages” over the company’s inability to hold onto its NBA contract, which prompted Warner Bros. Discovery to take a $9-billion write-down in the value of its basic cable networks, including TNT, which had carried NBA games since 1989.
The shareholders led by Richard Collura, are seeking class action status. They accuse Warner Bros. Discovery Chief Executive David Zaslav and Chief Financial Officer Gunnar Wiedenfels of allegedly making misleading statements leading up to the news that the company would lose its longtime package to Comcast’s NBCUniversal and Amazon’s Prime Video.
The lawsuit alleges that company executives should have recognized that the loss of the NBA rights would prompt a reevaluation of its business prospects and spur goodwill write-downs. The lawsuit claims Zaslav overstated the company’s prospects of retaining the NBA when he addressed the matter on earnings calls.
Attorneys are seeking shareholders that owned Warner Bros. Discovery stock from Feb. 23 to Aug. 7 to join as plaintiffs in the suit.
A representative for Warner Bros. Discovery declined comment on the suit.
Warner Bros. Discovery’s stock tumbled in May after news broke that NBCUniversal was poised to claim the coveted rights package. The stock cratered again in August when Warner Bros. Discovery took the write-down of its cable channels. The company’s share price slipped below $7 in August, but in recent weeks has regained ground.
The stock closed Tuesday at $10.11 — marking a 13% decline this year.
After the new 11-year, $77-billion media rights deal was announced, Warner Bros. Discovery sued the NBA, claiming that the league breached its current deal by allegedly refusing to honor Turner’s rights to match an offer from Amazon Prime Video for streaming rights.
Amazon’s package will put regular season games, the NBA Cup and playoff games on its Prime Video streaming service starting in the 2025-26 season.
Warner Bros. Discovery settled the suit on Nov.18. As part of that arrangement, the company will continue to produce its popular studio show “Inside the NBA,” but it will run on Walt Disney Co.’s ESPN beginning next season.
Along with the ESPN agreement, the legal settlement keeps Warner Bros. Discovery in the NBA business, with extensive rights to highlights in the U.S. and live game coverage in some European and Latin American markets.
Warner Bros. Discovery President and CEO David Zaslav attends the premiere of HBO’s “House of the Dragon” Season 2 on , June 3 in New York.
(Evan Agostini / Invision / Associated Press)
During its second quarter earnings call, the company said its networks, including CNN, TNT, Food Network and Animal Planet, were worth $9 billion less than they were two years ago. The write-down brought into sharper focus the collateral damage of consumers’ shift from pay-TV subscriptions to streaming video platforms.