The finance and economics app, Zhitong Caijing, learned on Friday that Warner Bros. Discovery Channel (WBD.US) filed a lawsuit against the NBA in an attempt to preserve a series of live game broadcast rights.

TNT Sports, a subsidiary of Warner Bros. Discovery Channel's Discovery Channel, said in a statement, "Given the NBA's unreasonable refusal to match our third-party offer, we have taken legal action to enforce our rights. We firmly believe that this is not only our contractual right, but also in the best interests of fans who want to continue watching our industry-leading NBA content, and we provide them with choice and flexibility through our widely distributed WBD video priority distribution platform (including TNT and Max)."

It is reported that on Wednesday, the NBA officially announced the continuation of its partnership with Disney (DIS.US) and reached a new broadcasting rights agreement with NBC Universal, a subsidiary of Comcast (CMCSA.US), and Amazon (AMZN.US), ending its 40-year cooperation with Warner Bros. Discovery Channel's Discovery Channel.

The 11-year media rights agreement is worth about $77 billion, and as the value of live sports events has skyrocketed, this number is significantly higher than the previous agreement.

Therefore, Warner Bros. Discovery Channel has been trying to match quotations, competing with Amazon for NBA broadcasting rights, or seeking economic compensation.

In response to the lawsuit, NBA spokesperson Mike Bass said: "Warner Bros.'s allegations are baseless, and our lawyers will address these issues."

Warner Bros. Discovery Channel stated earlier this week that it had submitted a document to the league asking for a matching of one of its contents. Sources said this part of the content is Amazon's $1.8 billion annual quotation, which includes the broadcasting rights of regular season, mid-season championship, and some post-season games.

When the NBA signed its previous media agreement in 2014, it granted Warner Bros. Discovery Channel matching rights, a clause designed to give existing companies the final refusal right to retain their media partnership status.

Warner Bros. Discovery Channel decided to match the package offered by Amazon, rather than the $2.5 billion agreement reached by NBC Universal, which led the NBA to declare the matching right invalid on Wednesday. Warner Bros. Discovery Channel's bid for the package includes airing NBA games on its cable TV network TNT and simultaneous streaming on its streaming service Max. The NBA believes this is different from Amazon Prime Video, which only offers streaming services.

In a court document filed on Friday, Warner Bros. Discovery Channel argued that its matching rights should still apply to Amazon's package, as many of the events in that package had previously been aired on cable TV.

In its court documents, Warner Bros. Discovery Channel wrote: "The Matching Rights Evidence (MRE) further provides that, 'if TBS matches a third-party tender that includes cable television rights,' without any other existing company causing a match, then TBS shall have the exclusive right and obligation to exercise the exclusive rights of cable television as specified (and on the same terms) in the third-party tender. This is exactly what is happening here: Amazon has submitted a bid for the cable television broadcast rights defined in the MRE, and TBS has matched it. However, the NBA violated the agreement and refused to respect TBS's matching right."

In a letter sent to Warner Bros. Discovery Channel on Wednesday, the NBA pointed out that the contract language for matching rights in the 2014 agreement was the reason for its rejection of the proposal.

The NBA cited this clause: "If the company executing the existing contract matches a third-party tender that provides for the exercise of event-related rights through any specific form of audio and video combination issuance, then the executing company has the right and obligation to exercise such event-related rights only through the specific form of audio and video combination issuance (e.g., if a specific form of audio and video combination issuance is Internet issuance, then the matching executing company may not exercise such event-related rights through TV issuance)."

The value of NBA to TBS

Warner Bros. Discovery Channel CEO David Zaslav has said in 2022 that his company "does not necessarily have to own the NBA" if the economic situation is not good.

Zaslav said at an investor conference in November 2022, "In the sports field, we are tenants. This is not a good deal."

Nevertheless, Friday's lawsuit clarifies the value of NBA to Warner Bros. Discovery Channel's cable TV business. Owning NBA broadcasting rights is still valuable to the healthy development of Warner Bros. Discovery Channel's cable TV business. In recent years, as millions of Americans have canceled traditional pay TV and turned to a range of streaming services, Warner Bros. Discovery Channel's cable TV business has been affected.

The company stated in the complaint that "NBA games attract a huge audience and bring in considerable ratings because consumers are more likely to watch the live broadcast of the game in real time. This in turn affects the fees TBS and Warner Brothers Exploration Channel charge their advertisers and downstream distributors, who authorize TNT to transmit content to their customers. Therefore, NBA copyright enables TBS and Warner Brothers Exploration Channel to develop their own brands and reach a larger consumer group that only NBA games can bring. NBA television broadcast rights also give TBS and Warner Brothers Exploration Channel a competitive advantage over other program makers, especially in negotiations over sports broadcasting rights with other leagues."

Warner Brothers Exploration Channel believes that NBA has brought "intangible and incalculable benefits" to the company's business and requests "preliminary and permanent injunction relief to prevent NBA from licensing these unique and irreplaceable rights to Amazon." It also added that if it does not receive "fair relief," it hopes that NBA will provide "financial compensation."