Warner Bros. Discovery (WBD) finds itself entangled in a lawsuit filed by investors, accusing the media giant of concealing the potential consequences of losing NBA broadcasting rights. The legal action, submitted as a proposed class action in New York federal court, alleges that WBD misrepresented the financial fallout tied to its failure to secure NBA regular and postseason broadcasting rights for its TNT network.
The lawsuit stems from WBD’s significant $9.1 billion goodwill impairment charge, recorded in August, a month after the NBA declined its offer to match a lucrative deal awarded to Amazon. This charge, reflecting the devaluation of WBD’s TV networks, coincided with a steep 9% decline in the company’s stock value in after-hours trading.
Longstanding NBA Partnership and Contentious Negotiations
TNT, a long-term NBA broadcast partner since 1988, had been paying approximately $1.2 billion annually under its existing agreement. However, earlier this year, negotiations to renew the contract faltered during WBD’s exclusive window. The NBA instead finalized new multi-billion-dollar deals with Disney, NBCUniversal, and Amazon, signaling a shift in its media partnerships.
The investors’ complaint highlights how WBD allegedly downplayed risks associated with losing NBA rights, despite the significant impairment charge that followed. In financial filings, the company had indicated that such risks “would not have a material adverse effect” on its operations—a statement now being challenged as overly generic and dismissive of real threats.David Zaslav, WBD’s CEO, had previously painted an optimistic picture of the company’s trajectory. During a February earnings call, he described discussions with the NBA as “constructive and productive,” expressing confidence in the company’s ability to achieve growth. However, the lawsuit points to these comments as evidence of a disconnect between the public narrative and internal realities.
In addition to facing this investor lawsuit, WBD had earlier sued the NBA after the league declined its matching offer for a portion of the media rights package. A subsequent settlement allowed ESPN and ABC to air Inside the NBA starting next season, while TNT Sports will continue producing the show with its iconic hosts, including Charles Barkley and Shaquille O’Neal.
The lawsuit also scrutinizes comments by Gunnar Wiedenfels, WBD’s chief financial officer, who acknowledged during the company’s second-quarter earnings call that negotiations over sports rights, particularly with the NBA, were “triggering events” leading to the reevaluation of its business. He detailed how these developments led to the multi-billion-dollar impairment charge.
To prevail, investors must prove that WBD executives knowingly issued misleading statements or acted recklessly regarding available information. As the legal battle unfolds, it underscores the financial and reputational risks tied to high-stakes media rights negotiations in the competitive sports broadcasting industry.
WBD has not yet commented on the lawsuit.
