Warner Bros. Discovery’s Reach May Heat Up Sports Rights Bidding

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With its merger complete, expect the newly formed Warner Brothers Discovery (NASDAQ: WBD) to become an even more aggressive bidder for top live-sports rights in the months ahead. Home to Turner Sports and Eurosport, and perhaps eventually to BT Sport, too (BT and Discovery agreed to merge BT Sport and Eurosport in February), the company is now positioned to “offer some things to leagues developmentally, outside of their home markets, that are not currently available to them,” Patrick Crakes (principal, Crakes Media) said. The company will also come to the negotiating table with the ability to deliver content across present and future distribution platforms, and the capital needed to compete for major rights packages. “WBD will have serious interest in every strategic property in some fashion going forward,” Crakes predicted. “Even those that in the past didn’t fit their smaller, but super high quality content portfolio.” A source with knowledge of the combined entity’s thinking confirmed WBD intends to be “very active” in its pursuit of premium sports rights moving forward. The company recently disclosed it is looking to fill the role of chair and CEO of Warner Bros. Discovery Sports.

JWS’ Take: Turner Sports has been active on the acquisition front over the last two years. The broadcaster renewed and expanded its relationship with MLB, inked an eight-year rights agreement with the NHL and added the rights to nearly all U.S. men’s and women’s national team qualifiers and friendlies (World Cup and Olympic matches are not included).

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The company has already demonstrated its intent to be a major player in sports, but the merger is expected to “super charge” things. “When it comes to live sports distribution, they are now powerful in Europe [with Eurosport], in the United States [with Turner Sports] and in Britain and Ireland [with BT Sport],” Crakes said. That global footprint should open up new opportunities.

Comcast (which owns Sky Group), Disney (which owns Disney+ Hotstar, along with the Fox Sports Latin America and Fox Sports Asia channels) and Paramount all control multiple sports assets around the world, too. But Crakes believes WBD’s “clean management structure” will enable it to organize, manage and distribute broadcast rights across countries more efficiently than those companies can. “When it is a property they want, they will be able to present the rights owner a global plan that is cogent” (think: joint international bid).

Amazon and Apple operate globally with clean management structures, too. But because those companies lack linear distribution platforms, they are not able to deliver rights owners the reach and high quality distribution others can. Of course, neither has really shown a willingness to invest heavily in sports at scale yet.

Having multiple distribution platforms, in multiple markets, means WBD can offer rights owners the ability to both reach the masses and the next generation of cord-cutting fans. It also means the company has “lots of routes” to monetization, using “its pay-TV alliances and a beefed up digital platform to pay for premium rights,” Crakes said.

The presence of another serious player in rights negotiations should further drive up the value of live sports content. Well, at least for some properties. “It’s going to make the tippy top stuff worth more than ever,” Crakes said. “If you are the NBA, this [merger] couldn’t have happened at a better time. Your partner needs content, you are the No. 1 piece of strategic content on the Turner platform, and you’re also an international league, and they have international assets.” The NBA’s existing deals with Disney and Turner expire following the 2024-2025 season.

The English Premier League is another league expected to benefit. “Now it has a competitor for NBC in the United States, who also has U.K. and European assets,” Crakes said. “The league can consider splitting up the package in the U.S. [come 2025], as it has done the U.K,” to grow rights revenues. Remember, the company will already be in business with the league via its ownership of BT Sport.

While top leagues like the NBA and EPL should see the value of their rights increase with WBD in the mix, its presence in negotiations is unlikely to have much of an impact on tier-two and tier-three properties. That is because the tier-ones are “gobbling up nearly all the growth,” Crakes said. “That is why you see the U.S. Soccer [men’s and women’s National Team] rights worth just [under $30 million per year].”

While tier-two and -three leagues are unlikely to experience a rights-fee increase with another global bidder in the market, WBD’s presence does create additional distribution options for those properties. And as Crakes noted, distribution “is all [many of them] need to make their models work. So this is great for [less prominent leagues], too.”

In addition to the NBA and EPL, the World Cup seems like an obvious fit for WBD. Serie A, Bundesliga, Ligue 1, Super League and Six Nations would also seemingly be “attractive” future options for a company taking a global distribution approach. “They will be able to say to a rights owner, ‘We can do your home market and your developmental market in the United States, and we’re going to do it together,’” Crakes said.

The NFL, NHL and MLB, which are all working to develop a presence in the U.K. and Europe, would seemingly make sense for the company, too. But those leagues recently signed new broadcast deals and the bulk of their rights are tied up in the short term.

Turner has historically been selective with sports rights acquisitions, pursuing only the most premium of properties. The World Cup would fit seamlessly into the portfolio, but it is harder to envision European soccer and rugby matches airing on TNT and TBS. As Crakes reminds, however, having multiple distribution platforms in a given market provides a level of flexibility. “The championship games [for those leagues] and select regular season and playoff games can be on [linear], and the rest of it can be distributed digitally on the new digital platform or on high quality HBO Max.”

In fact, multiple distribution platforms create a need for more live sports content. Crakes expects this will inevitably lead WBD to invest in more lower tier-one, tier-two and tier-three assets. The distribution mix (i.e. linear to digital) will look different for each property.

If WBD’s trans-Atlantic sports strategy works, expanding into Asia seems like a logical next step for the company. “Some of the most valuable properties in Asia are European soccer and rugby leagues,” Crakes said. Of course, if it is buying up premium rugby rights, Australia and New Zealand would be logical markets to expand into, too.

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