TNT’s turnover or an NBA foul? In July, Warner Brothers Discovery (“WBD”) and its subsidiary Turner Broadcasting System (“TNT”) sued the National Basketball Association (“NBA”) for breach of contract and to retain its media rights. The lawsuit’s basis is that the NBA contracted with Amazon Prime Video (“Amazon”) to sell its media rights after TNT’s contract expired. TNT, as was their contractual right, claimed they matched Amazon’s offer and that the NBA rejected the match.
The contract provides that if the NBA receives an offer for its media rights (such as the Amazon Offer) it must notify TNT, which then has five days to renew its media rights contract by matching the other offer (in this case TNT had to match Amazon’s offer). Additionally, the contract provides that neither the NBA nor TNT may take action to circumvent the performance of its obligations.
TNT’s four causes of action against the NBA include (1) breach of contract seeking specific performance, or damages in the alternative; (2) declaratory relief that it properly matched Amazon’s offer and now has the rights to televise such NBA games; (3) breach of duty not to circumvent TNT’s matching rights; and (4) permanent injunction blocking the NBA from proceeding with the Amazon contract.
Upon filing the suit, TNT publicly expressed that matching Amazon’s deal was not only their contractual right but in the best interest of NBA fans.
TNT further alleged that Amazon’s offer included three “poison pills” rendering it impossible for TNT’s ability to match Amazon’s offer. Poison pills are legal tactics used by selling parties to deter takeovers by unwanted companies meant to frustrate acquisitions of control. “The Amazon offer required that NBA games be shown on a platform that also shows NFL games,” where TNT does not have NFL media rights. The NBA required WBD to move $3.2B into escrow within five days of Amazon’s signing agreement; the NBA knew WBD had only $2.98B at its disposal. Matching Amazon’s deal also included NBA termination rights worth up to $4.5B ‘if either S&P or Moody’s were to downgrade WBD’s credit rating below a certain threshold,” which, according to the complaint, “is much more likely for WBD than it is for Amazon given the relative size and health of both companies.”
Poison pills are not dispositive in concluding a contract breach occurred. However, these three provisions in the Amazon Offer that the NBA claims TNT failed to materially match support TNT’s assertion that the NBA circumvented the terms of their 2014 Offer.
The New York Supreme Court decision in this case has marked implications for both NBA viewers and contract law. For NBA viewers, the court’s decision could remove the “Inside the NBA” team from the broadcast. For contract law, the court’s decision could wrinkle the definition of a “material” term in a contract and how strictly such circumvention clauses will be followed. The case remains in the preliminary stages of litigation. If the parties would go to trial, the process would likely be expedited to resolve by the beginning of the 2025-2026 NBA season. For now, the ball remains in the chambers of the New York Supreme Court.
David Hayden is a second-year law student at Wake Forest University School of Law. He holds a B.A. in Economics from the University of Wisconsin – Madison.
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