David Zaslav just quieted his Wall Street critics as Warner Bros. Discovery shows it’s fine without the NBA

Warner Bros. Discovery CEO David Zaslav took heat for losing the NBA, but his plan may pay off.

It looks like Warner Bros. Discovery didn’t “have to have the NBA” after all.

A year and a half after that infamous quote from WBD CEO David Zaslav, the NBA’s broadcast partner of four decades was outbid by Disney’s ESPN, Comcast’s NBC, and Amazon for the league’s next TV deal, valued at $76 billion over 11 years.

Zaslav was widely chastised for allowing NBA rights to slip through his fingers after seeming to express indifference about their value at a time when live sports seem like the cable bundle’s only hope. Media analysts widely agreed that WBD underestimated NBC’s bid and would see the value of its TV networks take a major hit without the NBA.

But that didn’t happen. In fact, the media conglomerate has now managed to secure higher rates for its TV networks from Charter and Comcast, the two largest cable providers in the US, people familiar with the terms of the deal told B-17.

No NBA, no problem?

The consensus wisdom in the media world was that pay-TV providers would play hardball and demand lower affiliate fees for WBD’s networks, especially an NBA-less TNT. Shrinking affiliate fees and weaker ad revenue from lower ratings could be disastrous for the debt-riddled firm.

Instead, WBD struck a head-turning deal with cable giant Charter in mid-September in which it secured a flat rate for TNT and higher rates for other channels like CNN, HGTV, and Discovery. However, doing so took a key concession: giving away its Max streaming service for free.

The Charter deal was heralded as a success, with Zaslav a “clear winner” in the eyes of veteran media analyst Rich Greenfield of LightShed. Greenfield had previously said that if WBD could fend off a major decline in affiliate fees in its next deals, then “investor fears are misplaced.”

Still, there was another major test ahead: WBD’s negotiations with Comcast. Some observers thought WBD got a sweetheart deal from Charter since cable legend John Malone was on the board of both companies, but analysts thought rival Comcast would take no prisoners. Comcast CEO Brian Roberts would be aggressive in negotiations, LightShed’s Brandon Ross predicted.

Comcast and WBD surprised the industry on Monday when they announced they’d reached a carriage renewal deal. The financial terms were not disclosed, but people familiar with them told B-17 that Comcast’s affiliate fees for TNT would remain flat and it would pay slightly more for WBD’s other networks. In return, Comcast customers in the US, UK, and Ireland can get Max free.

The terms WBD and Comcast agreed to are remarkably similar to WBD’s deal with Charter, and each came together more than a year before key deadlines. So-called “most favored nation” clauses mean that cable providers can get similar terms as their competitors, but some analysts thought Comcast would get a better deal that Charter could match in retrospect.

Company insiders seemed pleased with the deals, though the WBD side seemed especially thrilled. People within the company think they’ve been vindicated after taking heat for losing the NBA.

In fact, those with knowledge of WBD’s thinking believe the company could actually be better off without the NBA now that it avoided carriage fee cuts. Instead of paying up for the NBA, whose ratings are down so far this season, the company can invest in other sports or pay down debt.

Unlike Amazon or Comcast, which have other businesses that can help subsidize their NBA rights, WBD would have needed its NBA investment to pay for itself — mainly through carriage fees, advertising revenue, and subscriptions to Max, which airs the NBA on TNT. And the company wasn’t sure that would be possible if it paid significantly more money for fewer games.

So while the WBD did hope to keep the NBA at the right price, it was prepared to walk away — hence Zaslav’s surprisingly blunt quote. By opting for Plan B, WBD sent the message that what matters most is serving shareholders by keeping costs in check and paying down debt.

WBD shares are up 58% since mid-September, which suggests that the market is rewarding the company for passing on the NBA — even though doing so was controversial.