David Zaslav risked Warner Bros. Discovery's future by passing on the NBA

Warner Bros. Discovery CEO David Zaslav shocked Wall Street and is hoping to do so again.

Warner Bros. Discovery is in what appears to be a contentious public divorce with the NBA, but after a surprise deal with cable giant Charter, the company might not be losing in the breakup.

NBA rights proved to be a hotter commodity than many expected — seemingly including WBD CEO David Zaslav. The polarizing media mogul was panned as rival NBCU stole its slate, and while the deal was expensive, analysts feared that losing the NBA would mean TV providers would pay much less for WBD’s networks.

But WBD’s first major test of life without the NBA was anything but an airball, as Charter agreed to pay the same rates for an NBA-less TNT in its next deal and higher rates for WBD’s other networks, like HGTV and Food Network, B-17 confirmed. The catch is that WBD will now give Max — including its coveted HBO content — for free to all Charter customers who want it (though that could boost the streamer’s advertising business).

WBD likely hopes that the deal will serve as a precedent in its upcoming carriage negotiations with other pay-TV providers, including important players like Comcast and DirecTV.

WBD didn’t respond to a request for comment.

The Charter deal is a coup for WBD

Wall Street has had little confidence in Zaslav and company lately. WBD shares had been down 40% in 2024 alone, and some believed breaking up the conglomerate was the best option.

But now a few media analysts say that if WBD could receive the same rates for its networks without the NBA, the company’s fortunes will be looking up.

“Can WBD get affiliation deals done without dramatic reductions in affiliate fees? If they can execute, investor fears are misplaced and the stock decline is overdone,” Rich Greenfield of LightShed wrote in an August 8 note after WBD’s Q2 earnings report.

After the news that WBD had done just that with Charter, Greenfield heaped praise on WBD.

“The clear winner is David Zaslav and Warner Bros. Discovery,” Greenfield wrote in a September 12 note. “WBD investors have grown increasingly concerned that Turner’s loss of the NBA (still being litigated, but we doubt they win), would lead to a dramatic reduction in affiliate fees to TNT and Turner more broadly, or even a loss of carriage.”

Craig Moffett of MoffettNathanson also loved the deal, telling B-17 in an email that both WBD and Charter got value.

“We also expected an uphill battle for TNT, if not the entire Turner portfolio, to maintain rates in the face of losing NBA rights next year,” Moffett wrote in a September 12 note.

Moffett added: “Now that the Charter deal is in place, we think it helps remove one of the bigger risks to WBD, i.e. that the linear cable network cash flows decline will take another significant step down post-2025 because of a change in trajectory in the rate of decline of affiliate fees.”

Comcast is prepared for combat, but Zaslav could get another win

No pay-TV provider is going to take it easy in the next round of negotiations with WBD, but some industry experts think Comcast could be especially tough.

Charter and Comcast are both broadband providers with TV businesses, but the similarities stop there as far as negotiations with WBD are concerned.

Comcast — which owns NBCU — outbid WBD in the NBA deal to boost its broadcast networks and streaming business, but also likely in part because it believes it can pay less for WBD’s cable networks in its next deal. With that in mind, there’s little doubt that Comcast CEO Brian Roberts will play hardball.

“Part of the reason Roberts’s NBC Universal stole the NBA from Zaslav in the first place was to stick it to him in the next distribution deal,” entertainment journalist Matt Belloni of Puck News wrote on Thursday. “I don’t think that strategy has changed, and if Comcast scores reduced fees, Charter will start waving its favored-nations clause to demand those better terms for itself.”

As great as WBD’s deal with Charter may be, Greenfield doesn’t believe Zaslav is out of the woods. If Comcast — or another pay-TV provider — gets better terms on affiliate fees for WBD’s networks, Charter may get them also due to so-called “most favored nation” rules.

“If Comcast can drive down the affiliate fees paid to WBD after Comcast’s NBCU took the NBA away from Turner, Charter’s MFNs would reduce the fees it has to pay for WBD’s networks,” Greenfield wrote. “The obvious question is: why didn’t Charter go to war with WBD vs. relying on Comcast to do the harder work?”

Just how hard Comcast pushes is an open question. Being left out of the now-troubled Venu sports streaming service may add fuel to the fire.

“You have to think Brian Roberts is going to be aggressive, because he has to pay for the NBA and still might have a Venu vendetta,” LightShed analyst Brandon Ross wrote.

Greenfield has a different take, writing that Comcast doesn’t typically play for the kill during carriage disputes, unlike DirecTV. He doubts Comcast will hold WBD over a barrel on rates or drop its networks, though he wrote that “they certainly felt threatened by the launch of Venu and WBD’s decision to bundle Max with Disney+ and Hulu.”

If Zaslav surprises the Street again with his Comcast deal, his company may have better days ahead.

“We just struggle to believe Comcast will push that hard, but maybe Brian Roberts and team will surprise us,” Greenfield wrote in an email to B-17. “If not, today was a clear win for Zaslav and WBD.”