Wall Street welcomes WBD’s decision to end dispute with NBA positively

Wall Street analysts are mostly positive after Warner Bros. Discovery (NASDAQ:WBD) settled its legal disputes with the National Basketball Association.

On Monday, the NBA and WBD reached a settlement where the league will proceed with Disney (DIS), Comcast’s NBCUniversal (CMCSA), and Amazon (AMZN) as its media partners, ending its 40-year stint with Turner Sports as the official broadcaster of the games in the U.S. after this season.

WBD will be able to show the NBA games in certain countries outside the U.S. and have free access to NBA highlights for its media properties.

The company and ESPN also reached a licensing agreement through which, beginning with the 2025-2026 season, “Inside the NBA” will air on ESPN/ABC, but TNT Sports will continue to produce the show.

In exchange, TNT Sports will receive rights to produce and broadcast 13 exclusive Big 12 football games and 15 Big 12 basketball games.

“In short, this appears to be as positive of an outcome as investors could have hoped for in a scenario where WBD walks away from distributing any games domestically. WBD does not have to absorb the significant step up in rights fees that would have been required to maintain carriage… While still early and a looming renewal with CMCSA still remains, the financial impact for WBD losing the NBA appears to be tracking much better than expected,” Bank of America said in their November 18 note.

BofA also thinks the announcement could yield a healthy annual profit for the company. They noted that WBD continues to add sports rights to its portfolio, which in aggregate, should help partially offset the loss of the domestic NBA distribution.

Analysts at Deutsche Bank also view the settlement announcement as “a very positive outcome” for Warner and noted that the licensing agreement between Disney and WBD is essentially a rights swap, with the company not laying out any cash for the Big 12 rights, which would help save the company a lot of money.

“When coupled with the savings from receiving global non-game content rights and some international rights to broadcast games as part of the settlement, we believe these announcements could add ~$100M in incremental EBITDA for Warner, excluding any value attributable to future affiliate renewals or incremental streaming net adds/subscription revenue,” Deutsche Bank said in its November 19 report.

Evercore analysts said Monday they see the announcement as a healthy exchange of value between each other, saying the parties “move on from the lawsuit to a productive commercial agreement and continue the relationship that began in 1984.”

WBD stock is down nearly 20% so far this year, while the S&P 500 is up more than 23%.