Warner Bros. Discovery asked the U.S. District Court for the Southern District of New York to dismiss a shareholder lawsuit accusing the company of misleading investors on the impact of its loss of NBA media rights in a motion obtained by TheWrap and filed last Friday.
In November, Richard Collura filed a class action lawsuit on behalf of investors who acquired WBD securities between Feb. 23 and Aug. 7, who experienced “significant losses and damages” caused by fallout from the media giant’s rights negotiations with the sports league.
The suit, which names CEO David Zaslav and CFO Gunnar Wiedenfels as defendants, alleges Warner violated securities laws by making “wrongful acts and omissions” through “misleading” SEC filings, press releases and other market communications for the company. It adds that the pair deliberately concealed “adverse facts” that had not yet been disclosed and the picture they painted was “materially false.”
Collura specifically challenges seven statements, including characterizing the negotiations as “constructive” and “productive,” noting that they had matching rights in the event that they failed to reach an agreement during the exclusive negotiating period, and Zaslav’s infamous 2022 comment when he said WBD did not have to have the NBA.
But in a July 11 filing responding to the allegations, WBD argues that the public statements were “self-evidently true and none predicted the outcome of the negotiations” and that the vast majority of them happened well before negotiations with the NBA failed and during a period when “everyone knew (and publicly discussed) that there was a possibility that WBD could lose the NBA rights.”
It argued that the company’s supposed failure to disclose the importance of the NBA rights was “directly contradicted by the wall-to-wall media coverage of the negotiations,” as well as its “steady drumbeat of disclosures” which “expressly warned investors about the possibility of losing the NBA rights and acknowledged that they were planning for various potential outcomes.”
As for the matching rights, WBD said the competing bids to match did not exist until around two months after the statements in question, which “merely stated the true fact that matching rights existed.”
“They did not say if WBD would be able to exercise those rights. In fact, the speculation about whether WBD could effectively exercise those rights was also widely discussed in the media,” the company added. “Needless to say, there are no
allegations of fact that support the claim that WBD could not match competing bids that were months away from being proposed.”
Ultimately, WBD says that any allegations supporting an argument of “fraud by-clairvoyance” and “glaringly absent.”
“There is simply no allegation of motive or other circumstantial evidence establishing the required cogent and compelling inference of fraudulent intent—let alone one sufficient to overcome the competing and straightforward inference: WBD was engaged in tough negotiations with the NBA and hoped it would secure the NBA rights, but, ultimately, the NBA chose competing offers,” they concluded.
NBA TV
The NBA struck new media rights deals with Amazon, NBCUniversal/Peacock and Disney’s ESPN/ABC in July of last year, ending a collaboration with TNT Sports that first began in 1984.
WBD subsequently sued the league to enforce its matching rights. However, the parties would ultimately reach a settlement, which gave TNT Sports and WBD’s portfolio of brands a global license to create, produce and distribute new and existing NBA content across its platforms.
The agreement includes expanded global content and highlight rights for TNT Sports, Bleacher Report and House of Highlights, with the ability to produce and distribute NBA content across the WBD portfolio, along with promotion, sales and creative commitments across both NBA and WBD platforms. It also gives WBD international rights to NBA games in Northern Europe and Latin America, excluding Mexico and Brazil. Additionally, TNT agreed to license its “Inside the NBA” show to ESPN.
WBD stock, which climbed 4.9% during Wednesday’s trading session, is up 58% in the past year, 18% year-to-date and 33% in the past six months.
Warner Bros. Discovery CEO David Zaslav and CFO Gunnar Wiedenfels