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USA’s Sunisa Lee (gold) celebrate son the podium during the medal ceremony of the artistic gymnastics women’s all-around final during the Tokyo 2020 Olympic Games at the Ariake Gymnastics Centre in Tokyo on July 29, 2021.
Lionel Bionaventure | AFP | Getty Images

If last year’s biggest corporate media challenge was launching subscription streaming services, this year’s unifying dilemma is figuring out what to put on them.

The tension between how to balance streaming video, theatrical release and linear TV is leading to some peculiar choices bound to confuse consumers in what’s becoming an increasingly jumbled landscape.

“The challenge all of these companies are battling — the central question — is what content goes where, who decides, and why?” said Rich Greenfield, a media analyst at LightShed Partners.

The programming decisions may alter how the public views streaming video. So far, most media companies have marketed streaming video as a complement to traditional pay television. This is why so many of the products are named with the suffix “plus” — Disney+, ViacomCBS‘s Paramount+, Discovery+, etc.

In the long run, it’s possible each streaming platform will become the home for all of a media company’s programming. The “plusses” will essentially be lopped off. ESPN+ may just be ESPN, with everything ESPN has to offer.

But the world isn’t there yet. And the results are increasingly confusing for consumers as new programming is made specifically for streaming services, and the best of linear TV still doesn’t show up on streaming.

The streaming labyrinth

For scripted television series, media executives have largely made the decision that streaming services will be the home for the highest quality original programming. Disney, AT&T‘s WarnerMedia, Comcast‘s NBCUniversal and ViacomCBS are all attempting to convince Wall Street they can grow beyond traditional cable television. They’re using new hit shows, including “The Mandalorian,” “Mare of Easttown,” and “Yellowstone,” as bait to entice subscribers. The results have varied from service to service, but all of the major new streaming services are growing by millions of customers each quarter.

For movies, there’s disagreement at a film-by-film level across the different services. Disney put Pixar movies “Soul” and “Luca” directly on its Disney+ service for no additional charge upon release. For “Jungle Cruise,” “Black Widow” and “Raya and the Last Dragon,” the company decided to make users spend an additional $30 to stream the movies before eventually making them free with a subscription. NBCUniversal placed “The Boss Baby: Family Business” on its paid tier of “Peacock” but only released “F9” in theaters. WarnerMedia decided to place its entire slate of 2021 films directly on HBO Max but won’t do that for blockbuster movies in 2022.

For news and sports, most media companies have kept their most valuable programming exclusively on traditional cable TV. The most-watched primetime programming on CNN, MSNBC and ESPN is still locked inside the cable bundle. This has allowed executives to push against the steady but not yet overwhelming surge of pay-TV cancellations, keeping alive a highly profitable business that brings in billions of dollars each year.

Choice overload

NBCUniversal is navigating the challenge of distributing valuable programming as it broadcasts the Olympic Games. Executives can choose to air live and pre-recorded events on NBC’s broadcast channel, NBC’s cable networks, NBC’s authenticated apps for cable subscribers, NBC’s free apps, Peacock’s free tier and Peacock’s paid tier.

The variety of choices has led to a complicated ecosystem because NBCUniversal is attempting to achieve several goals at once. The company wants to push Peacock subscriptions, appease pay-TV distributors who have agreed to many years of fee increases because they were receiving unique content, and maintain expensive TV advertising rates by attaching commercials to exclusive live programming.

“It’s the innovator’s dilemma in action,” said one veteran broadcast television executive. “You know the linear TV world is collapsing, but you’re trying to stay on the Titanic for as long as possible. At the same time, you’re setting up the lifeboats, which are digital and streaming.”

Making the numbers work

Disney is staring down a major streaming dilemma as soon as next year with “Monday Night Football.” The company secured rights to stream the perennially most-watched cable series on ESPN+ in its new TV rights deal with the National Football League in March. But Disney and ESPN haven’t said anything about when it will actually include “Monday Night Football” on ESPN+.

ESPN is by far the most expensive network on cable TV. It gained that distinction by being the only way Americans can watch “Monday Night Football” and other popular sporting events. If Disney starts moving previously exclusive programming from ESPN to ESPN+, pay-TV distributors will push back on future rate increases and millions of consumers will be given another reason to cancel cable TV.

The math makes this calculus tricky. Beginning Aug. 13, Disney will charge $6.99 per month for ESPN+ after a recent price increase. But Disney makes more than $9 per month per cable subscriber for ESPN, according to Kagan, the media research division at S&P Global, in pay-TV distribution fees. When bundled with the other ESPN networks, Disney Channel and ABC, Disney makes more than $16 per month.

In other words, for every customer canceling cable, Disney loses more than $16 per month. It will need to start charging more for its streaming products to break even  and that’s not even counting the loss in advertising associated with its linear programming, which dwarfs streaming video advertising revenue.

“Nobody is ready to unplug the linear ecosystem, because it brings in so much cash,” Greenfield said. “So they’re all balancing how to manage legacy assets with future investments that are free cash flow negative to show Wall Street that they’re trying. They’re all walking the tight rope.”

News programming decisions

NBCUniversal and WarnerMedia announced this month they’ll hire hundreds of new employees to beef up their streaming news services.

Instead of simply duplicating MSNBC, CNBC and CNN programming on “Peacock” and “HBO Max,” the media companies are taking a different strategy. CNN is building a subscription news service, CNN+. CNN chief digital officer Andrew Morse said he plans to hire 450 people to develop and market new series and newscasts. NBCUniversal News Group Chairman Cesar Conde announced plans to hire nearly 200 new employees across its news brands, the majority of which will support NBC News Now, the company’s flagship streaming network.

The decision to create separate programming for streaming — some of which may duplicate the content of what’s already being broadcast on linear TV — can be viewed in several different ways.

Skeptically, it could be seen as a waste of resources, filled with redundancies, as a “moment in time” decision to keep exclusivity in the cable bundle that may no longer exist in two or three years.

But NBC News executives say the investment acknowledges streaming audiences aren’t the same as linear viewers. That should lead to programming decisions that acknowledge digital viewers tend to be younger and more diverse.

“We’re always thinking about ways to optimize our journalism for each distribution platform,” said Noah Oppenheim, president of NBC News. ”How do we engage these new audiences? Sometimes the answers lead to different faces on screen, different approaches to storytelling, a different lens on the world.”

It’s unclear if there’s actually an audience for an all-streaming news network — especially one that demands consumers pay a monthly subscription fee, such as CNN+, which debuts in 2022. The notion of programming to a younger audience is suspect, as a video news broadcast, whether streaming or on traditional TV, may simply not appeal to those under 25. The decision to invest more in streaming news could lead to a gradual decline in investing in broadcast or cable productions if total revenue is shrinking.

NBC News Chief Digital Officer Chris Berend said he’s confident further investment in NBC News Now will pay off because he can already see the growth in time spent on the existing product, which launched in 2019. NBC News Now is free for consumers, backed by advertising.

“We are incredibly excited about the millions of hours audiences spend with NBC News NOW and how that continues to grow as we continue to invest,” said Berend. “That time spent, which includes more than an hour per visit on some platforms [like YouTube], is a clear indicator we are satisfying our audience across many platforms, each with their own demographic nuances.”

Disclosure: NBCUniversal is the parent company of CNBC.

WATCH: Comcast CEO Brian Roberts on earnings and streaming business

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Tim Cook says Apple will use chips built in the U.S. at Arizona factory

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Tim Cook says Apple will use chips built in the U.S. at Arizona factory

Tim Cook says Apple will use chips built in the U.S. at Arizona factory

Apple CEO Tim Cook spoke at an event in Arizona on Tuesday, ahead of remarks expected by President Joe Biden later in the day, where Cook confirmed Apple will buy chips built in the U.S.

Cook said Apple would buy processors made in a new Arizona factory, according to a video from the event.

“And now, thanks to the hard work of so many people, these chips can be proudly stamped Made in America,” Cook said. “This is an incredibly significant moment.”

The chip factories will be owned and operated by Taiwan Semiconductor Manufacturing Company, the biggest foundry company with over half of the global market share. TSMC produces the most advanced processors, including the chips in the latest iPhones, iPads and Macs.

The plants will be capable of manufacturing the 4-nanometer and 3-nanometer chips that are used for advanced processors such as Apple’s A-series and M-series and Nvidia‘s graphics processors.

“Today is only the beginning,” Cook said. “Today we’re combining TSMC’s expertise with the unrivaled ingenuity of American workers. We are investing in a stronger brighter future, we are planting our seed in the Arizona desert. And at Apple, we are proud to help nurture its growth.”

TSMC currently does most of its manufacturing in Taiwan, which has raised questions from U.S. and European lawmakers about securing supply in the potential event of a Chinese invasion or other regional issues. Chip companies such as Nvidia and Apple design their own chips but outsource the manufacturing to companies like TSMC and Samsung Foundry.

The factories in Arizona will be partially subsidized by the U.S. government. Earlier this year, Biden signed the CHIPS and Science Act into law, which includes billions of dollars in incentives for companies that build chip manufacturing capabilities on U.S. soil.

TSMC said on Tuesday that it would spend $40 billion on the two Arizona plants. The first plant in Phoenix is expected to produce chips by 2024. The second plant will open in 2026, according to the Biden administration.

The TSMC plants will produce 600,000 wafers per year when fully operational, which is enough to meet U.S. annual demand, according to the National Economic Council.

The U.S. plants will be a small fraction of TSMC’s total capacity, which produced 12 million wafers in 2020.

AMD CEO Lisa Su said in remarks on Tuesday that AMD plans to be a significant user of the TSMC Arizona fabs.

American chip company Intel has also said it wants to compete for Apple’s business and is building chip factories in Arizona and Ohio, which are expected to be partially subsidized by the CHIPS act.

Last year, Intel said it would act as a foundry for other companies, although its manufacturing abilities currently lag behind TSMC’s. That makes Intel less attractive for the fastest chips.

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Former FTX engineer quietly became multimillion dollar Democratic donor after new role at cryptocurrency exchange

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Former FTX engineer quietly became multimillion dollar Democratic donor after new role at cryptocurrency exchange

FTX logo with crypto coins with 100 Dollar bill are displayed for illustration. FTX has filed for bankruptcy in the US, seeking court protection as it looks for a way to return money to users.

Jonathan Raa | Nurphoto | Getty Images

Former FTX CEO Sam Bankman-Fried wasn’t the only company executive who put big money behind campaigns aligned with the Democratic Party.

A year after Nishad Singh became the company’s director of engineering, he quietly emerged as a reliable political donor for Democrats, according to over a dozen Federal Election Commission records reviewed by CNBC.

Singh, who became FTX’s lead engineer in 2019 following a stint at Bankman-Fried’s trading firm Alameda Research, has donated over $13 million to party causes since the start of the 2020 presidential election, according to state and federal campaign finance records.

Singh donated $8 million to federal campaigns in the 2022 election cycle, and all of it went to Democrats, according to the nonpartisan OpenSecrets. He was among a handful of former senior officials at FTX who were deeply involved with financing the 2022 midterms.

The sum makes him the 34th highest donor to all federal campaigns across the country during the latest election, ahead of other party donors such as billionaires Tom Steyer and angel investor Ron Conway, OpenSecrets said.

Singh’s only recorded campaign donation before he took the senior role at FTX was a $2,700 contribution in 2018 to Rep. Sean Casten, D-Ill., a member of the House Financial Services Committee.

Two years later, Singh donated $1 million to Future Forward USA, a PAC that backed President Joe Biden’s 2020 run for president, records show. Singh lists Alameda Research as his employer on the filing showing the $1 million donation.

Records show some of his donations mirrored those made by Bankman-Fried. The former FTX CEO gave $5 million to the pro-Biden PAC the same month Singh contributed.

Singh, who was among the FTX leaders initially fired after the company collapsed, did not return repeated requests for comment. He reportedly was one of Bankman-Fried’s roommates and contributed to FTX’s philanthropic arm.

A prolific Democratic donor

Singh’s multimillion dollar output in the midterms makes him only one of the key FTX figures who piled money into the election cycle.

Bankman-Fried contributed $39 million during the 2022 midterms, while co-CEO of FTX Digital Markets Ryan Salame donated another $23 million, according to OpenSecrets. Bankman-Fried gave most of his money to Democrats, while Salame aimed to boost Republicans.

Still, Singh was known in the crypto political fundraising world as a “Bankman-Fried guy,” who made many of the same campaign contributions as the former FTX CEO, according to a strategist for multiple crypto-backed political action committees. Those who declined to be named in this story did so in order to speak about private conversations.

Bankman-Fried and FTX are under investigation by federal authorities and regulators after it was discovered that the cryptocurrency company funneled billions of dollars in FTX client funds into Alameda Research. FTX filed for Chapter 11 bankruptcy last month.

Bankruptcy court filings show that Alameda made $4.1 billion in related party loans, including a $543 million loan to Singh.

The former lead engineer at FTX spread his money across a variety of Democratic causes before the company’s collapse.

Singh gave a combined $2 million in June and July to the Senate Majority PAC, a super PAC that helped Democrats maintain their majority in the U.S. Senate. That’s double the amount Bankman-Fried contributed to the same organization throughout the midterms. That super PAC is currently spending millions to help Sen. Raphael Warnock, D-Ga., defeat Republican candidate Herschel Walker in a runoff campaign for a Senate seat in Georgia.

A PAC spokeswoman declined to comment.

Singh lists a mailing address in Los Altos Hills, Calif., on the FEC filings showing the contributions to the super PAC. The home was sold last year for over $4 million and features a wraparound deck next to an outdoor hot tub, according to Zillow.

Singh gave $4 million, combined, in August and September to Reproductive Freedom for All, a campaign that boosted a Michigan ballot measure called Proposition 3, according to state records. The ballot measure approved last month effectively codifies abortion rights for people in Michigan.

The $4 million Singh gave to the group doubles billionaire Mike Bloomberg’s $2 million contribution to the same organization in September, records show. A representative for the campaign did not return requests for comment.

Singh gave another $1 million last year to Mind the Gap, a super PAC that was co-founded by Barbara Fried, a lawyer and Sam Bankman-Fried’s mother. The super PAC has reportedly acted as a donor advisory group that helps Democrats raise campaign cash. Singh’s donation was the single largest contribution the PAC has ever received, according to OpenSecrets.

The FEC filing showing the $1 million to Mind the Gap lists Singh’s mailing address as an over 7,000-square-foot-home in Saratoga, Calif. The home is estimated to be worth $8.5 million, according to Zillow.

Fried did not return a request for comment. Representatives for the PAC also did not return requests for comment.

Scrutiny of FTX builds

The political donations came in the buildup to FTX’s collapse. Washington has increased its scrutiny of FTX, and the House Financial Services Committee is preparing to hold a hearing on the platform’s implosion later this month.

The committee has called on Bankman-Fried to testify. The former FTX CEO said in a tweet on Sunday that he may not testify in front of the committee during the Dec. 13 hearing, citing his need to finish “learning and reviewing what happened” at his crypto company.

Committee Chair Rep. Maxine Water, D-Calif., insisted to Bankman-Fried in a tweet on Monday that “it is imperative that you attend our hearing on the 13th.” A lawmaker on the committee told CNBC that, as of Monday evening, Waters had yet to tell members privately that she will subpoena Bankman-Fried to testify.

John Jay Ray III, the current FTX CEO, is going to testify on Dec. 13, according to House Financial Services Committee ranking member Rep. Patrick McHenry, R-N.C.

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David Zaslav’s top priority at Warner Bros. Discovery: Get the cash flowing again

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David Zaslav's top priority at Warner Bros. Discovery: Get the cash flowing again

David Zaslav

Olivia Michael | CNBC

A few months ago, after a lengthy and sobering review of Warner Bros. Discovery‘s business, Chief Executive David Zaslav gave his division heads a cutthroat mission.

Pretend your units are family businesses, Zaslav said. Start from scratch and prioritize free cash flow, he added, according to people familiar with the matter. Then, Zaslav said, come back to me with a new strategic plan for your unit.

Zaslav’s directive has led to what will amount to thousands of layoffs at the company by the middle of this month, said the people, along with substantial strategic changes at CNN, the Warner Bros. film studio and other divisions.

The CEO formed his plan after he took a hard look at the finances of the combined WarnerMedia-Discovery, a deal that closed in April. Zaslav determined the company was a mess. AT&T mismanaged WarnerMedia through neglect and profligate spending, he’d decided, according to people familiar with his discussions. The people asked not to be identified because the talks were private.

Warner Bros. Discovery’s total debt of about $50 billion was tens of billions more than the company’s market capitalization. About $5 billion of that debt is due by the end of 2024 after paying off $6 billion since the close of the merger. The company could push back the maturity on some bonds if necessary, but interest rates have risen dramatically, making refinancing much costlier.

To pay down debt, any company needs cash — ideally, from operations. But the near-term trends suggested Warner Bros. Discovery’s business was getting worse, not better. The company announced free cash flow for the third quarter was negative $192 million, compared to $705 million a year earlier. Cash from operating activities was $1.5 billion for the first nine months of 2022, down from $1.9 billion a year earlier.

Along with the rise in rates, Netflix‘s global revenue and subscriber growth had slowed, prompting investors to bail on peer stocks — including Warner Bros. Discovery, which had spent the past three years developing streaming services HBO Max and Discovery+. Moreover, the advertising market was collapsing as corporate valuations flagged. Zaslav said last month the ad market has been weaker than at any point during the 2020 pandemic.

Warner Bros. Discovery shares have fallen more than 50% since WarnerMedia and Discovery closed the deal in April. Its market value stands at about $26 billion.

In addition to job cuts, Zaslav’s directive spurred the elimination of content across the company, including scrapping CNN original documentaries, Warner Bros. killing off “Batgirl” and “Scoob 2: Holiday Haunt,” and HBO Max eliminating dozens of little-watched TV series and movies, including about 200 old episodes of “Sesame Street.”

The immediate decisions allowed Zaslav to take advantage of tax efficiencies that come with changes in strategy after a merger. Warner Bros. Discovery expects to take up to $2.5 billion in content impairment and development write-offs by 2024. The company, which has about 40,000 employees, has booked $2 billion in synergies for 2023. Overall, Zaslav has promised $3.5 billion in cost cuts to investors — up from an initial promise of $3 billion.

The underlying rationale behind Zaslav’s cost-cutting strategy centered on turning Warner Bros. Discovery into a cash flow generator. Not only would cash be needed to pay off debt, but Zaslav’s pitch to investors would be to view his company as a shining light in the changing entertainment world — a legacy media company that actually makes real money.

“You should be measuring us in free cash flow and EBITDA [earnings before interest, taxes, depreciation and amortization],” Zaslav said an investor conference run by RBC Capital Markets last month. “We’re driving for free cash flow.”

Zaslav is trying to give Warner Bros. Discovery a head start on what may be a year of downsizing among large media and entertainment companies. His strategy appears clear: Cash generation will coax Wall Street into seeing his company as an industry outperformer. But he’ll need to keep together a company made up of tens of thousands of ex-Time Warner and then ex-WarnerMedia employees who have been through round after round of reorganizations and layoffs.

“It isn’t going to be overnight, and there’s going to be a lot of grumbling because you don’t generate $3.5 billion of operating synergies without, you know, breaking a few eggs today,” Warner Bros. Discovery board member and media mogul John Malone told CNBC in an interview last month.

Cash rules everything

Malone has co-strategized and cheered Zaslav’s effort to focus the company on maximizing free cash flow, which is defined as net income plus depreciation and amortization minus capital expenditures.

“Whenever I talk to David, the first thing I say is manage your cash,” Malone said last month. “Cash generation will ultimately be the metric that David’s success or failure will be judged on.”

Even before Zaslav gave his directive to all of the division heads, the new CEO was already thinking about how to boost cash flow. That was at least part of the motivation to eliminate CNN+ just weeks after it launched, which had a spending budget of about $165 million in 2022 and an eventual $350 million, according to people familiar with the matter.

Warner Bros. Discovery owns streaming services, linear cable networks, a movie studio, a TV production studio and digital properties. It owns DC Comics, HBO, CNN, Bleacher Report, and oodles of reality TV programming. It has sports rights both internationally and domestically, including the NBA on TNT.

Zaslav hopes his reconstruction of Warner Bros. Discovery will deliver two results. First, it will showcase the company as a fully diversified content machine, featuring top brands and intellectual property in prestige TV (HBO), movies (Warner Bros.), reality TV (Discovery), kids and superheroes (Looney Tunes, DC), news (CNN) and sports (NBA, NCAA March Madness).

Liberty Media’s John Malone

Michael Kovac | Getty Images

Second, he wants it to prove that a modern media company that’s spending billions on streaming video can also generate billions in cash flow. The company has estimated 2023 EBITDA will be $12 billion. Warner Bros. Discovery will generate more than $3 billion in free cash flow this year, about $4 billion next year and close to $6 billion in free cash flow in 2024, according to company forecasts.

That would give Zaslav a selling point to investors compared to other legacy media companies. Disney has generated just $1 billion of free cash flow over the past 12 months and analysts estimate the company will have about $2 billion in 2023. That’s despite growing Disney+, its flagship streaming service, by 46 million subscribers during the period and owning a theme park business that generated $28.7 billion in revenue for the fiscal year — up 73% from a year earlier.

The low free cash flow relates largely to the money drain from streaming services and Disney’s large investments in theme parks. Over the past 12 months, Disney had $4.2 billion in operating income from its media properties, down 42% from a year ago. Returning Disney CEO Bob Iger said in a town hall last month he will prioritize profitability over streaming growth — a change from when he left the post in 2020. Outgoing boss Bob Chapek put into place a Dec. 8 price hike for Disney+ and other streaming services to accelerate cash flow.

“Discovery was a free cash flow machine,” Zaslav said earlier this year of his former company, which he ran for more than 15 years before merging it with WarnerMedia. “We were generating over $3 billion in free cash flow for a long time. Now, we look at Warner generating $40 billion of revenue and almost no free cash flow, with all of the great IP that they have.”

Wall Street vs. Sunset Boulevard

When AT&T announced it was merging WarnerMedia with Discovery Communications last year, Zaslav immediately went on a Hollywood “listening tour,” sensing an opportunity to become the new king of Tinseltown. Many Hollywood power players thought Zaslav would dedicate his first year as CEO to currying favor with the industry given his lack of history with scripted TV or movies. He even bought producer Bob Evans’ house for $16 million in Beverly Hills, a sign some thought meant he wanted to be Hollywood’s next mogul.

A year later, Zaslav isn’t the king. In fact, many consider him a villain.

It turned out Zaslav’s top priority as CEO of a large public company wasn’t to win over Hollywood. Rather, it was to convince investors his company could survive and flourish as a relative minnow against much larger sharks, including Apple, Amazon, Disney and Netflix, in an entertainment world that’s quickly moving to digital distribution.

Zaslav’s focus on investors before Hollywood makes business sense. The company must be financially sound before it can make big investments. But he’s taken a hit, reputationally, with some in the creative community.

“HBO Max is widely acknowledged to be the best streaming service. And now the execs who bought it are on the verge of dismantling it, simply because they feel like it,” tweeted Adam Conover, the creator and host of “The G Word” on Netflix and “Adam Ruins Everything” on HBO Max, in August. “Mergers give just a few wealthy people MASSIVE control over what we watch, with disastrous results.”

One Hollywood insider who met with Zaslav to give him advice before he stepped into the job said the Warner Bros. Discovery CEO has ignored 90% of his advice on how to manage the business.

Time will tell whether Zaslav’s year-one decisions have lasting ramifications with a spurned Hollywood community. Critics of Iger at Disney initially said he lacked “creative vision” when he first took over as chief executive nearly two decades ago.

Zaslav can counter that Warner Bros. Discovery hasn’t decreased content spending. The company spent about $22 billion on programming in 2022. But he’s also made cost consciousness a point of pride.

“We’re going to spend more on content — but you’re not going to see us come in and go, ‘Alright, we’re going to spend $5 billion more,'” Zaslav said in February. “We’re going to be measured, we’re going to be smart and we’re going to be careful.”

The company’s content decisions have been based on strategic corrections, such as eliminating made-for-streaming movies and cutting back on kids and family programming that don’t materially entice new subscribers or hold existing ones, executives determined. Warner Bros. Discovery’s HBO continues to churn out hits, including “White Lotus,” “Euphoria,” “House of the Dragon” and “Succession,” under the leadership of Casey Bloys.

V Anderson | WireImage | Getty Images

‘We don’t have to have the NBA’

Perhaps Zaslav’s biggest dilemma is what to do with the NBA.

Like other media companies, Warner Bros. Discovery rents the rights to carry games and pays billions to leagues for the privilege. Warner Bros. Discovery currently pays around $1.2 billion per year to put NBA games on TNT. In 2014, the last time the league struck a deal with TNT and Disney’s ESPN, carriage rights rose from $930 million to $2.6 billion per year.

Negotiations to renew TNT’s NBA rights will begin in earnest next year. Zaslav has said he has little interest in paying a huge increase just to carry games again on cable networks — a platform that loses millions of subscribers each year.

“We don’t have to have the NBA,” Zaslav said Nov. 15 at an investor conference. “With sport, we’re a renter. That’s not as good of a business.”

The problem for Zaslav is keeping legacy pay TV afloat may be his best way to keep cash flow coming, and putting NBA games on TNT may be his best chance to do that. In the third quarter, Warner Bros. Discovery’s cable network business had adjusted EBITDA of $2.6 billion on $5.2 billion of revenue. That’s compared with a direct-to-consumer business that lost $634 million.

If Warner Bros. Discovery is going to pay billions of dollars a year for the NBA, Zaslav wants a deal to be future-focused. He has the luxury of having NBA Commissioner Adam Silver’s ear for the next three years because the NBA will be on TNT through the end of the 2024-25 season.

“If we do a deal on the NBA, it’s going to look a lot different,” Zaslav said.

Charles Barkley on Inside the NBA

Source: NBA on TNT

Warner Bros. Discovery knows how to produce NBA games and airs a studio show, “Inside the NBA,” which is widely regarded as the best in professional sports. It’s possible Zaslav could strike a deal with another bidder, such as Amazon or Apple, which may allow Warner Bros. Discovery to produce their games while giving him a package of games that came with a lower price tag.

Ideally, Zaslav would like to do sports deals that include ownership of intellectual property. This is also appealing to Netflix, The Wall Street Journal reported last month. Acquiring leagues gets Zaslav out of the rental business. But while smaller professional sports leagues, such as Formula One and UFC, are owned by media companies (Malone’s Liberty Media and Ari Emanuel’s Endeavor, respectively), it seems unlikely NBA owners would agree to sell Warner Bros. Discovery a stake in the league.

Silver said last month at the SBJ Dealmakers Conference he was open to rights deals structured in novel ways.

“We’re in the enviable position right now of letting the marketplace work its magic a little bit, you know, to see where the best ideas are going to come from, what’s going to drive the best value,” Silver said.

It’s also possible Zaslav could walk away from the NBA completely. While “Inside the NBA” co-host Charles Barkley recently signed a 10-year contract to stay with Warner Bros. Discovery, it includes an out clause if Zaslav doesn’t re-up the NBA, according to The New York Post.

Live sports aren’t necessarily essential to most streaming services’ success. Netflix, Disney+ and HBO Max all have zero live sports — at least for now.

The one certainty is Zaslav’s decision will be squarely based on how a deal affects the company’s free cash flow.

“It’s how much do we make on the sport?” Zaslav said. “When I was at NBC, when we lost football [in 1998], we lost the promotion of the NFL, which was a huge issue. Then you have the overall asset value without the sport. So you have to evaluate all that.”

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