HATR Consulting

Cable TV network, TNT, has reportedly exercised its right of first refusal on a $Billion deal with the NBA, and the NBA may not accept TNT’s offer, which could lead to a big lawsuit.

The NBA sells media rights to several networks, and with the rise of streaming, the NBA has been transitioning some of those packages away from legacy networks to the likes of Amazon Prime Video. TNT’s contract with the NBA expired last season, and was up for renewal. Apparently TNT had an exclusive negotiation period, but dropped the bag. This allowed Amazon to make a $Billion deal with the NBA, TNT losing its NBA rights and losing the base for its most popular show.

Now, TNT has since come back to the NBA, claiming they have a right to match Amazon’s offer. Reports are that the NBA is not excited about this. Here’s a link to a CNN article.

TNT losing their rights was talked about weeks ago, so I was surprised that they came back with a matching right. So what happened? What is a right of first refusal (right to match)?

A right of first refusal (ROFR) gives the holder of that right priority to make a deal or match a competitor’s bid.

In so far as contract negotiations can be, ROFRs are “sexy.” On its face, it just means $$$ – the party giving this right away is going to get paid.

But as a commercial attorney, these only give me heartburn. There are so many practical implications that few seem to want to really think about. Are you going to remember you gave a ROFR in three, five years? How long does the ROFR holder have to make a decision? How much information about your other offer does the ROFR holder get? When does the ROFR expire? It’s a mess.

I also can’t help but think about what happened when the TNT-NBA-ROFR was first negotiated. Some business people might see a request for an ROFR as an easy “give” – “Sure, you can have an ROFR, no problem.” Admittedly, my experience does not include negotiating TV media rights, but I wonder: (a) how much thought was there on giving the ROFR in the first place? (b) did the NBA remember TNT had an ROFR? Or did they sign a contract with Amazon without thinking about it? (c) what does the contract say with respect to the ROFR process?

Now, ROFRs are not always bad. I’d stress that really understanding what you’re doing is important – don’t think you can just move on the next hot thing when it comes along.

Do you have thoughts on ROFRs? I’d love to hear it. What do you think about the Lakers drafting Bronny?