Following the decision by the Sinclair Broadcast Group
According to the Wall Street Journal, late last month AT&T SportsNet, an RSN operating in Denver, Houston and Pittsburgh sent a letter to eight teams they televise, notifying them the business will not have sufficient cash to pay the upcoming rights fees. The RSN wants to transfer ownership to the teams, with the potential AT&T SportsNet will declare bankruptcy.
The teams impacted are the MLBs Colorado Rockies, Houston Astros and Pittsburgh Pirates; the NBAs Denver Nuggets, Houston Rockets and Utah Jazz; the NHLs Pittsburgh Penguins and Vegas Golden Knights. Reportedly the NBA, NHL and MLB were also notified. (AT&T SportsNet also owns a 40% stake in Seattle’s Root Sports that televises MLB’s Seattle Mariners, NHL’s Seattle Kraken and NBA’s Portland Trail Blazers which are, for the moment, not impacted.)
The RSN is owned by Warner Bros. Discovery
Not too long ago, RSNs were a lucrative and consistent business model, with revenue coming from both high subscriber fees and ratings that, at times, exceeded broadcast television. With cord-cutting and growth of streaming, however, RSNs are no longer providing steady revenue flow. In another statement, WBD said, “AT&T SportsNet is not immune to the well-known challenges that the entire RSN industry is facing.”
Paul Pastor, Chief Business Officer and co-founder at Quickplay says via email, “Regional sports companies are feeling the impact of two major trends: first, consumers are increasingly migrating to digital, direct-to-consumer platforms, and second, cable companies, no longer having local market monopoly power, can no longer force consumers to accept a hard bundle for services they don’t watch, especially expensive sports programming channels that very few consumers watch. This is forcing cable companies to push back on fees and carriage, resulting in a “reconning” for RSNs that have not prepared for this eventuality.”
Since the acquisition, the newly formed WBD has been looking to slash its $50 billion debt. The media company has used such cost-cutting strategies as personnel layoffs, hiring freezes and has slashed programming budgets. Nonetheless, in fourth quarter WBD reported a net loss of $2.1 billion. WBD also owns Turner Sports which televises such premiere live sporting events as the NCAA Men’s Basketball Tournament, the MLB and the NBA.
The NBA’s media rights with Disney and Turner Sports are up for renewal at the end of the 2024-25 season. It is reported rights fees could triple from the current $2.6 billion each year. Turner Sports and ESPN have an exclusive negotiating period through April 2024 which can be waived. Besides, Disney and Turner Sports, NBCU, and deep-pocketed streaming providers Apple
With Diamond Sports Group’s in a financially precarious position, MLB Commissioner Rob Manfred has said they would be able to provide fans with in-market games, if need be, possibly via MLB.TV. It is likely the same would happen with AT&T SportsNet. (MLB produces Friday night baseball on Apple TV+.) Besides the MLB, both the NBA and NHL are keeping a close eye on the financial situations of RSNs and are looking at contingency plans.
Quickplay’s Paul Pastor comments, “These RSNs need to now operate in a world in which TVE and DTC solutions need to sit alongside each other in the interim, and RSNs need to prepare for the eventuality of DTC. This means investing in robust technology solutions that can support broadcast quality, low latency experience, and one that drives tremendous insight into its consumers to maximize their value. In addition, they will need to look at new business models, including a la-carte game offerings, custom packages, partnerships/bundles, and more to drive revenue across multiple sports and features such as gaming, gambling, and metaverse opportunities.”
Last June the NBA renewed a local streaming rights agreement with Bally+ for 16 teams. According to John Ourand of Sports Business Journal, the Bally RSNs had met the 13 requirements the NBA stipulated for renewal. The agreement is a series of one-year renewals that expires in 2024-25, when the current Disney, Turner Sports NBA rights deal concludes. In the likely event Diamond Sports Group files for bankruptcy, the agreement would be breached with the streaming rights turned over to the NBA.
Besides Bally+, a few other RSNs are offering or planning to offer DTC to viewers bypassing cable. For example, last June NESN 360 was launched in New England with a monthly fee of $30 or annual fee of $330. In New York, the MSG Networks announced the launch set for this summer of MSG+, which will live stream the New York Knicks, New York Rangers, New York Islanders, New Jersey Devils and Buffalo Sabres games. MSG+ will cost $10 per game, $30 a month or $310 annually. In addition, the YES Network which carries New York Yankees and Brooklyn Nets games are also planning to launch a DTC offering soon.
Another possibility is that over-the-air television stations could televise local sports. In December the E.W. Scripps Company launched Scripps Sports. The aim is for Scripps Sports to enter local live sports. Scripps owns 61 local television stations in 47 markets including such major sports markets as Baltimore, Detroit, Denver, Cleveland, Miami and Phoenix.
In addition, in 2021 Scripps acquired ION for $2.65 billion. ION is a national network that tailors their programming locally. Scripps Sports assets allow for televised local sports on cable systems, CTV or over-the-air capable of reaching 100+ million households. Scripps President Brian Lawlor said, “Cable subscriptions are down and regional sports networks are challenged, keeping fans from watching their home teams.”
Besides Scripps, the Nexstar Media Group
With local stations having a larger reach than RSNs, over the past few weeks, executives at Scripps and Nexstar have had discussions with team owners about televising more local games on broadcast TV.
Before the emergence of RSNs, the primary source for local TV sports had been broadcast stations. Perhaps what was old will be new again.
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