What is happening with all of the talk about the RSNs? Why does it matter to us as sports fans?
I discussed the business side of baseball and referenced the news on RSNs in the context of the MLB rules changes. Please check that out here.
Ben DuBose recently covered this news in his EXCELLENT style. I strongly recommend you read his article here:
Ben and I got together to discuss this topic on the YouTube. What an honor and a treat. Please PLEASE watch this video. You are going to learn something. I did.
If you want to read and then listen, here is the general outline I had for our discussion.
Let’s review the RSN situation at four levels
· What has happened
· Where are we now
· Where are we headed
· Why it could be important to you
What has happened?
RSN are going away- RAPIDLY
A. Diamond Sports Group- Bally Declared Bankruptcy
Diamond Sports Group, which holds the rights to 42 MLB, NBA and NHL teams on 19 regional sports networks, is expected to file for bankruptcy protection in the middle of March. Diamond’s RSNs operate under the name of Bally Sports.
Diamond, which is carrying about $8 billion worth of debt, has told the leagues and teams that it plans to continue producing and carrying games even through bankruptcy.
B. Warner Brothers Discovery - AT&T SportsNet offered to teams to return their TV rights at no cost as long as MLB agrees to release them from all obligations
Warner Bros. Discovery has told teams that it plans to exit the regional sports network business entirely within the next several weeks.
The company, which operates three AT&T SportsNet-branded channels in Denver, Houston and Pittsburgh and has a minority stake in the Root Sports channel in Seattle, has told teams that they have until March 31 to reach an agreement to take their rights back. If the RSNs can’t reach deals with the teams, the channels eventually plan to move forward with a Chapter 7 liquidation filing.
In a statement provided to SBJ, WBD said, “AT&T SportsNet is not immune to the well-known challenges that the entire RSN industry is facing. We will continue to engage in private conversations with our partners as we seek to identify reasonable and constructive solutions.”
WBD sent letters to the leagues and teams this afternoon informing them of their plans to divest their interest in those four RSNs.
WBD has rights deals with 10 teams across those four networks: four MLB teams (Astros, Mariners, Pirates, Rockies), three NBA teams (Blazers, Jazz, Rockets) and three NHL teams (Kraken, Penguins, Golden Knights).
WBD Owns these sports related brands
TNT / TNT Sports
The RSNs are a minute part of their business- these people own many many of the cable channels you know BEYOND SPORTS.
C. The model for the delivery of sports content is rapidly shifting
In the past
All customers paid for channels they never watched (usually $1-5/month) in a bundle on their cable/ satellite package
Sports fans demanded their teams RSNs were on the basic package
RSNs fees were steady – people would not cancel their cable based on performance
For example- Astros Got ~$70M from ATTSN according to FG in 2020 (Let’s Update the Estimated Local TV Revenue for MLB Teams | FanGraphs Baseball)
Where are we now?
It’s a Streaming World
1. People are cutting the cord and going to streaming providers that MANY do NOT include ATTSN or any RSN as part of the basic package. MOST Streaming services have RSNs as an ADD-ON service level
2. This has led to smaller and smaller subscription fees being collected by the RSNs from providers like DirecTV. In some cases RSNs were getting paid less by providers than they were paying the teams.
3. This is ruining the RSN business model
4. This shift has also been illustrated by the Big 12 signing a more standard media rights package in October of 2022 and the Pac 12 shifted to a reported primary streaming package for their media rights. The Pac 12 has been challenged with the lack of revenue this model has generated.
Per Ben’s Article
"According to SBJ, the letter proposes that AT&T SportsNet transfer ownership of the networks and programming rights to the teams for no purchase price consideration beyond a release by the teams of any future claims against the networks.
Assuming an agreement is reached, not much should change for local fans in the short-term. In effect, teams will inherit the existing regional carriage agreements that providers like AT&T SportsNet Southwest have with distributors like DirecTV and fuboTV.
Rather than having those distributors pay an RSN, and then an RSN pay the teams, those payments could go directly to the teams. It’s not yet clear if they would stick with the AT&T SportsNet branding or perhaps shift it to something reflecting local control. Existing broadcast teams and related infrastructure would remain.
Relative to prior projections, there could be something of a financial hit to the teams involved. The general decline in linear TV subscribers due to cord-cutting trends means that the overall volume of subscribers — in other words, revenue for the cable and streaming groups — is short of what it was a few years ago. That’s part of why companies like WBD are focusing their efforts elsewhere."
The SBJ also described this
"Many MLB, NBA and NHL teams have been told to expect their local media rights fees to be cut by as much as 70% over the next several years as they try to figure out new ways to make their games available to their local fans. This pending revenue shortfall matters, as most local media revenue is one of the top two or three moneymakers for teams -- accounting for as little as 10% of a team’s total revenue to upward of 60%-70%."
Where are we headed?
Also from Ben’s Article
"In the longer-term, once existing carriage agreements expire, the transition to local ownership might allow teams to explore direct-to-consumer (DTC) streaming options. But that’s likely a number of years away, and each sports league will have conversations with its teams regarding the best path forward. The vast majority of teams and their broadcast partners are experiencing similar challenges."
I would ask though if WBD goes bankrupt what is FORCING the carrier to provide the Astros content. I THINK DirecTV’s contractual obligation was to ATTSN not the Astros. Sure they may not want the wave of cancelations if they did this but it depends on the economics here.
IF the MLB is rapidly putting in place a DTC delivery then DirecTV and other providers have little incentive to play ball.
Another option from SBD
"Local over-the-air broadcasters like Scripps, Gray Television and Sinclair have been trying to pick up some local sports rights. Each of the leagues also have been looking into developing a direct-to-consumer streaming service."
J.J. Cooper also wrote a great article at Baseball América on the subject. Including this but you should read the entire article.
"MLB has promised that it has a plan in place to ensure fans can watch their teams even if Bally and AT&T’s RSNs all go belly up. There are a lot of understandable questions about what this will mean for local baseball broadcasts in 2023. There are also questions about what it will mean for the much-hated local TV blackouts on MLB.tv as well as concerns for what it will do for teams’ 2023 revenues.
Those are all worthwhile questions, but in the long run what happens in 2023 will likely be viewed more as the start of something much bigger. We are at the cusp of a foundational shift in baseball, as MLB transitions from the era of regional sports networks to direct-to-consumer offerings. And it’s likely that it will make as dramatic an impact as the arrival of Regional Sports Networks (RSNs) and cable TV did in the 1980s and 1990s.
Not every team’s local broadcast rights are currently affected, but RSNs and cable TV in general can be viewed like landline phones in 2010. Sure, there were still plenty of them around, but no one had any illusions on where that industry was headed.
For a diehard fan, there are likely some positives and negatives about the foundational shift. If you’re willing to pay, it will likely become much easier to watch games of your local team wherever you are. And the insanity of Iowans being blacked out on games from one fifth of the league may go away.
For the baseball teams and MLB, the shift will be much more dramatic. The next era of baseball broadcasting may be very different. There are significant questions over whether teams can come close to recouping the revenue they received for local broadcast rights from RSNs if they sell directly to consumers through MLB.tv. But that’s only one significant question. Equally important is the reality that teams will go from a world where RSN income is steady and consistent to one where they have to win over fans each and every year, or in some cases, each and every month."
Why it could be important to you
Per my article
Everything we think we know about baseball on TV is about to change and not really by the MLB's doing. Multiple RSNs are going bankrupt. How you consume Astros baseball may very well be different in September than it is in April.
AT&T Sports Southwest will eventually be replaced by MLB.TV DIRECT to you and they hope to your TV provider. The number of games on MLB Network will increase. You are going to see the LEAGUE marketing the sport hoping to get you to subscribe to THEIR feeding you Astros games directly. If this happens the dreaded blackout rules may very well change overnight. It's AT&T Sports Southwest that demands the blackout of streaming option because they want the TV ratings for you watching the game on their channel so they can sell ads to pay the rights fee.
You are thinking, Larry that all sounds OK to me. I am ready to stream. How much would you PAY? The Astros get around $70 million per year from AT&T Sports Southwest when they actually PAY them which, reportedly, they aren't fully doing. So will 700,000 Astros fans pay $100 each year to get the games? I doubt it. Will 300,000? Maybe. Some people are going to want answers why they have to now pay for something they used to get for free. Well, it wasn't free; it was part of your cable, satellite, or streaming cost.
So, what does it all mean? Business in the MLB is rapidly changing and probably not for the better for the owners. They are going to want direct subscribers. They are going to do anything they can to make this game appeal to casuals.