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The demise of Diamond Sports Group and the shuttering of the AT&T Sportsnet regional sports networks (RSN) portends doom for the long-standing RSN business model. How much longer will RSNs be around? It depends on the market.
In case you’re playing catch-up, the world of watching live sports is undergoing a major shakeup. RSNs, once a bedrock of every major city’s pro sports scene, are losing money. Diamond Sports Group, the owner of the 19 Bally Sports RSNs, and Warner Bros. Discovery, parent of the AT&T Sportsnet RSNs are both in the red. Warner Bros. Discovery is shutting down its RSNs, and Diamond Sports is expected to file for bankruptcy after coming up short on interest payments.
The decline of cable TV is killing off RSNs
RSNs rely on carriage fees and advertising revenue to survive. For example, when fuboTV carries an RSN, fuboTV is required to pay a fee for access to the RSN’s programming lineup. The cable companies and streaming services then pass those fees on to the consumer. However, fewer households have cable TV, and many streaming services have dropped RSNs over fee disputes. The revenue pie for RSNs is shrinking which is why you see smaller and medium-market RSNs tanking. The ad dollars and carriage fees these networks receive don’t cover the cost of interest on debt payments and the local TV fees they owe to teams.
Yes, the NBA extended its contract with Diamond Sports, but only for one year, and only as a life raft. According to the Sports Business Journal, if Diamond Sports misses any payments to the respective NBA teams, the NBA’s rights revert back in full to the league.
One of those conditions mandates that Diamond’s RSNs continue to pay its teams a full rights fee. If Diamond misses any rights payments to one of its NBA teams, the league can take back all of its rights and launch competing streaming services in those markets.John ourand writing for sports business journal
The MLB, NHL, and NBA teams that have TV deals with RSNs would like to leave them in place as they have been profitable for years. But whether the old RSN system is the preferred solution for NBA teams or not, Diamond Sports will go under, and when they do, the NBA teams that play on Bally Sports and AT&T Sportsnet RSNs will be looking for a new TV home, as will 19 MLB teams for the 2023 season.
Direct-to-consumer is the future
Direct-to-consumer offerings might not be as lucrative as were the old RSN deals, but that is the future for many pro sports leagues. In markets where an RSN isn’t profitable, teams and leagues will be forced to step in and sell the local TV rights to fans directly and to media companies. If RSNs are no longer there as rights holders, “out-of-market” offerings like MLB.TV, NBA League Pass, and NHL.TV (now with ESPN+) will have to fill the void.
The local TV inventory held by RSNs is made even less valuable because of existing TV contracts which assign the rights to the biggest national games to major media companies. For example, FOX has the exclusive right to air the World Series. A switch-up in local TV deals doesn’t change anything with the national deals that are in place over the long-term.
As such, much of the RSN inventory is yesterday’s turkey.
RSNs like YES Network, NESN, Spectrum Sportsnet LA, and some others, that have strong viewership and that command high carriage fees will continue to exist, which is another problem for the direct-to-consumer model. No matter what happens with the failing RSNs, the successful networks, like YES Network, will still enforce their local TV rights. The successful RSNs stand in the way of a consolidated direct-to-consumer offering by the various leagues.
For example, MLB can expand MLB.TV to include mid-market games with no regional restrictions in many areas, but fans in NYC will be blacked out.
Traits of successful regional sports networks
Regional sports networks built to last seem to have three core traits:
- Team ownership – YES Network is owned by the Yankees, NESN by the Red Sox, and MASN by the Orioles, to name a few.
- Engaged fan base in a large market.
- Potential for independent direct-to-consumer offerings – NESN 360 is a successful direct-to-consumer streaming service for Bruins and Red Sox fans. The service has had success even at a $30 per month price point. Similarly, the YES Network has long been rumored to be ready to launch a direct-to-consumer digital product as early as the 2023 season.
Teams that own RSNs that fans want to watch, and more importantly, that fans will pay for, aren’t going anywhere. The old system will remain in place through a handful of successful RSNs.
What this means for the future of watching MLB, NBA, and NHL games
What does this mean for watching NBA, MLB, and NHL games in the future?
No one knows for sure.
As I mentioned above, markets with a successful RSN (LA, NYC, Baltimore) will remain with the status quo. The local RSN will continue to air games and league-wide out-of-market packages will be blacked out.
Markets with a failing RSN will shift to league specific channels and previous out-of-market channels. For example, MLB games in failed RSN cities will move to MLB.TV and MLB Network. the increased inventory on these channels will be better for fans and will force the hand of providers like YouTube TV to add back MLB programming as demand increases.
Regional sports networks are going away for these teams
While teams like the Yankees and Dodgers will have business as usual, each of the MLB listed below will very likely see an upheaval in their normal broadcast routine for the 2023 season. With the regional sports networks in these markets shutting down, MLB will have to find creative ways to air games, with MLB.TV and MLB Network playing a larger role.
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