Can RSNs Dodge A DTC Knockout In Shifting Cable Landscape?

A new study of California consumers suggests tough sledding ahead for the regional sports networks that stud the state's pay-TV offerings as they try to attract audiences in the direct-to-consumer future, and find bundle partners where they can drive viewership and revenue.

As part of Ring Digital's fall study of consumer attitudes, it looked at RSNs compared to some other notable basic-cable networks. The study suggests that the RSNs aren't as likely to be seen as must-have additions when the Great Re-Bundling, as TVRev's Alan Wolk likes to call it, begins in earnest in the coming shakeout of streaming services.

One part of the problem is the long-time disparity between viewership and revenue per subscriber for many sports networks. They tend to have limited, ardent viewerships devoted to whatever local teams they're showing on their channel. That can be lucrative, but such channels could be left on an ice floe in the direct-to-consumer future.

A 2017 Wall Street Journal study (it didn't include RSNs) found that smaller sports-focused basic-cable channels such as ESPNU, Fox Sports 2, MLB Networks and the Golf Channel, attract relatively few viewers. The flip side for most of these channels: they still generate revenue per viewer of as much as $7,406 per subscriber, and that was for Fox Sports 2, which ranked dead last in viewers among about 40 basic cable networks in the study, based on numbers from Nielsen and Kagan. Only ESPN attracted more than 1 million viewers, while generating nearly $3,900 per viewer in revenue.

But as more viewers shift to Build Your Own Bundles, choosing SVOD services such as Disney+, Netflix and Apple TV+, or sports-free "skinny bundles" such as Philo, will the RSNs be left out? The study's results suggest they may need to find new way to demonstrate value to ensure they can continue to attract the subscribers, revenue and pricey sports rights that are essential to their existence.

A recent analysis by Maury Brown in Forbes of Fox Sports data around the country suggests that baseball continues to be a strong draw in terms of hours of consumption compared to broadcast and basic cable programming. In fact, except for Miami, where the tattered Marlins franchise is struggling to attract interest from anyone, baseball is ranked No. 1 in cable prime in every MLB market, Ring said.

That's good news for Sinclair Broadcast Group (NASDAQ: SBGI), which with partners spent more than $10 billion to buy 21 Fox RSNs from Disney earlier this year. Sinclair also partnered with the Chicago Cubs to create a sports channel that launches next season in that city, and partnered with the New York Yankees and Amazon (!) to acquire all of the YES Net\work in New York.

The intensity of engagement that sports can engender is valuable to advertisers. The problem for RSNs is whether they'll be able to count on that intensity of engagement when they are no longer receiving the financial undergirding of a basic cable package. The study's results suggest it may be a challenge.

For instance, only 10.4 percent of Californians said in the past year they "regularly" watched a local RSN, such as NBC Sports Bay Area, Fox Sports West or Spectrum SportsNet LA. Almost 65 percent of those surveyed said they "never" watched an RSN in the past year.

The survey did a similar "regularly"/"never" ratio for four basic-cable channels: ESPN, Fox Sports 1, CNN and Fox News, which is routinely one of the most watched cable channels and launched its own SVOD service late last year.

The survey found that CNN was lowest in the "never" rankings, 48 percent, while conversely, Fox News' hard-core fans said they "regularly" watched it almost 19 percent of the time.

Ring then ranked the channels by their never/regular ratio, to see which are most likely to be included in future bundles, skinny, mesomorphic or otherwise.

Fox News was first, at a ratio of 2.9, with CNN close behind at 3.3. The regional sports networks trailed at nearly double that level, 6.3, and 43 percent higher than ESPN's 4.4 ratio.

"The lower this ratio is, the more likely that channel will have a 'must-have' dynamic for future TV bundles," Ring Digital's Brian Ring wrote.

The only consolation for the RSNs: Fox Sports 1 trailed the pack badly, at a ratio of 12.2. Only 16.2 percent of respondents said they regularly or sometimes watched the channel, part of New Fox's strategic emphasis on live news, sports and competition-reality shows. But at least FS1 is part of a Fox group of channels, including Fox News, that can be used to wedge open future bundling partners.

Given the size of the sample set, the Ring data should be considered suggestive, not definitive. It surveyed more than 300 U.S. Internet users based in California, using online Google Surveys. Margin of error ranged between about 3 percent and as much of 5.7 percent, depending on the answer.