RSNs In Flux, Chicago-Style

LocalProximity
Written By Tim Hanlon

@blakeguidry/Blake Guidry via Unsplash

The regional sports network (RSN) industry is in a state of flux, and few markets exemplify both the chaos and transformation more than Chicago. As a major sports hub, Chicago's local RSN market is both a microcosm of the national industry's challenges and a unique case that underscores the complexities of this fast-evolving space.

The Decline of the Traditional RSN Model

The RSN model, once a reliable revenue generator for local sports teams, is facing unprecedented upheaval. The rise of cord-cutting/never-ing, the proliferation of direct-to-consumer streaming options, and the overall decline in pay TV subscriptions have all contributed to a seismic shift in how sports are consumed.

Chicago, like many other markets, is not immune to these pressures. The two major RSNs in the metro — Marquee Sports Network and NBC Sports Chicago — are grappling with these industry-wide issues, but each has its own unique set of hurdles to surmount.

Marquee Sports Network, a joint venture between the Chicago Cubs and Sinclair Broadcast Group, is a prime example of how the traditional RSN model is struggling to stay relevant. Somewhat counter-intuitively launched in 2020, Marquee was designed to be the exclusive home for Cubs content, offering live games, shoulder programming, and some limited additional general sports fare. However, the network's narrow focus on a single team in a market with numerous major sports franchises (and not the only MLB team in town for that matter) has raised questions about its long-term viability as a one-club “standalone.” With basic cable packages becoming increasingly expensive, subscribers are questioning the value of having to pay for a channel dedicated almost entirely to one team.

NBC Sports Chicago, on the other hand, has been the longer-time home for a broader range of Chicago sports — including baseball’s White Sox, the NBA Bulls, and NHL Blackhawks (also the Cubs until the launch of Marquee) — since 2004, when it launched as Comcast SportsNet Chicago. Curiously, this network is also facing its own existential crisis: the owners of all three teams are in the process of shifting their broadcast rights to a new venture, the Chicago Sports Network (CHSN)— yet another RSN — which is set to launch with the financial backing of private equity-owned Standard Media in October 2024. This move effectively signals the end of NBC Sports Chicago as we know it, leaving a void that the new network will try to fill.

Chicago's Unique Position in the RSN Landscape

While the challenges of Chicago's RSNs mirror those of the broader industry, the market also has its own unique dynamics that set it apart. For one, the Windy City traditionally over-indexes in traditional linear cable and satellite subscriptions. This means that, despite the national trend toward cord-cutting, a significant portion of Chicago sports fans still rely on legacy pay TV packages to watch their teams’ local broadcasts (long gone are the days when legendary broadcast stalwart WGN-TV disproportionately handled those duties). This has provided a temporary reprieve for the city's RSNs, allowing them to hold on to a larger subscriber base relative to most other US markets.

Long term, however, this outlier dynamic is not sustainable. The move by the oft-reviled Reinsdorf and Wirtz team ownership groups to form CHSN is a clear indication that even in a market like Chicago, the long-lucrative traditional RSN model is under existential duress. The future of local sports broadcasting, both in Chicago and nationwide, is instead increasingly geared toward direct-to-consumer (DTC) models.

The Shift to Direct-to-Consumer Models

According to its initial PR positioning, the new Chicago Sports Network is expected to be more than just a basic cable replacement for NBC Sports Chicago. In fact, it will most certainly be forced to a higher-priced MVPD extended tier, or even a fully standalone a la carte pay TV offering. Additionally, CHSN will be available separately as a pure-play streaming app (no foundational pay TV subscription required) as a direct-to-consumer product — an option that Marquee itself began offering begrudgingly two seasons ago.

This hydra-headed approach is indicative of the broader shift in how sports content is distributed, consumed and monetized. As RSNs across the country face declining revenues (including the dwindling of exclusive live local game inventory), teams and leagues are aggressively exploring ways to bypass traditional MVPD providers altogether and deliver content directly to fans. This DTC approach offers several advantages, including greater control over content, pricing, ad/marketing opportunities, and enhanced customer relationships.

However, this shift also comes with significant challenges. For one, the cost to consumers for watching their favorite teams will undoubtedly increase. The days of paying an embedded $12 or $13 a month as part of a basic cable package are rapidly fading. Instead, fans may be asked to pay $25 or more a month for a standalone streaming service. While this might appeal to a smaller number of die-hard fans, it could alienate the broader casual viewer base who will be unwilling to pay a premium to watch their favorite teams just every so often.

Moreover, the move towards more direct-to-consumer models pose a new direct threat to the financial stability of sports franchises that have long relied on steadily increasing, predictable revenue from RSNs carriage fees. As we discussed recently in a TVOT Televisionation “Talk Back To Television” episode, teams that depend heavily on local media revenues will need to find new ways to bridge the gap as RSN revenues begin to precipitously decline. This could involve bundling streaming app subscriptions with things like season tickets, club merchandise, and exclusive at-game or in-app fan experiences to create more enticing packages that become more like comprehensive VIP team service offerings than simply a convenient way to watch TV.

Chicago as a Bellwether for the RSN Industry?

Chicago's RSN market is at a crossroads, reflecting both the broader trends in the industry and the unique characteristics of the city. The transition from traditional RSNs to direct-to-consumer models is inevitable, but the path forward is fraught with challenges. As the rest of the country watches, Chicago may serve as a bellwether for the future of sports broadcasting, illustrating both the potential and the pitfalls of this new era.

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Tim Hanlon

Tim Hanlon is the Founder & CEO of the Chicago-based Vertere Group, LLC – a boutique strategic consulting and advisory firm focused on helping today’s most forward-leaning media companies, brands, entrepreneurs, and investors benefit from rapidly changing technological advances in marketing, media and consumer communications.

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