Where Could Teams Turn Without Regional Sports Networks?
Diamond Sports’ bankruptcy filing last week could affect as many as 42 U.S. professional teams across the NBA, NHL and MLB that air games on Bally Sports regional sports networks. But the biggest immediate issues could come for the baseball contingent, as their regular season is weeks away from starting and there’s now some uncertainty about whether many local markets will be able to see all games.
With an 162-game schedule and relatively limited national TV exposure compared to other major sports in the U.S., daily RSN broadcasts are a crucial part of MLB franchise revenue streams. Data shared by Sportico on Monday shows that 23% of MLB club revenues come from local media (largely RSNs). If that stream is jeopardized for the 14 clubs whose games appear on Bally Sports RSNs, it’s a major blow to checkbooks.
Diamond Sports’ Bally Sports-branded networks carry the games of 16 NBA, 14 MLB & 12 NHL teams. But when Diamond filed for bankruptcy last week, the impact on MLB got all the attention
— Lev Akabas (@LevAkabas) March 20, 2023
Why? Because local media is a much bigger slice of the MLB revenue pie pic.twitter.com/IofkDRyXdA
That’s even before diving into individual teams’ revenues. In 2020, FanGraphs data showed the Los Angeles Angels actually had the most lucrative Bally Sports RSN deal at $138 million per year (through 2031), while clubs like the Milwaukee Brewers and Miami Marlins – among others – were collecting less than a third of that total per year.
While MLB’s “small-market teams” have less total revenue to lose should these Bally Sports RSNs falter, they’re still highly reliant on them. Along with lower ticket and merch sales, those markets are also less likely to be able to sell pricey sponsorships than their big-market brethren. Plus, even with league-wide revenue sharing, less overall revenues from RSNs mean there’s less shared with these clubs.
One could argue NHL (NHL.TV’s already bundled into ESPN+) and NBA (League Pass) teams are already relatively well-positioned to handle any RSN issues that come from this bankruptcy filing. But those teams and leagues also have the benefit of fewer games, less revenue and an entire offseason to figure it out.
MLB clubs need to be thinking of both short- and long-term solutions to both get games in front of fans and also replicate as much revenue as possible in case these streams (which have buoyed two decades of growth) disappear. MLB has already indicated it could stream games for free in these markets. Even robust ad sales against game inventory doesn’t make up the loss of carriage fees, however.
So where else could teams turn? Some ideas, of varying degrees of difficulty:
Take ownership of their own RSNs
This was the way to go in the early days of RSNs, with the New York Yankees, New York Mets and Boston Red Sox all among the teams raking in over $100 million per year from RSNs the clubs’ respective owners have a stake in.
Now, could the Marlins, Cleveland Guardians or Minnesota Twins do the same? Theoretically, yeah. But owning doesn’t have the same upside it once did pre-pandemic since carriage is a much harder sell as well.
Even a multiple-team option for markets like Cleveland or Minnesota would be hard-pressed to make up the difference from the Diamond Sports RSN deal, since they’d be on the hook for the cost of starting up a network, the programming, talent, ad sales, carriage negotiations, etc. Plus, any revenues generated would have to be split by the number of teams involved in the venture.
Find a media partner for RSNs
Again, perhaps an option from a bygone era. The Dodgers partnered with Spectrum to launch SportsNetLA in 2014 and were still able to force carriers’ hands despite the Los Angeles Lakers doing the exact same thing with Spectrum SportsNet just two years earlier. Both teams have made a killing from carriage fees, while mitigating costs of operating the network by working with an experienced party there.
The issue now, of course, is that with linear audiences declining, RSNs aren’t worth what they used to be (as evidenced by the bankruptcy filing). Not only would it be tough to get steep carriage fees for any network – regardless of market – but teams would be hard-pressed to find a large media company interested in getting into that business.
Along with Diamond’s bankruptcy filing, Warner Bros. Discovery is also trying to get out of the RSN game, affecting even more pro teams. With the entire TV industry seemingly over-extended by expansion into streaming, there aren’t many likely partners out there.
In a possibly related approach, teams could also just opt to contract with local broadcast networks again, as they once did decades ago. That revenue is all ad-based, though, instead of being reliant on (to-date, lucrative) carriage fees. It’s also easier to do in large markets where there’s competition between broadcasters to win those rights.
Owned streaming
Currently, local blackout rules prevent streaming in-market teams through apps like NBA League Pass and MLB.TV. However, the leagues could all opt to ignore local blackout rules in a reality where many teams are without a dedicated RSN. In that case, the league streaming service becomes the de facto RSN, and they could likely charge more for those services as a result. But would consumers want to pay those increased rates? Those not already subscribed to the current RSNs may balk at the idea.
Right now, one of the biggest things driving down the price of a service like NBA League Pass is the fact that it’s for out-of-market fans or super fans that want access to all games. Adding the local option makes it more valuable and essential for ALL fans. The same goes for MLB.TV and the ESPN+ membership that grants access to the NHL.TV plan.
The NBA, NHL and MLB could also just let teams own their own streaming services for local games. But again… that’s both unlikely for MLB in particular for 2023 and costly for anyone that tries it. While streaming would “only” require an app build and the aforementioned expenses for physically running a network, going direct-to-consumer means a constant drive by the teams to both grow and retain subscriptions.
More streaming partners
Either in conjunction with– or instead of– using owned streaming services/subscription plans to be the sub for RSNs, leagues could also just opt to work with streamers with deeper pockets and an eagerness to get more involved in live sports.
Hulu’s already tied to ESPN through Disney and could be an RSN sub or just expand its live sports options by linking with MLB.TV/League Pass. Netflix would have a bigger lift, but could tack on RSN add-ons, even if not a full league-wide streaming subscription.
Amazon has already done some test-runs on the RSN model, with local deals for the Yankees, plus the WNBA’s Seattle Storm and MLS’s Seattle Sounders clubs. Prime Video could be an easy place to plug in these local broadcasts in-market, and provide advertisers with lucrative local purchasing data in the process. Or perhaps this is how FASTs like Pluto or Tubi jump into sports, if they have access to ad buying platforms through parent companies Paramount and Fox, respectively.
Admittedly, none of these options are perfect. But like everyone else, sports leagues were looking at adjusting to the new reality of TV viewership… eventually. They just didn’t think the change was going to be this abrupt.
Despite the gloom-and-doom above, MLB games remain one of TV’s best properties. Inscape data indicates baseball was one of the top five programs by minutes watched last summer, and even this year’s World Baseball Classic was the No. 2 program by watch-time from Mar. 7-21 – only behind men’s college basketball. There’s clearly an appetite for baseball games. The league and the individual teams just need to figure out the right delivery mechanism(s).
