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Monday, February 27, 2023

No RSN panic … yet

The challenge as the RSN business continues to fall is to try to come up a new model for local sports rights that eventually could replicate the revenue streams currently provided by the RSNs.

Consensus is that the push for streaming to replace the RSN model on its own will bring in only a fraction of the local media revenue that currently comes from the RSNs.

One NBA team president cited internal research that predicted its RSN rights-fee payout would drop from the mid-$30 million range per year to around $8 million if it made its games available via a direct-to-consumer service on its own.

During his press conference, Silver said he’s not concerned about recouping that RSN revenue in the long term, citing local over-the-air television stations and national streaming services that could step into the breach.

Some team executives already have started talks with local broadcast groups, such as Scripps, Gray Television and Sinclair, even if they have a couple of years left on their RSN deals. They view these talks as a way to move on from the RSN if it implodes sooner than expected.

Take the RSN that operates in Phoenix — Bally Sports Arizona — for example. Due to a combination of cord cutting and its distribution deals, the RSN only reaches 40% of the Phoenix market. League and team officials expect that percentage to continue to drop.

RoyalsRetro (AG#1F) Posted: February 27, 2023 at 11:47 AM | 16 comment(s) Login to Bookmark
Tags: regional sports networks

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1. DL from MN Posted: February 27, 2023 at 12:12 PM (#6118850)

It is a problem that the RSN isn't actually reaching their audience. They have been shrinking their audience for years with the pay TV model.

Drop the cost, grow the audience and sell a ton of ads. Also, market tickets & merchandise to your streaming customers. Or keep the cost high and your audience will just steal your product from disreputable internet streamers.

2. Jay Seaver Posted: February 27, 2023 at 12:50 PM (#6118857)

I've wondered on occasion why NESN/the Red Sox don't just buy WSBK or WHDH, although that probably would have been a better plan 5-10 years ago. Now, it sure looks like the league(s) will probably step in to fill some of the role of the RSNs, with the likes of MLB.TV offering non-blacked-out games for regions where they handle production and distribution. Heck, maybe MLB Network winds up pre-empting their national program for local games where they're doing this.

3. Walt Davis Posted: February 27, 2023 at 01:48 PM (#6118871)

One NBA team president cited internal research that predicted its RSN rights-fee payout would drop from the mid-$30 million range per year to around $8 million if it made its games available via a direct-to-consumer service on its own.

Oof! That's a bigger drop than I would have expected, 75%.

Take the RSN that operates in Phoenix — Bally Sports Arizona — for example. Due to a combination of cord cutting and its distribution deals, the RSN only reaches 40% of the Phoenix market. League and team officials expect that percentage to continue to drop.

A lot of that is monopoly (RSN exclusive rights) vs monopoly (only one cable option per area). When even the Dodgers' RSN can't cut a deal with every carrier that's pretty clearly a system that's not working.

Another question is how much longer will the big national deals be there?

4. Jay Seaver Posted: February 27, 2023 at 01:55 PM (#6118873)

I think the big national deals will stick around - live national eyeballs are still going to be pretty valuable so long as people are still selling advertising - although they'll explicitly include streaming (and, heck, may be set up as "live streaming with broadcast/cable simulcast"), although it could change who buys them. Like, does Fox really have a streaming service now that Disney owns (nearly?) all of Hulu, or will they wind up partnering with Amazon/Prime or Apple on their bids?

5. RoyalsRetro (AG#1F) Posted: February 27, 2023 at 02:12 PM (#6118876)

I can see ESPN getting out of the national deals as they were benefitting greatly from the old cable model, and it sounds like Disney wants them to stand on their own. But I can also see new players getting involved as Jay mentions.

6. The Duke Posted: February 27, 2023 at 08:27 PM (#6118942)

If I were looking for a big extension (like Machado), I'd get it done now before the macro landscape changes. There's only so many coastal teams that can buy the top talent. Some of those guys need to sign with the fly-over teams.

I'm already re-signed to the Cardinals not doing any free agent signings for a couple years.

7. willcarrolldoesnotsuk Posted: February 27, 2023 at 08:58 PM (#6118951)

One NBA team president cited internal research that predicted its RSN rights-fee payout would drop from the mid-$30 million range per year to around $8 million if it made its games available via a direct-to-consumer service on its own.

Oof! That's a bigger drop than I would have expected, 75%.

It doesn't seem that bad to me. I mean, sure, "75%" sounds pretty awful out of context, but year-over-year, in 1987 the NBA lost 100% of the $8 I spent on a tee shirt in 1986, and they still haven't recovered even a penny of that loss.

Brief googling tells me that the average NBA team has yearly revenue of like $340 million. So a loss of $27 million is like 9%. "I'm not saying we wouldn't get our hair mussed", but 9% is a far cry from 75%. Even if they foisted all of the shortfall onto the players, the average team has a yearly total salary of players of like $150 million or something; for the sake of simplicity, let's just get a rough estimate by saying that all goes to the twelve active players. So the average yearly salary for a player is like $12.5 million, and would get knocked down from there to like $10.3 million or so.

Of course it's easy for me to say when I'm not the one losing a couple million dollars a year, but... boo freakin' hoo.

8. The Yankee Clapper Posted: February 27, 2023 at 09:36 PM (#6118957)

If I were looking for a big extension (like Machado), I'd get it done now before the macro landscape changes.

That the Padres, a team with a contract with a Sinclair RSN, are willing to do an 11-year deal with Machado suggests they don’t believe the landscape will change significantly. At least not to their detriment. The other decade long contracts, or nearly so, for top dollar this off-season also suggest that players have no need for panic. MLB is still awash in dough.

9. Walt Davis Posted: February 27, 2023 at 09:44 PM (#6118962)

But local broadcast revenue is a big chunk of teams' marginal reveunue. True, nobody except the Pirates owners cares if Pitt's TV deal gets whacked by 75% but the Dodgers would be real money. A couple of years ago fangrpahs estimated total local TV deals (not incl the Jays) was $2.1 B so we'd be talking $1.5 B reduction give or take or about 12-14% of total revenue and obviously an average of $50 M per team. But in theory, we're talking the Dodgers going from about $250 M to $50 M which is not trivial even for them; other big teams would be losing on the magnitude of $75-100 M. That doesn't necessarily all have to come out of player payroll but, in practice ...

And will the Dodgers et al continue to accept giving half of their meaguer haul into revenue sharing? Or does it make the ineuality ratios worse where the Pirates are now looking at $5 M while the Dodgers can still count on $150?

10. The Duke Posted: February 27, 2023 at 11:41 PM (#6118971)

This seems like a big deal to me. I think the conversations I'm hearing from
The league are happy talk. "Don't worry, we'll make sure the games get broadcast". Of course they will. But they'll be generating 50-75% less money. That's a big deal and it likely hurts the low revenue teams the most.

11. pthomas Posted: February 28, 2023 at 08:43 AM (#6118986)

Well, it seems the business model of making all cable subscribers, sports fans or not, pay a major part of their cable bill to sport broadcasters was unsustainable.
Who knew?
There are many stories going back for years about how sports channels added 20 percent or more to the average cable bill. The scam is over, and the real bill is due. This will get much worse for the leagues.

12. snapper (history's 42nd greatest monster) Posted: February 28, 2023 at 09:29 AM (#6118992)

There are many stories going back for years about how sports channels added 20 percent or more to the average cable bill. The scam is over, and the real bill is due. This will get much worse for the leagues.

Even if franchise valuations fell 50%, most owners would still have a profit on their investment.

13. Starring Bradley Scotchman as RMc Posted: February 28, 2023 at 09:58 AM (#6118998)

Re 7: Primey for the Dr Strangelove reference.

14. Walt Davis Posted: February 28, 2023 at 02:53 PM (#6119031)

Overlooked here -- it's treated as if the team-owned RSNs are off the hook. But if Pitt cable operators aren't willing/able to pay Sinclair/Bally or WBD/AT&T, what makes us think Chicago area cable operators are willing/able to pay what Marquee is asking? It's the same business model, maybe easier for Marquee/Cubs to move to a streaming/direct sub model.

Compare this with the Hicks/Rangers, Dodgers (I've forgotten that crooked owner's name) or Trib/Cubs bankruptcies. In those cases, the baseball team was one of the valuable assets in the bankrupt portfolio and were pretty easily sold off. But these broadcast rights don't seem to be valuable assets here, at least not if they really are now worth just 25% of what they were. I was expecting "sure, this market's contract is no longer worth the $50 M fee but we can still re-sell those rights at $35-40 M in the short term." Not good but not such a big deal and maybe small enough the MLB slush fund could cover the shortfall for a year or two. Instead, it may be a $35-40 M drop.

15. The Yankee Clapper Posted: February 28, 2023 at 04:04 PM (#6119046)

Some local RSNs are doing just fine, will continue to make their payments, and depending somewhat on their deal & the success of the team, make significant profits. Some teams are doing just fine, too, and if their rights-holder goes bankrupt will just have to find another broadcast partner, or do it themselves, while recovering what they can in court. That’s not a huge problem if your broadcast rights are still valuable, which seems to be the case for the Padres. Some less competitive teams may have a more difficult time, but if they become more competitive, their broadcast rights would be more valuable, too.

16. Walt Davis Posted: February 28, 2023 at 06:05 PM (#6119066)

Depends. If the problem is just a localised ratings problem -- nobody wants to watch tanking teams -- then why all the gnashing of teeth about cord-cutters and HGTV viewers no longer willing to subsidize (not clear to me they have been since RSNs usually cost extra don't they?) and the need to get up a streaming option ASAP? If it's a ratings problem then the solution would seem to be "sorry Pirates, you gotta suck it up -- either use more of that $230 M to pay players or use it to calm yourself over the $30 M loss." But who can see MLB telling owners to spend more money on players leaving us at "Dodgers, Yankees, Mets, etc refuse to help tankers replace lost revenues."

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Monday, February 27, 2023

No RSN panic … yet

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