The landscape of regional sports networks is about to change.
Warner Bros. Discovery said Friday night it is getting out of the RSN business. Ten MLB, NBA and NHL teams have distribution agreements with the company through AT&T SportsNet and Warner Bros. Discovery has informed those teams that they have until the end of March to strike a deal to take back their distribution rights.
In a statement to Sports Business Journal, the company said, “AT&T SportsNet is not immune to the well-known challenges facing the entire RSN industry. We will continue to have private conversations with our partners as we try to find reasonable and constructive solutions.”
The Colorado Rockies, Houston Astros, Pittsburgh Pirates and Seattle Mariners will be the four teams most affected by the announcement as the March 31 deadline falls before the 2023 MLB season. AT&T SportsNet also has deals with the Houston Rockets, Portland Trail Blazers and Utah Jazz and Las Vegas Golden Knights, Pittsburgh Penguins and Seattle Kraken. But with the end of the season fast approaching for those teams, all they need is a short-term fix for the off-season.
According to the SBJ, the AT&T SportsNet channels would file for Chapter 7 liquidation if they cannot reach rights deals with the teams.
The impending RSN reckoning
SportsNet’s announcement follows news that Diamond Sports Group is also preparing to file for bankruptcy this spring. DSG owns and operates Bally Sports’ regional networks and holds the local television rights to more than 40 MLB, NBA and NHL teams. Dozens of teams across the country have several years left on their current rights deals with WBD and DSG.
Founded by the Sinclair Broadcast Group, Diamond Sports Group acquired Disney’s former Fox Sports regional networks after the Fox RSN rights were part of Disney’s acquisition of 21st Century Fox in late 2010. The purchase of Diamond was not profitable from the start. The company is $8 billion in debt and is struggling to gain wide distribution for its RSNs amid changing consumer television consumption habits. DSG networks are not available on YouTube TV and other television services.
MLB commissioner Rob Manfred said earlier in February that MLB would handle team broadcasts in 2023 if DSG misses rights payments. Manfred’s comments came after Diamond said it would miss a $140 million interest payment in what is widely seen as the first step toward bankruptcy proceedings.
If the Bally Sports network crumbles for the season, Manfred said MLB “would go straight to distributors — that is, Comcast, Charter, the big distributors — and make an agreement to distribute those games through cable networks.” He also said teams would have more flexibility to stream their games. At this time, consumers can only watch games in local markets through Bally’s streaming service or a television provider.
A big drop in royalty fees?
An SBJ story earlier this week said that “many” teams with regional sports network distribution deals “have been told they expect their local media rights fees to be cut by as much as 70% in the coming years,” as the local TV landscape changes. Regional sports networks were once the mainstay of cable television. But with more and more consumers turning to streaming-based entertainment options and those networks’ distribution dwindling, the channels are much less profitable than they were.
The seemingly rapid decline in RSNs across the country could make Major League Soccer look prescient, at least in the short term. The MLS season kicks off Saturday and all league games are available via a streaming package on Apple TV. The new MLS package has no blackouts and consumers can access every game on Apple TV for one price.
Could similar ideas be on the horizon for MLB, the NBA and the NHL? It is possible. It wouldn’t take much for baseball’s MLB.TV to serve fans without local blackouts and Apple and Amazon have been named as potential bidders for some NBA TV rights in 2024-25. If the RSN landscape becomes barren in the coming months, there could be an opening for Apple and Amazon to stream games for local fans as part of a deal to broadcast major games nationally.