When it comes to sports media properties in the U.S., there is the National Football League, and then there is everything else. And nothing confirms that more clearly than the prairie fire of carriage battles over the distribution of regional sports networks (“RSNs”) on cable, satellite and streaming platforms. What does this portend for the future of sports media and for multichannel video itself?
Look, I’m not predicting the full-on implosion of the sports business. That declaration of media Armageddon has been as wrong over the last couple of decades as the bearish economists who have predicted six of the last three recessions. The NFL couldn’t be much more financially stable, having just signed at $100 billion rights deal with all of their broadcasting, cable and streaming distribution partners – it’s good to be the King. And last month ESPN inked the National Hockey League to a deal that will roughly double the annual rights payment to the league compared to its existing agreement. The National Basketball Association remains a cultural bellwether as well.
On the other hand…we see an aging fan base with declining attendance and TV ratings in baseball (with a looming collective bargaining battle), NBA player salaries continuing to grow exponentially and hockey remaining little more than a niche sport on a national basis. These are the three sports that form the bedrock of RSN programming, and the present carriage battles suggest that the odds of the post-pandemic RSN landscape returning to its old ways and structure seems highly unlikely.
Until recently, RSNs were one of the surest gravy trains in the TV world. The networks did have to pay hefty fees for their most valuable programming, live sports, but the business model made it work. TV ratings in regional markets for the home teams have been amongst the highest in local markets, driving a significant advertising business. On top of that, RSNs charged cable and satellite distributors a wholesale distribution fee – easily $3-6 per subscriber per month – dramatically higher than that enjoyed by any ad-supported cable network outside of ESPN. Even if only 10% of your subscribers really cared about watching their local sports teams, the distributors usually had to carry the RSN to all of their basic subscribers. And these fees were of course directly passed on (with a margin) to every one of those subscribers. If you wanted cable or satellite, you were taking the RSN(s) whether you watched them or not.
Fast forward to today, and you’ve got big attacks aimed at both of these revenue streams. The proliferation of Netflix and their streaming brethren, not to mention rising cable and satellite prices, have helped accelerate cord-cutting dramatically. In the last decade the number of RSN multichannel video subscribers has fallen by 20% and over 20 million households. Take $3-6 per sub per month times 20 million and cut it out of your business. Ouch. And the diminished distribution footprint makes it that much tougher to garner audience scale, TV ratings and attendant ad dollars.
For cable and satellite distributors, the options for going forward have been daunting. If you carry the RSNs, you are paying big monthly fees for all of your subscribers, which likely helps drive away non-sports fans. And if you don’t carry the RSNs, you’re likely to lose some of your most passionate consumers, the core sports fans. For the RSNs, they hoped to look to some of the new virtual MVPDs such as Fubo, YouTube TV, Sling TV and Hulu Live to get carried and grow sub numbers. But all of those businesses are marginal at best, so where does that leave the RSN business?
Sinclair’s RSNs are the most prominent protagonists in the fight for traditional and streaming media carriage. Sinclair became the 800-pound gorilla of the RSN world when it purchased the group of 21 formerly Fox-owned RSNs in 2019 as part of the spin-off from the prior Fox sale to Disney. Those networks in turn have been rebranded as Bally’s Sports Networks under a Bally’s-Sinclair deal drawing sports betting closer to the center of these enterprises. The good news for the business is the $85 million infusion it has brought to Sinclair. The bad news? It hasn’t clarified the future of the distribution challenges.
The Sinclair-Bally’s RSNs are facing an ongoing multi-front carriage fight. Dish, which has traditionally played the hardest of hardball in distribution fights, is no longer carrying these networks to its nearly nine million subscribers. And the hope for streaming as an alternative to picking up more subscribers? YouTube TV and Hulu Live have also stopped carrying these networks. At the same time team owners continue to push for increases in rights fees.
Of course, Sinclair is far from alone among RSN owners in confronting a challenging carriage environment. Dish has also dropped several of the NBC-owned RSNs and MASN, the joint network of the Washington Nationals and Baltimore Orioles. In New England, YouTube TV subscribers won’t find NESN, the home of Boston’s Red Sox and Bruins. In Chicago, you can’t find a much more passionate group than Cubs fans, but neither YouTube TV nor Hulu Live carry Marquee, the Cubs’ RSN. The less distribution on streaming platforms in turn lessens the pressure on traditional cable and satellite distributors to accede to RSN demands for price increases.
There is still plenty of sports passion out there to be tapped into. But the RSN model of relying on millions of consumers to support price increases for products a small minority actually consume seems to fly in the face of the media world today. Each of the sports leagues, as well as their individual teams, are increasingly likely to look at direct to consumer offerings such as Peacock, Disney+ and their brethren as outlets for licensing their games, as we already see with the NFL Thursday Night games going to Amazon Prime. The role of digital giants will only increase as they seek the data of engaged sports fans with less concern about ratings and ad dollars. Why not start their own DTC services? Sports betting likely will be a more a more prominent part of the revenue mix as well, not just in branding such as Bally’s but in revenue shares among leagues, teams, sports books and DTC platforms.
Will RSNs disappear? That is no more likely than the disappearance of multichannel video itself, but their role is likely to serve as a smaller brick in the foundation of the sports media business going forward.