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Tensions are constructing amongst broadcast station owners and pay TV providers as the local rights to air NBA, NHL and MLB games go up for grabs.
Broadcast station owners including E.W. Scripps Co., Gray Television, Nexstar Media Group and Sinclair have been in discussions with leagues and teams about potential deals to hold games on free over-the-air channels, in line with people conversant in the matter, as long-held media rights for teams on regional sports networks unravel.
Regional sports networks have owned just about all local sports rights for many years, but their viability is doubtful after tens of thousands and thousands of Americans have been canceling cable TV in recent times. A shift to a model revolving around broadcast stations and direct-to-consumer streaming would upend the business that saw teams and leagues reap hefty fees. It could also boost broadcast station owners leverage in carriage negotiations — and potentially speed up cord-cutting.
The discussions come soon after Diamond Sports Group, which owns the biggest portfolio of RSNs, filed for bankruptcy protection and stopped paying rights fees for a few of the teams on its channels. Warner Bros. Discovery, which owns a slate of networks, said it could exit the business by year-end, putting one other handful of teams on the table.
The leagues and teams began contingency planning in March when Diamond filed for bankruptcy, the people said.
Broadcasters are viewing the chance to hold local NBA, NHL and MLB games as an unexpected pathway to spice up the fees they receive from pay TV operators like Comcast, Charter or DirecTV for the correct to hold their stations.
Broadcast corporations typically tie all of their stations together after they renegotiate contracts with pay TV carriers. That makes local sports unusually useful.
If corporations like Gray or Nexstar can land sports rights in several markets, they’ll likely use those rights as leverage to spice up fees for all of their stations. If pay TV operators beat back on price increases, the station groups can threaten to black out the games. Leagues typically need to avoid local blackouts which disappoint sports fans.
That dynamic has led distributors, which have also shown interest in short-term deals to hold games, to specific concern to the leagues about more games going to local broadcast stations being provided free to viewers with a TV antenna and no paid package, the people said. They fear local sports moving to broadcasting could further speed up cord-cutting.
Top executives at DirecTV, including CEO Bill Morrow, are expected to satisfy with NBA and NHL leaders in coming weeks as a part of an ongoing dialogue about local games if RSNs are to drop teams, a few of the people said.
Pay TV providers are also exploring alternatives to maintain local games within the bundle. Charter Communications is introducing a less expensive TV bundle in the autumn without RSNs to provide consumers more selections.
While MLB teams are also in danger, the talks have to date focused on the NBA and NHL, a few of the people said.
An NHL spokesperson said the league “is closely monitoring the RSN situation … [and] prepared to deal with whatever circumstances dictate to supply our fans with access to our games.”
RSN pressure
The Ohio Cup Trophy on top of a Bally Sports logo prior to a game between the Cincinnati Reds and Cleveland Guardians at Progressive Field in Cleveland, May 17, 2022.
George Kubas | Diamond Images | Getty Images
The regional sports network business model has been under pressure as consumers ditch traditional cable bundles and switch to streaming as an alternative.
For many years, these RSNs have paid fees to leagues and teams, and cord-cutting has hit the model especially hard. That, plus the debt load that stemmed from Sinclair’s acquisition of Diamond Sports in 2019, pushed the network’s owner out of business earlier this yr.
As a part of the bankruptcy, Diamond isn’t only seeking to restructure its debt load but additionally reset a few of its media rights deals with teams to reflect so-called market rates. A bankruptcy judge ruled Diamond needed to make those rights payments or teams can walk away from their contracts.
“We’re in ongoing discussions with our team and league partners about paths forward and are engaged in renewal discussions regarding the 2 distribution agreements which are up this yr,” a Diamond spokesperson said in an announcement. “Our goal is to proceed producing and broadcasting games for all teams in our portfolio.”
Along with its contracts with teams, Diamond can also be negotiating two carriage deals with DirecTV and Comcast, which is able to soon expire, in line with court documents.
Though the networks are still profitable, the industry — from the leagues to pay TV providers — is experimenting with alternatives. Many networks, including Diamond-owned Bally Sports channels, now offer direct-to-consumer streaming options, often priced at $19.99 or more a month.
“The underside line is you need to be seen in as many homes as possible and generating latest revenues,” said sports consultant Lee Berke. “There’s not only one strategy to do it, but you possibly can’t be fully dedicated to pay TV alone. There must be different streams of revenue.”
Broadcast is back
A few of these sports deals have already been signed.
The NBA’s Phoenix Suns and Utah Jazz recently reached deals to be be aired on local broadcast networks run by Gray and Sinclair, respectively. A Nexstar-owned broadcast station in Los Angeles will carry a set of Clipper games, while the Las Vegas Golden Knights, this yr’s NHL Stanley Cup champions, will likely be aired on a Scripps network this fall.
“One thing is evident to us, no matter whether [Diamond’s] Bally Sports had financial problems. The distribution of teams only through RSNs had develop into a extremely bad business for the teams,” said Brian Lawlor, president of Scripps Sports, a programming division launched in December. “The teams and leagues have a reach problem.”
Before the Scripps deal, Lawlor said, the Knights reached about 35% of households within the Las Vegas area on its original network, owned by Warner Bros. Discovery.
The Vegas Golden Knights rejoice winning the NHL Stanley Cup after defeating the Florida Panthers on June 13, 2023 at T-Mobile Arena in Las Vegas, Nevada.
Jeff Speer | Icon Sportswire | Getty Images
For these deals to work, broadcast station owners have to have existing stations in the identical footprint as the teams as well as an affiliate station in the realm that may not a top 4 broadcaster — ABC, NBC, CBS and Fox — in case it interferes with national sports games.
In some cases which means starting latest broadcast stations, and in others affiliate networks just like the CW Network or Scripps’ Ion might be used.
Nexstar’s CW has been increasingly desirous about adding sports, with recent deals for ACC college football games and NASCAR, and can be desirous about obtaining more sports rights, including for local games, in line with a few of the people conversant in the present deals talks.
The Phoenix Suns will likely be aired between two Gray networks, including the newly launched KPHE, reaching greater than 2.8 million households and tripling its audience reach. The Suns’ deal got here to fruition as Diamond opted to not renew its contract with the team. The Suns’ rights had also drawn interest from Scripps, a few of the people said.
Some argue that while cord-cutting is depleting the standard RSN business, it remains to be profitable and the lucrative rights fees prop up the payrolls of leagues and teams. Deals with over-the-air broadcasters are unlikely to copy those fees, even in the event that they expand the reach.
“The fact is that the problem people keep talking about is the rights fees. However the rights fees aren’t necessarily the query,” said Berke. “The query is what is the range of revenue opportunities available for teams and media outlets?”
Wider reach means more visibility for fans, Berke identified, paving the way in which for promoting to make up for a few of that revenue.
MLB differences
David Peralta #6 of the Arizona Diamondbacks is congratulated by Kole Calhoun #56 and Starling Marte #2 after a walk-off RBI single against the Oakland Athletics through the ninth inning of the MLB game at Chase Field on August 17, 2020 in Phoenix, Arizona. The Diamondbacks defeated the A’s 4-3.
Christian Petersen | Getty Images
Then there’s MLB.
Broadcast station owners have shown interest in airing local MLB games, in line with the people familiar, nevertheless it is probably not as easy as it’s for the opposite leagues.
MLB team territories are so large and it might be difficult to search out a single broadcast station that covers the realm, one in all the people said.
In the previous couple of months, MLB has begun running the distribution for San Diego Padres and Arizona Diamondbacks games after Diamond opted out of paying their rights fees amid a push for direct-to-consumer streaming rights for MLB teams.
Diamond’s Bally Sports+ apps don’t carry all of its MLB teams, unlike the NBA and NHL, which have blanket streaming-rights deals with Diamond.
This season fans can watch Padres or Diamondbacks games through cable TV or through the MLB.TV streaming service. Discussions about future carriage of those teams are still ongoing for upcoming seasons, a few of the people said.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
Correction: Bill Morrow is CEO of DirecTV. An earlier version of this story misstated his title.