RSN Armageddon? What fans can expect as Bally Sports’ likely bankruptcy looms

Bankruptcy, media giants breaking away from team contracts, leagues scrambling to throw life rafts. The much-heralded Armageddon, Doomsday, has arrived for the regional sports network universe this week.

But is the upheaval really as bad as it seems, and what does it mean for fans? Short answers: No; and fans should ultimately have more choices, but unfortunately probably higher costs.

Diamond Sports, the company that owns the Bally Sports Regional Network, which carries 14 MLB teams, 16 in the NBA and 14 NHL teams on 19 RSNs, is likely to file for bankruptcy protection this week. Meanwhile, Warner Brothers Discovery said in a statement that it would be exiting its businesses with regional sports networks, which broadcast three MLB teams, through the end of March, leaving baseball fans in particular concerned about whether the 17-team games will be held in the strike zone aired a few weeks on the opening days.

AT&T Sportsnet, seen here interviewing manager Dusty Baker last season, was Warner Brothers Discovery’s RSN, broadcasting Houston Astros games. (Erik Williams / USA today)

While the RSNs also broadcast NHL and NBA games, those seasons are about to end and the media chaos isn’t immediately as big of a threat.

There are still many unknowns – Diamond looks likely to be trying to keep some, but not all, of the teams carried by its 19 RSNs – but two tenets seem clear: Games will happen in some way, and viewers need to as the game progresses paying more as clubs begin the painful move away from channels carried under the traditional cable bundle. The sports fan has been subsidized by the cable bundle for decades, paying a fraction of what the games would cost individually. That’s why leagues and teams have fought esports tiers for so long, and why stream sales are driving prices up.

“Let’s say you have $4 a month” that a cable consumer pays for an RSN, explained sports consultant Marc Ganis that every subscriber pays. “If only 20 percent buy (a new standalone option), just to get the same number of subscriptions, you have to pay multiples of five for those who want it. That’s just math.”

However, detaching from cable, even partially, can result in more options, access, and variety as the streaming migration continues. However, this will come at a cost to consumers.

“If you take a step back, this is the first time so many baseball games, so many football games, or so many college sporting events have been made available to consumers anywhere, whether in streaming or on a linear basis,” said William Mao, senior vice president of Media Rights Consulting at Octagon. “And if that requires an increase in the overall wallet, that proportion of the wallet or the size of that wallet will be different for different consumers.”

In other words, imagine if your team was only on one RSN. In the future some games may be broadcast on the old-fashioned local partner channels on the market and also via a streaming option. There may be an RSN in this paradigm, but what the channel is paid for by the cable operator will be dramatically less than it is today because streaming deprives the games of exclusivity.

“The RSN needs to be reinvented,” said sports media consultant Lee Berke. “And that means they’re offering their content across a range of screens at revised prices. You will have games available in free to air TV games available in streaming, you will boost your economy. Right now, your economics are essentially based on exclusivity or near exclusivity for these games on the traditional cable pay-TV package.”

How many teams are thrown into this world at once is unclear. Of Diamond’s 19 RSNs, a person close to MLB said Sinclair Broadcasting’s affiliate has told the league it plans to move away from those that carry the Cincinnati Reds, Cleveland Guardians, Arizona Diamondbacks and Texas Rangers . In a bankruptcy, Diamond views RSNs the way a bankrupt retailer would view store leases: discard those that are not viable and keep those that are.

Warner Brother Discovery’s calculus is different, as RSNs aren’t a core business like Diamond is. The teams Houston Astros, Colorado Rockies and Pittsburgh Pirates are affected. Since the Pittsburgh RSN also carries the Penguins, which has common ownership with the New England Sports Network, the person close to MLB said the channel could step in.

“In the past, this has been a pretty thriving business,” Luis Silberwasser, chairman and CEO of Warner Brothers Discovery Sports, told the SportsPro streaming conference Tuesday morning, “it’s grown in the last, I’d say, two to three years changed .

“Ideally we have a transition with the teams and we can always somehow make sure that the fans are not affected. We’ve been very transparent and we’ve spoken to all the teams, we’ve spoken to all the leagues about a smooth transition to this plan. And I think we will, and it’s been a good conversation both at a league level and at a team level. And I think we will get through this difficult period, but in a very smooth way and with a good result.”

Bob Thompson, the former president of Fox Sports Networks and co-founder of the Big Ten Network, doesn’t think the sky is collapsing and predicts Warner Brothers won’t go until the end of the month as announced. For one, he said the TV trucks and crew needed to broadcast the games on the RSNs are already booked.

“This whole idea that ‘Oh, we’re going to pull them, we’re going to knock them out on the 31st[March],’ I just, there’s a lot of things that are going to happen before that,” he called.

“There will continue to be regional feeds and regional linear TV shows,” Thompson added of the upcoming RSN world. “Most of these will be on the existing RSNs. Some will be on some form of reconstituted or hybrid RSN. Some are streamed. ”

MLB has said it has a plan B with Diamond and Warner Brothers stepping out of RSN contracts as the league builds its own regional media division. However, MLB commissioner Rob Manfred has also said that if Diamond gives up just one media deal, they all go, urging a bankruptcy court battle with Diamond.

Manfred commented on the situation to reporters last month.

“We have made it very clear that if Diamond does not pay under each and every one of the transfer agreements, it creates a right of termination and our clubs will continue to terminate those agreements,” Manfred said.

However, that can be a difficult position before the bankruptcy court. The bankruptcy judge decides which contracts a debtor like Diamond can “buy” and has the final say.


What the Bally Sports saga means to NBA, NHL and MLB broadcast: Everything you need to know

MLB wants to wipe the slate clean and create a system where there is a mix of linear and streaming options, both in-market and out-of-market. But even if the league gets the 14 MLB teams in Diamond — a very unlikely if — other teams have existing, well-established RSNs that they either own or are involved in, including the New York Yankees, Boston Red Sox, Seattle Mariners, Chicago Cubs and Baltimore Orioles. The Red Sox already have a streaming option through NESN, and the Yankees are expected to have one soon. It’s hard to imagine these teams giving up their RSNs to join a nationalized MLB media initiative.

Diamond is a victim of both the cable cuts wave, which has so far reduced cable subscribers by more than a third from its peak, and parent company Sinclair’s roughly $10 billion in debt, which it bought in 2019 by buying the RSNs from Walt Disney Co , Diamond has skipped a $150 million debt payment and the 30-day negotiated grace period ends this week, making a Chapter 11 filing likely.

If Diamond can get out of debt, he doesn’t think the RSN business is irretrievably broken. Thompson points out that if RSNs were a 30 percent margin business before cord cutting, they would still be a 20 percent margin industry today.

In fact, the current environment does not reflect the importance of sport in the media. Baseball games on RSNs are routinely prime programming on the days they air. The problem is that as more viewers abandon the cable bundle, the economics collapse from fans paying cable operators, followed by cable operators paying RSNs, to RSNs paying teams.

“One is that there is no rating crisis of sports content, sports games, teams are watched and the ratings are strong and much higher than in almost any other television segment,” says sports media consultant Berke. “It’s not the ratings that are a problem. It is the business model that is an issue and a business model change that needs to be implemented to help all stakeholders realize the full value of the sports content on offer.”

(Top Photo: Mark Cunningham / MLB Photos via Getty Images)

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