Turmoil Hits Local Sports TV, But Your Viewing Should be Safe

The biggest owner of regional sports networks has declared bankruptcy. Teams and leagues may take more control.

The times they are a changin’ (as Bob Dylan sang) in the world of televising games of local sports teams.

Bankruptcy has been declared by Diamond Sports Group, whose 19 Bally Sports networks show the games of more than 40 Major League Baseball, basketball and hockey teams to their local audiences.

Also, AT&T Sports Networks, a Warner Bros. Discovery  (WBD) - Get Free Report subsidiary that owns three regional sports networks and has a stake in a fourth, wants to get out of the business.

“Clearly the RSN [regional sports network] model is in decline,” John Kosner, president of Kosner Media consulting firm, told TheStreet.com.

To appreciate what’s going on, it helps to understand how the RSN business model has worked for years. There are several moving parts. RSNs pay a sizable sum to teams to broadcast their games on local cable/satellite channels.

In the End, Consumers Pay Up

For example, Spectrum Sports Net LA paid $196 million to the Dodgers last year for broadcast rights, according to Forbes. That’s the highest sum in Major League Baseball.

The RSN then charges a fee to cable and satellite carriers such as Comcast  (CMCSA) - Get Free Report and Dish Network to recoup the money the RSN pays to teams.

Many RSNs charge more than $5 per month per subscriber, according to Kagan research firm. That means RSNs are the most expensive networks for the carriers after Disney's  (DIS) - Get Free Report national sports broadcaster ESPN, according to CNBC.

The cable and satellite carriers then charge viewers for the channel. For example, in West Palm Beach, Fla., a subscriber would pay Comcast $16.45 per month for a RSN – Bally Sports Florida.

But as you’re no doubt aware, many TV viewers don’t want to pay for channels they don’t watch, which may include sports channels. So they’re dropping their cable/satellite service – cord cutting – and streaming individual networks or bundles such as YouTube TV online.

With fewer customers, cable/satellite carriers have less money to pay RSNs, which means RSNs have less money to pay teams. And that has created the industry’s mess.

Experts: Viewers Should be Safe

The good news is that the turmoil won’t take away your ability to watch your home teams’ games, experts say. Baseball has the most immediate relevance, because the season has just begun.

“Major League Baseball has prioritized making sure games are available to be watched over everything,” Daniel Cohen, executive vice president of media rights consulting at sports agency Octagon, told TheStreet.com. “It may be streaming-only or MLB Network-only for a short time,” but the show will go on, he said.

So how will the RSN business change, given the industry’s turmoil? One thing that’s clear is the networks need to take in money beyond traditional-TV game broadcasts and streaming, experts said.

“If they don’t create additional revenue, then they’re operating a business that’s unprofitable,” Cohen said. The best-case scenario for RSNs would be a “one-stop shop” for fans, including betting, ticket buying and one-click merchandise purchasing, Cohen said.

Meanwhile, the days of watching all your team’s games on a single RSN channel may be over. “It might be that RSNs show home games and over-the-air (local) broadcasters pick up certain road games,” Kosner said. “Or the games might be available on a mix of over-the-air, pay TV and streaming.”

Curt Pires, president of Cap Sports Group, a sports media consulting firm, sees the center of gravity shifting from RSNs. “Leagues will participate with teams” in local broadcasting, he told TheStreet.com. “That’s where we’re heading.”

For example, in Houston, the Astros and Rockets are negotiating to take over AT&T SportsNet Southwest. “We might have more of that,” Pires said. “It’s a healthy way to do business. Teams don’t want to sell their rights, and third parties [RSNs] realize they can’t squeeze a profit anymore.”