Regional sports networks plan to broadcast the future without pay TV –

Live sports are the glue that holds an expensive TV package together.

This is a refrain that has become so popular over the last decade that it’s easy to take it for granted. Even as consumers increasingly turn to streaming services for their entertainment, sports and news needs they have remained stubbornly attached to legacy packages, with executives rejecting any effort to publicize them.

For example, Chase Carey, former head of 21st Century Fox, said in a memoir about selling individual channels at the company’s Investor Day in 2013: “A la carte is a fantasy.”

Nearly ten years later, Kerry’s fantasy is quietly coming true.

Long seen as the channels least likely to switch directly to consumers due to their high cost and regional appeal, regional sports networks are starting to position themselves without a TV for the future and where sports fans pay for direct access. RSN of your favorite team.

For live streams of local games (typically from major baseball, NBA, and NHL leagues), RSNs charge a huge fee for the pay-TV package, although the local nature of the games (and the leagues’ broadcast market limits) keep them in common access. serious. Before.

The first RSN to dip its toes in the water was the home of the NESN, the Boston Red Sox and the Boston Bruins. NESN, which shares ownership with teams (Fenway Sports Group and Delaware North), launched its offering, NESN 360, in early June.

Then, on June 23, Bally Sports RSN, controlled by Sinclair Broadcast Group, launched a streaming offering in 5 markets: Milwaukee, Detroit, Tampa Bay, Kansas City and Miami.

The bet is that while pay-TV isn’t dead yet, its days may be numbered: Major pay-TV providers lost 1.95 million subscribers in the first quarter of this year, according to Leichtman Research, and they need streaming. Option for those who unplug the cable or for those who will never pay for the cable in the first place.

“We see it as a hybrid model moving forward and in the near future,” said Sinclair CEO Chris Ripley. the hollywood reporter. “Refers to RSNs in MVPDs and RSNs directly to the customer who lives next door to each other.”

“Our distribution partners are very important to us. But we have to have a market offering that serves the next generation of viewers, whether cable or wire, with an innovative, immersive and interactive experience,” adds Ripley. “We’re looking to DTC, which offers us to bridge that gap for the large and growing consumer base of sports fans beyond cable.”

Bally Sports is the biggest player in the RSN space, owning 19 channels and owning shares in others, including the New York Yankees’ ‘YES Network’ and the Chicago Cubs’ Marquee Sports Network.

Due to its scale, its success or failure will be closely monitored across all industries.

“Subscribers are overwhelmed with streaming platforms, but most of them are focused on scripts and reality shows,” said Christian Azi, an analyst at Moody’s. “Positioning Bally Sports as a provider of local sports content at scale is an advantage, but that scale and with it subscriber growth will be limited in the long term unless more MLB teams subscribe.”

RSN owners are also betting that the streaming option can generate new revenue streams such as more advanced promotional offers and, of course, sports betting integration.

In terms of advertising, NSNs underperformed national sports, which are among the most sought after shows by advertising buyers. The streaming service has the potential to fix some of the issues that have arisen with its current product.

“The advertising business is huge. “As a local media buyer, RSNs have always been what our customers want to buy, but they really have very little measure,” said Michael Beach, CEO of Cross Screen Media. “There’s a lot of potential for commercial advertising, I think it probably underestimates people.”

While market limits prevent NSRs from reaching national scale (at least for now), more advanced ad targeting technologies and measurement capabilities can improve CPMs and potentially revenue.

And on the betting front, there is a feeling among some RSN owners that the sky is the limit. Online sports betting has seen a huge increase since the Supreme Court paved the way for its legalization in 2018, and rights holders have long hoped that the offerings will be more like those in Europe, with active spectators than ever before. They actively make small bets. in the middle of the game.

“Many focus groups and surveys have shown that people who like to bet on games are busier and watch more hours. “And the DTC product will give every fan more ‘personalization,’” said Ripley. “But let’s be clear, no bets will be accepted on Bally Sports+.

But the possibility of betting also highlights some of the challenges facing the industry. Regional appeal (and league market definitions) limits growth and offerings are expensive (NESN 360 is $30 a month or $330 a year, Bally Sports is $20 a month or $190 a year ). But they must be, if they have any hope of returning the margins they received from the cable, even in the case of other potential income.

League relationships are critical and can be a fatal blow to any RSN that doesn’t want to get used to them.

A top source from the leagues the RSNs work with emphasized that he hopes to have a say in any stream offering to ensure a consistent, high-quality product. They may also want to participate in the economy or have an opinion on a business partner.

Another league partner source also emphasized the need for a high-quality product, noting that the DTC model is about connecting with fans and having a direct relationship. In the long term, the leagues hope that future rights deals will add further improvements and flexibility for both parties (“We always talk to our league partners to create a structure that works best for all stakeholders,” says Ripley).

And betting makes things even more complicated as the leagues strike deals for their official sports betting partners (MLB has deals with Bally’s and DraftKings, NBA has deals with DraftKings, FanDuel and MGM, NHL has deals with BetManDM-com) . RSNs will likely need to navigate according to league-level relationships.

And then there’s the problem, the problem with all streaming services. High prices, along with live games only for part of the year, may encourage users to sign up for the season and cancel after it ends. And registration can also depend on teamwork, as NSNs host strong teams that make it easy for users to register, while others host losing teams that struggle to attract anyone.

NESN 360 is trying to alleviate this problem by awarding its expensive annual plan to buyers with eight Red Sox tickets, which can stop anyone from thinking about swimming, but other NSNs may need to develop their own strategies (the NESN shares red with the owner Con los Sox, which makes donating tickets a relatively simple proposition).

“Without a league-wide and/or multi-league broadcasting platform (such as a Sunday ticketing program) and revenue-sharing structure, the risk of closer subscription ties and commitment to on-field/court/performance ice increases significantly. “Autoline’s pay-TV subscriptions are falling apart,” said Neil Begley, an analyst at Moody’s. There may also be increased risk for teams and leagues in the long term.

In fact, as Begley says, in the long run, the future of the NSNs may depend on the leagues themselves. It could be a form of leagues offering NSNs their own broadcast technology or offering multiple leagues to distribute investments.

“I’ve seen major baseball leagues, whether it’s the NHL or the NBA, do their job if they can,” says Beach.

But as Major League Soccer’s recent deal with Apple has shown, it could be a return by the leagues themselves to full rights, even if that means multi-year upfront contracts or costs RSN owners dearly.

As a result of the Apple/MLS deal, Apple has created a new standalone paid MLS app that will feature all league games as well as a variety of MLS games that will be available for free.

And national sports networks like ESPN balance their own broadcast futures. Disney CEO Bob Chapek said during a recent call from the company that he had many ideas in mind for genuine ESPN direct customer service: “This is going to be the best deal for the fans,” he said. ESPN already operates ESPN+, which has its own set of sports rights and broadcasts some ESPN events.

Without ESPN, pay TV is likely to deteriorate further, reinforcing the need for NSNs and leagues to discover their own futures.

However, now all bets are off. NESN and Bally Sports are in the streaming game and others are likely to follow. Turner Sports is not moving forward with its plans for its RSNs, with NBC Sports saying earlier this year that “our DTC strategy is evolving as we value the options in each unique sports market we serve.”

Meanwhile, the Chicago White Sox, Chicago Bulls and Chicago Blackhawks are in talks to launch a new RSN when their NBC Sports contract expires in 2024, suggesting the teams still see potential in the industry.

But does the economics of streaming ever match the cash register of a pay-TV?

“Only time will tell,” Ripley said. The economics of the regular distribution model [MVPDs] They are still very strong and the surface of the DTC economy is not yet ruined. We believe that both sources of income will be strong in the future. We want it, our team partners want it, and our customers want it. ”