A sea change is being driven by cord-cutting, which has put the pinch on RSN finances. While some bigger-market RSNs are staying the course for now, many others are challenged. Warner Bros. Discovery, for example, told its league partners that it wants to exit the space (it owns RSNs in Colorado, Houston and Pittsburgh) and hand its rights back to the teams and leagues.
But no company has been more impacted than Diamond Sports. Formerly the Fox Sports RSNs, Diamond was launched by Sinclair Broadcast Group in 2019 in a $10.6 billion deal premised on leveraging the scale of all the RSNs to force pay TV providers to raise fees. However, Morgan Stanley’s Ben Swinburne noted in a June 21 research report that the deal was “ill-timed and over-leveraged,” with cord-cutting eating into the company’s ability to pay interest. Diamond filed for Chapter 11 bankruptcy protection in March and has already given up control of San Diego Padres games — the MLB took over production, and games are available to stream for free and on some local stations — and other teams are expected to see their rights cut loose, or fees cut down.
So, what next? Wall Street analysts, executives and league officials see multiple possible visions, though they come with a warning: The near and medium term is unlikely to be as lucrative for teams as pay TV’s heyday.
A sign of what’s to come can be seen in new broadcast deals announced by the NBA’s Phoenix Suns and Utah Jazz. The deals combined the oldest of old-school media technologies — games on local broadcast TV — with a new twist: a direct-to-consumer streaming service for cord-cutters or superfans. The catch, of course, is that the new deals are not paying as much in rights fees as the RSNs could. “Recall that before there were RSNs, local broadcast stations carried all the local team games,” says Moody’s senior vpNeil Begley. “But [local stations] are also being pinched by declining pay TV losses and they would need to get higher affiliate fees than they currently receive to cover much of the licensing costs to the teams.”