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Sports fans are being sidelined as RSNs fight the decay of pay TV

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Nikola Jokic #15 from the Denver Nuggets shot the ball against the San Antonio Spurs in Game Five of Round One during the NBA Playoffs 2019, which took place on April 23, 2019, at the Pepsi Center, Denver.

Getty Images| National Basketball Association | Getty Images

Jackson Wieger has been an avid Denver sports fan for twenty years. The Nuggets are his favorite team, led by Nikola Jokic (reigning NBA MVP), and Wieger grew-up watching the NHL’s Colorado Avalanche.

Wieger (27), who lives outside Denver in Lakewood Colorado said, “Both Nuggets & Avalanche are 82 games. I would say that I used to be able to watch 65 games each year.”

His fandom collapsed two years ago. ComcastAltitude Sports was the regional network responsible for broadcasting both teams’ games, and it stopped airing them. couldn’t reach a carriage agreement. Comcast said at the time It was estimated that 95% or more of its customers have seen less than one weekly game.

Wieger, as well as many others he knew, was part of the 5%. They are now interested in sports that have a different approach.

Wieger explained, “My relatives and friends were so passionate. But now you can’t see, you’re less in touch with the world.” You’re less excited. It’s not as engaging.

As cable and satellite TV providers abandon RSNs, the local sports drama is unfolding in U.S. markets. Instead of charging large monthly fees for subscriptions, pay-TV providers such as Comcast, DirecTV, and others are accepting substantial amounts. DishAnd digital providers, such as YouTube TV HuluAs costs drop, more people will walk away.

The amount that they pay to maintain RSNs within the bundle is not economically feasible, considering how few people see them or how expensive they are.

RSNs, other than ESPN are the most costly networks in the bundle. Many charge more than $5 per month per subscriber, according to research firm Kagan, a subdivision of S&P Global. To support this cost cable bills must rise, leading to increased cancellations.

About 25 million households in the United States have dropped traditional pay-TV since 2012. Executives in media expect subscribers to drop. by another 15 million to 25 million by the end of 2025. Meanwhile, monthly bills continue to go up.

It results in a lot of unhappiness. Fans feel excluded. RSNs lose money. The audience is becoming less valuable for leagues and teams.

Subscription streaming is a possible escape from this vicious circle. media and entertainment companies are focusing their attention. This push acceleratedConsumers looked for cheaper ways to save money during the pandemic and for many months had no way to view live sport while they were at home.

RSNs don’t have a solution yet, but professional sports leagues begin to think about their future.

Leo Hindery was the former CEO of New York’s YES Network, and now works in private capital. two special purpose acquisition companies. YES broadcasts New York Yankees’ baseball games as well as Brooklyn Nets’ basketball games. People are cutting their cable because of the high cost of sports. Hindery stated that we are learning how to live with out sports.

Sinclair’s plight

Chris Ripley is the CEO of Sinclair Broadcast GroupThe pain is real. Sinclair holds the majority of 21 RSNs. This is more than any other company. The network broadcasts live from Major League Baseball’s 43 teams as well the National Basketball Association or National Hockey League.

Sinclair acquired the RSNs for about $10 billion in 2019 after DisneyThe majority of 21st Century Fox was purchased and the remaining sports networks were sold. Sinclair, who owns almost 200 stations in U.S. broadcasting affiliates and was not involved in RSN before this transaction shocked business leaders.

Sinclair has a market capitalization below $4 billion had to borrow $8 billionTo complete the deal, Diamond Sports was created as a separate entity. Byron Allen’s Entertainment Studios also stepped in to help with financing.

Ripley said, “I believe that the consolidation of the remainder of the industry makes sense.” earlier this month during his company’s third quarter earnings conference call.

Ripley’s vision of an industry-wide rollup could also be a bailout for his investment. Sinclair shares at first soared 35%The stock briefly rose to $60 on the news, but has plunged more than 50% since then to $24. Its market cap is now below $2,000 billion and Diamond Sports bonds are at around $24. have plummeted.

Sinclair was acquired by RSN Portfolio in less than 15 months. wrote down the value of the assets by $4.23 billion.

Sinclair made a bet on expanding to regional sports. Sinclair believed local broadcasts would still attract large pay-TV carriage fees. This is because avid fans of the NHL, NBA, and MLB teams will not have any other option but to view their games when they aren’t available.

Sinclair was also angling to tie future RSN negotiations with the company’s other networks, which are affiliates of ABC, NBC, CBS and Fox — channels that customers would loathe losing. Sinclair owns nearly 85%. RSN revenue comes from pay-TV subscriptions.

Two major events have impacted Sinclair’s ability to justify his entry into RSN markets over the past two years.

It was then that the pandemic broke out.

One was by DishSinclair’s network to cease carrying Dish. Dish dropped 21 RSNs on July 19, 2019, one month after Sinclair had closed the transaction. Dish was the fourth-largest U.S. TV provider. has about 11 million subscribersIt has satellite TV and digital Sling TV in all 50 states. A few of its customers live within Sinclair territories.

Charles Ergen of Dish

Andrew Harrer | Bloomberg | Getty Images

Sinclair was not the only one who supported Dish’s move to get rid of RSNs. Dish dropped Comcast’s NBC Sports RSNs in April And AT&T’s RSNs in September.Near Denver is Dish, they don’t have Altitude Sports. It’s the same network that hosts the Nuggets and Avalanche. Stan Kroenke, Altitude’s owner, controls both teams.

Altitude speaks for itself websiteComcast, Dish and Dish are “continuing to ignore customers’ wishes and fan requests” and have “exhibited a level that is clearly out-of-touch.”

Charlie Ergen is the founder and billionaire chairman of Dish. He refuses any concessions. The company’s history quarterly earnings callErgen described RSNs in August as a tax for subscribers. Most networks broadcast low-rated programming like sports documentaries or reruns when there aren’t any live games.

Ergen stated to analysts that there are no customers calling RSNs right now. “We are happy to discuss anything creative and does not harm our customers. But we do not want to tax customers who don’t subscribe. It doesn’t make sense.

The ‘Bundle has been broken’

Standing outside Sinclair Broadcast Group Inc. Headquarters in Cockeysville Maryland, U.S.A, signage on Friday Aug. 10, 2018. 

Andrew Harrer | Bloomberg | Getty Images

RSN’s industry faces an existential threat. The potential downstream effects are putting America’s biggest sports teams on edge. RSNs are a huge source of revenue for sports leagues. They use this money to pay salaries to players and to invest in their organization.

Fandom’s future is uncertain. The future of fandom is a world where fewer people see local sports, and they can be difficult to find outside of TV. This could lead to younger viewers not being able to go to the games and buying jerseys.

Warnings signsAlready present. Recent research shows that Americans younger than 50 are less likely to see live sporting events.

Michael Schreiber CEO, Playfly Sports (a media and sports marketing company), stated that “Forget about the teams and the regional networks. It’s not going be good for either the sport or leagues.” The trick to keeping live games in the USA visible is creating innovative access methods.

Sinclair has a near-term goal to develop a direct-to consumer subscription service. It will give local customers streaming access to their favorite games, without the need for a cable package. An outline of the company’s streaming strategy was provided by Sinclair. SEC filingIn July.

Sinclair claimed that fans could watch their teams via the internet and generate an additional $2 billion a year with an estimated 4 million subscribers. This filing suggests potential revenue streams in fantasy sports, non-fungible tokens and sports betting. Sinclair rebranded its RSNsThis year, you can use the Bally’s casino name to more closely align the networks with gambling.

A streaming service’s biggest problem is its affordability. Sinclair’s contracts with operators of pay-TV would require them to charge a higher price for a product that is direct-to consumers than Comcast, DirecTV or Dish. CNBC heard from an industry insider who said that the consumer’s average cost would be five-fold higher.

Sinclair will charge $20/month for similar content that is streamed to users, even if the cable company charges $4 per month to Sinclair to access one its regional networks.

Julius Randle #30, of the New York Knicks, drives to the basket in Round 1 of the 2021 NBA Playoffs against the Atlanta Hawks. This was on June 2, 2021 at Madison Square Garden. New York City.

Getty Images| National Basketball Association | Getty Images

The New York Post reported that Sinclair had been fired in June. considering a $23Sinclair, however, has not confirmed that it is offering monthly streaming services for games located in territories where it holds digital rights. This is a comparison NetflixHBO Max costs about $15 per month and Disney+, Hulu, ESPN+ cost $13.99 each. Sinclair did not comment on pricing plans for its streaming service. The first launch is next year.

Sinclair is at risk from streaming plays making it more difficult for pay-TV distributors and paying the higher price. Ergen highlights the fact that content no longer needs to be included with a bundle is not essential.

The last month ComcastMSG Network was dropped from Xfinity Channel’s lineup. The network claimed viewership was virtually non-existent. MSG and its sister networks, MSG2 and MSG Plus 2, show live games from the NBA’s New York Knicks and the NHL’s New York Rangers, New York Islanders and New Jersey Devils. Comcast has a service in New Jersey and Connecticut, but not New York City.

Comcast said that they don’t think customers should pay MSG the multimillion dollar fees for the highest quality sports content available in a country that has very little viewership. said in a statement. Nearly 95% of MSG customers did not view more than 10 games in the last year.

Sinclair’s digital distributors aren’t doing any better. YouTube TV, Hulu with Live SportsEven FuboTV, which is sports-oriented, has decided not to include RSNs within their bundles. They start at $65 per month.

Sinclair doesn’t have streaming rights for the majority of its RSN teams, adding to confusion.

MLB permits each team to independently negotiate for media rights. All of the NBA and NHL teams have digital rights. Sinclair already has rights to streaming direct-to-consumer for four MLB team teams. Sinclair also talks with the NBA or NHL about other streams outside the cable bundle.

MLB Commissioner Rob Manfred

Steven Ferdman | Getty Images

Ripley feels confident that he will be able to get the information he needs, as Sinclair is considered to have a block function in digital rights. Sinclair would not be able to make Sinclair obsolete without its participation, which is financially costly.

Another question is whether Sinclair will be able to afford the participation.

“We have been extremely clear with [Sinclair]We’ve always believed that both sets of rights are extremely valuable for baseball. And we won’t just throw them in to save Sinclair,” Rob Manfred, MLB Commissioner, said last month during the CAA World Congress of Sports. He continued to state that while cord cutting can be a problem, there is also an “excessive amount of leverage” at Sinclair’s Diamond subsidiary.

Can RSNs survive?

Manfred of MLB stated that digital rights were “very valuable” and “crucial to our future.” However, he did not say “who the partners will actually be”.

The team owners are adapting to the possibility of a future without RSNs. There is hope that big technology companies such as AmazonAmazon could potentially acquire streaming rights through partnership with RSNs. Amazon already owns a minority stakeIn the YES Network streamed 21 Yankees gamesPrime users in the New York area this year

Comcast might also decide to include local games in PeacockNBCUniversal’s streaming service.

According to him, the revenue from fans who enjoy our games and are not there is going nowhere. Steve BallmerFormer owner of NBA’s Los Angeles Clippers, and MicrosoftInterview with CEO. There are many open questions about how we generate that revenue. They will be large media contracts with people on broadcast television cable? Companies like GE and AT&T will be affected by these changes. Amazon, AppleThe streaming players want to be able to watch the game instead of just ESPN or Turner. Is there a direct-to-consumer deal by the league? This is definitely possible. “There’s so much to figure out.”

A New York Post report says so. story last monthThe NHL, MLB and NBA have all considered creating a streaming platform that bypasses RSNs. Sinclair could either drop its block provision, or collaborate with the league in order to become part of the streaming service.

Sinclair understands that leagues and teams want direct-to consumer strategies. RSNs reach a smaller number of people than RSNs, and cord-cutters are abound. Sinclair believes that RSNs continue to generate millions of dollars each year for leagues, which gives them some leverage.

Ed Desser is president of Desser Media. He advises the sport television industry. But they need to adapt to market realities, he stated.

Desser stated, “It has been one-size fits all for many years.” “I expect that this will change,” Desser said.

(Disclosure: Comcast owns CNBC and is the parent of NBCUniversal.

This report was contributed by Jabari Young, CNBC.

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