The Bally Sports-branded RSNs owned by Diamond Sports carry local games for 16 NBA teams.usa today images
Diamond Sports Group, which holds the rights to 42 MLB, NBA and NHL teams on its 19 regional sports networks, looks to be weeks away from filing for bankruptcy protection. Warner Bros. Discovery, which has the rights to 10 pro teams on its four RSNs, is trying to get out of the business entirely and has started negotiating with teams to take back their local rights.
Times are tough in the RSN business, which has huge implications for teams that have depended on that ever-increasing revenue stream over the past several decades.
Many MLB, NBA and NHL teams have been told to expect their local media rights fees to be cut by as much as 70% over the next several years as they try to figure out new ways to make their games available to their local fans. This pending revenue shortfall matters, as most local media revenue is one of the top two or three moneymakers for teams — accounting for as little as 10% of a team’s total revenue to upward of 60 or 70%.
But during the NBA’s All-Star Game festivities in Salt Lake City this month, league and team executives were nearly unanimous in saying that they were not panicked by the RSNs’ crumbling business plans — at least not in the short term.
“[Even] in a worst-case scenario, our games will still be on the air,” said Orlando Magic CEO Alex Martins, who is in the middle of a rights deal with Bally Sports Florida. “Revenue-wise, if it were a free fall and they’d have to stop payments, we’d have to work through that. But all indications are that’s not going to happen.”
The Magic still have five years left on a 10-year rights deal that started with the 2016-17 season. That deal carries an average annual value of $40 million, sources said.
So far, Bally Sports Florida has not asked the Magic to rework its deal to account for the RSNs’ crumbling business model. In fact, all league and team executives contacted by SBJ over the past several weeks said they’ve received full rights fee payments from their RSNs.
That sense of confidence was echoed by NBA Commissioner Adam Silver. That’s because the NBA’s regular season ends April 9, just three weeks after Diamond is expected to file for bankruptcy protection.
In a worst-case scenario, if Bally Sports decides to stop carrying local games for its 16 NBA teams as soon as it hits bankruptcy, the NBA will only have to scramble for those three weeks.
“For that period of time, we will have in place, if necessary, a way to continue to distribute those games,” Silver said during his annual press conference the day before the NBA All-Star Game.
Diamond Sports has told the leagues and its teams that it intends to continue producing and carrying games even after it has entered bankruptcy protection, as expected.
“We hope our teams will continue to receive their contractual payments,” said MLB Chief Revenue Officer Noah Garden. “In the event they are not, we stand ready to support our clubs and make sure our fans get to watch their favorite teams. Baseball has always been the backbone of the RSN business.”
Teams will have a difficult time not getting soaked, at least initially, in the declining RSN industry. Warner Bros. Discovery is looking to get out of the business, which it operates as Root Sports and AT&T SportsNet.getty images
The challenge as the RSN business continues to fall is to try to come up with a new model for local sports rights that could eventually replicate the revenue streams currently provided by the RSNs.
The consensus is that the push for streaming to replace the RSN model on its own will bring in only a fraction of the local media revenue that currently comes from the RSNs.
One NBA team president cited internal research that predicted its RSN rights-fee payout would drop from the mid-$30 million range per year to around $8 million if it made its games available via a direct-to-consumer service on its own.
During his press conference, Silver said he’s not concerned about recouping that RSN revenue in the long term, citing local over-the-air television stations and national streaming services that could step into the breach.
Some team executives have already started talking with local broadcast groups, such as Scripps, Gray Television and Sinclair, even if they have a couple of years left on their RSN deals. They view these talks as a way to move on from the RSN if it implodes sooner than expected.
Take the RSN that operates in Phoenix — Bally Sports Arizona — for example. Due to a combination of cord cutting and its distribution deals, the RSN only reaches 40% of the Phoenix market. League and team officials expect that percentage to continue to drop.
The choice isn’t so easy. On one hand, a local broadcast deal instantly would double the size of the teams’ addressable audience. On the other hand, local broadcasters won’t pay nearly as much for the rights as RSNs.
It’s the next couple of years — described by Silver as “the midterm” — that is causing the most angst among team and league executives.
“We had extensive discussions with Diamond … about potentially restructuring, and I am fairly optimistic we will be able to work something out with them,” Silver said. “But if we can’t, we will make sure we have a system in place for delivering those games to fans.”
One asset the NBA has is the fact that its national media rights deals with ESPN and Turner are up after the 2024-25 season. Already, the biggest media and tech companies have started jockeying for position to pick up the NBA’s national rights. Top executives from ESPN, Warner Bros. Discovery, Google, Amazon and Apple descended on Salt Lake City this month to participate in All-Star Game festivities and meet with their NBA counterparts.
This kind of auction atmosphere makes it likely that the NBA will at least double the value of its current deal. That influx in national media revenue will do a lot to make up for any shortfalls in local media revenue.
The Magic’s Martins also expects many of his team’s local rights questions to be answered during those national negotiations.
National partners could agree to stream all the games with teams providing local announcers. This scenario would kill all blackouts.
Martins also mentioned a league operated and distributed streaming service as a possible solution.
“I just know it is going to be different,” he said. “The model we are accustomed to is shifting, and our job is figuring out how best to monetize it as those changes take place.
“There’s going to be some pain. There’s going to be a rocky period of time. Maybe there will be a period of time where you have to accept a little bit less, as you are creating a model that ultimately yields more. Over the long term, it will be as healthy as ever. It will just look different.”