Live Sports is an adhesive that keeps pay TV bundles intact.
It’s become so common in the last decade that it’s easy to take for granted. Even as consumers become more and more focused on streaming services because of their entertainment needs, sports and news are stubbornly tied to legacy bundles, and executives are rejecting pushes to break them.
For example, former 21st Century Fox COO Chase Carey remembers that “à la carte is an illusion” about selling individual channels on the company’s 2013 Investor Day.
Almost 10 years later, Carrie’s fantasy is quietly becoming a reality.
The regional sports network has long been seen as one of the channels with the least direct access to consumers due to its high cost and regional appeal, but it is beginning to position itself for the future without a TV bundle. , Sports fans are RSNs of their favorite team.
The home of live local games (usually Major League Baseball, NBA, NHL), RSN draws oversized shipping within pay TV bundles, but the local nature of the game (and restrictions on the broadcast market from the league). Maintains overall reach low. until now.
The first RSN to soak the toes in water was NESN, home of the Boston Red Sox and the Boston Bruins. NESN, which shares owners with the team (Fenway Sports Group and Delaware North), launched its product, NESN 360, in early June.
Then, on June 23, Bally Sports RSN, managed by the Sinclair Broadcast Group, soft-launched streaming services in five markets: Milwaukee, Detroit, Tampa Bay, Kansas City, and Miami.
The bet is that pay TV bundles aren’t dead yet, but the number of days may be counted — according to Leichtman Research, the top pay TV providers had 1.95 million subscribers in the first quarter of this year. Lost — and need streaming Option for those who disconnect the cord, or who don’t pay for the cable in the first place.
“We see it as a hybrid model moving forward — and for the foreseeable future,” says Sinclair CEO Chris Ripley. Hollywood Reporter.. “It means both an RSN on the MVPD and a co-existing direct-to-consumer RSN.”
“Our distribution partners are very important to us, but we have products that serve the next generation of viewers, whether they are code cutters or code never, to provide an innovative, engaging and interactive experience. We need to bring it to the market, “adds Ripley. “We are looking at DTC products to fill the consumer base gap of large and growing sports fans outside the cable bundle.”
Barry Sports is the largest player in the RSN space, owning 19 channels and investing in other channels such as the New York Yankees YES Network and the Chicago Cubs Marquee Sports Network.
Due to its size, its success or failure is carefully watched by everyone in the sector.
“Subscribers are overloaded with streaming platforms, but most of them focus on scripted dramas and reality TV,” says Moody’s analyst Christian Adge. “While Bally Sports’ position as a local sports content provider of scale is an advantage, its size and associated increase in subscribers will remain limited in the long run unless more MLB teams register. “
RSN owners are also betting that streaming options may bring new revenue streams, such as more advanced advertising services and, of course, sports betting integration.
In terms of advertising, RSN is actually inferior in performance compared to one of the most popular programs for ad buyers, national sports. Streaming services may fix some of the issues that are built into the current product.
“The advertising business is huge. As a local media buyer, RSN has always been something customers want to buy, but it’s rarely measured in practice,” said Michael Beach, CEO of CrossScreen Media. “There is great potential in terms of business advertising. I think it’s probably underestimated by people.”
Market restrictions will prevent RSNs from reaching nationwide (at least for now), but more advanced targeted advertising technology and measurement capabilities can improve CPM and potential revenue.
And when it comes to betting, some RSN owners feel that the sky is the limit. Online sports betting has grown significantly since the Supreme Court paved the way for legalization in 2018, with rights owners making small bets in the middle of the game with actively involved viewers. So I’ve long wanted the offering to be a bit like Europe.
“Many focus groups and studies show that people who like to bet on games are more aggressive and see more time. And DTC products give each fan more” personalization “. We will make it possible, “says Ripley. “But let’s be clear. No bets are placed on Bally Sports +. Anyone who wants to bet will be directed to an authorized sports betting partner.”
However, betting opportunities also highlight some of the challenges of the sector. Regional appeal (and the definition of the league market) limits growth and offers are expensive (NESN 360 is $ 30 / month or $ 330 / year, Bally Sports is $ 20 / month or $ 190 / year). But if you want to regain the margins you get from the cable, you need to do so, even if there are other revenue potentials.
Relationships with the league are very important and can be fatal to RSNs who do not want to agree with the league.
Sources in one of RSN’s major leagues emphasized that they expect to have a say in streaming services to ensure quality products and consistency. They also want to share in economics, or may have to say with some commercial partners.
Sources from another league partner also pointed out that the DTC model aims to connect and have a direct relationship with fans, emphasizing the need for high quality products. In the long run, the league expects future rights transactions to further enhance the capabilities and flexibility of both parties (“Always a league partner to evolve the optimal framework for all stakeholders. “We are discussing with Ripley,” says Ripley.
In addition, betting complicates the problem. The league has contracts with official sports betting partners (MLB deals with Bally’s and DraftKings, NBA deals with DraftKings, FanDuel, MGM, NHL deals with BetMGM and FanDuel). The RSN needs to navigate these league-level relationships accordingly.
And then there’s Churn, the tragedy of all streaming services. The high price combined with some live games of the year may encourage users to sign up for the season and only cancel at the end of the season. Also, signing up can depend on your team’s performance. RSNs hosting strong teams are easy for users to sign up, and others hosting losing teams have a hard time attracting someone.
NESN 360 seeks to mitigate this issue by offering eight Red Sox tickets to purchasers of expensive annual plans. With the Red Sox, presenting a ticket is a relatively simple suggestion).
“Without a league-wide and / or multi-league type streaming platform (such as a Sunday ticket type program) and a revenue sharing structure, there is a significant risk of subscription and engagement being inextricably linked to field / court / ice performance. Basic subscriptions for automated linear pay-TV are declining, “says Moody’s analyst Neil Begley. “It can also increase the risk to teams and leagues in the long run.”
In fact, as Begley says, the future of RSN may depend on the league itself in the long run. It can take the form of a league built by providing RSN with its own streaming technology, or a multi-league offering to diversify its investment.
“We could see Major League Baseball, the NHL, or the NBA definitely doing their thing if possible,” says Beach.
But the league itself has all the rights, even if that means waiting for years of contracts and high payments to RSN owners, as the recent contract with Apple for Major League Soccer shows. There is also the possibility of regaining.
The Apple / MLS agreement will create a new standalone paid MLS app with all the games in the league and a variety of MLS games that will be streamed for free.
And national sport channels like ESPN are evaluating the future of their own streaming. Disney CEO Bob Chapek said in his last earnings announcement that he paid considerable attention to true ESPN’s consumer services. “This will be the ultimate fan service,” he said. ESPN already operates ESPN +, which has its own sports rights, and is broadcasting several ESPN events simultaneously.
Without ESPN, pay-TV bundles are even more likely to fray, consolidating the need for RSNs and leagues to understand their future.
But for now, all bets are off. NESN and Bally Sports participate in streaming games and others may follow. Turner Sports continues to consider RSN plans, NBC Sports said earlier this year: “The DTC strategy is evolving as we evaluate options in each of the unique sports markets we serve.” I am.
Meanwhile, the Chicago White Sox, Chicago Bulls, and Chicago Blackhawks are in talks to launch a new RSN when the NBC Sports deal is signed in 2024, and the team still sees potential in this sector. It suggests that.
But is the economics of streaming comparable to automated teller machines for pay-TV bundles?
“You’ll see it over time,” says Ripley. “Economics of a normal distribution model [MVPDs] It’s still very powerful and hasn’t hurt the economic surface of DTC yet. In the future, we believe that both sources of revenue will be strong. We want it, our team partners want it, and consumers want it. “