Tuesdays with Tom: The Death of the Regional Sports Network
The world of local sports on TV is about to change; plus thoughts on The Super Mario Bros. Movie, Warner Brothers and corporate purpose
They say content is king and in America, no content is more valuable than live sports. Time and time again we prove that watching sports is an American pastime that transcends all of television viewing. It is one of the only entities that remains steady amongst the fragmented world of entertainment. But there is one battle that the sports industry is losing and time is running out for a comeback. For decades, regional sports networks have been the lifeblood of professional sports leagues, not only for fans who watch on television, but for the billionaires who own these businesses citizens support with their time and dollars. The death of the regional sports network is officially upon us.
In the 1990s, regional sports networks, or RSNs, rose to prominence as cable television expanded across the United States and Canada. The business of cable was very profitable for media companies and straightforward for consumers. For a monthly fee, you could bundle hundreds of channels together, paying for everything available, and watch to your heart’s content (or not at all). Each network charged a different price for their channels, but even if you didn’t watch you were paying for each one. This model succeeded for decades and cable companies and networks slowly increased their rates and grew their subscription bases. The RSNs were among the most expensive channels, coming in as high as $2 to $3 per month for each channel. Professional sports leagues like the NBA, MLB and NHL negotiated with television networks for the rights to broadcast their games nationally, and more crucially, locally.
It’s no secret that cable has been on a rapid decline for over a decade, with over 40% of Americans cutting the cord since 2015. In 2023, less than half of all U.S. TV households still pay for cable and it’s a threefold problem for RSNs and sports leagues alike. The first issue is that with declining ratings, there is less advertiser interest in partnering with locally broadcast sports. Secondly, RSNs are paying more and more with every negotiation cycle for broadcast rights and are losing profits with each new deal. The third, and most vital, problem is that the millions of Americans who blindly paid for RSN channels via cable are no longer doing so. And those customers are never coming back. It all leads to the current dilemma of the RSN model. It’s never been more expensive to broadcast local sports and the profits are growing smaller by the year.
This is particularly troublesome for the NBA, MLB and NHL. Each league has agreements for nationally broadcast games, but the vast majority of their programming is served to local markets. The NFL is the only American pro sports league immune to the RSN model -- local fans can watch their teams for free on broadcast channels, without the need for an RSN. The other three major professional leagues are responsible for selling 81 to 162 games per season to local TV markets. Each individual team is ultimately accountable to figuring out their own local distribution. For example, in Chicago, NBC Sports Chicago holds the rights for the Blackhawks, White Sox and Bulls games locally. But the Chicago Cubs created their own RSN, Marquee Sports Network. Every team is set up differently and the prices for these partnerships vary greatly by team.
An underrated aspect of these arrangements is the leagues don’t have to do any work creating the broadcast. RSNs like NBC Sports Chicago take on the rigorous work of producing each game in exchange for the advertising dollars and eyeballs that come with live sports viewership. But while local sports remain the top-viewed program in most DMAs, they also suffer from the slow ratings dip of other programs and cable companies are constantly at odds with RSNs on negotiations. You can likely think of several instances where your local RSN sent out nasty marketing asking you to call your cable provider to prevent them from dropping their channel. The revenues of RSNs don’t just affect television networks either. These broadcast deals influence how your team makes money and pays their employees on and off the field. Essentially, RSNs are a big reason why teams like the Los Angeles Lakers and New York Yankees continue to print money and sign attractive players, while other small market teams are constantly scrambling to turn a profit and field a competitive product.
Another complicating factor is the rigid policy across each league that protects RSNs from direct-to-consumer models like MLB.TV. If you live in your local team’s market, cable or a cable replacement like YouTube TV is a requirement to watch. Otherwise, you are out of luck. Even if you live out of the team’s market, sometimes you get screwed, too. If you are a White Sox or Cubs fan living in Iowa, it’s virtually impossible for you to watch White Sox games even if you pay $149.99 per year for the all-out-of-market game package with MLB.TV. Similar options like NBA League Pass and NHL Center Ice also cost hundreds of dollars per year, but it only helps if you are in a viewing eligible city or happen to love watching every other team.
So, what’s happening now? Diamond Sports, an RSN for over 40 pro sports teams, has filed for bankruptcy. There are rumors that NBC may be ditching local sports rights in the coming years. The MLB is desperately trying to salvage the teams impacted by Diamond Sports’ actions, but it’s unclear if it can be saved. As much as these leagues would love to mimic the NFL’s approach, it’s not feasible to completely cut out local TV broadcasts for their infinitely higher volume of games. One league that took matters into their own hands is Major League Soccer. Apple TV+ is now the exclusive broadcaster for all MLS games. The MLS receives $250 million per season from Apple and the teams split the money. That means if you want to watch an MLS game, you have to subscribe to Apple TV+ for $6.99 per month, plus an additional $13 per month to stream any MLS game. It might seem extreme to go all-in with a streaming service, but could this be a solution to the complex problem of the struggling RSN model?
The MLS isn’t the only pro sports league to partner with a streaming service for programming. The NHL has an extensive relationship with ESPN+ for regular season and postseason games. The MLB already has a partnership with Apple TV+ for a package of Friday games throughout the season and another one with Peacock on Sundays. The NBA will re-negotiate with their television partners in a few years and it seems like a certainty that they will partner with a streaming service for the first time very soon. Even the NFL is in bed with partners like Amazon Prime Video and YouTube TV for NFL Sunday Ticket. It makes sense that these businesses would want to monetize their broadcast rights in as many ways as possible.
The problem with this fragmented approach is that it is painful for fans. Say what you want about cable, but it was a simple ask for customers. Pay for everything upfront and you get it all, including your local teams. Today, if you are a sports fan, you not only have to pay hundreds of dollars a year for cable or a skinny bundle, but you also potentially have to pay for 2-3 streamers to watch one night’s worth of games that hardly ever feature your team. And if you go all-in on a direct-to-consumer option like MLB.TV, you might still be left out of the games you actually care about. Imagine the fury of cable customers who are clinging to the cord because of live sports if they discover that RSNs are no longer included with cable. That day is coming soon and the alternative isn’t going to be cheaper either.
The ultimate question is what will these leagues do to combat these issues. Will they try to make their direct-to-consumer packages the exclusive way to watch? A world where there are no blackout policies when you buy MLB.TV no matter where you live? Will they make a deal with a streamer to become the exclusive home for their local sports like MLS did with Apple? Or will they take a third approach: standalone platforms for each team. How much would you be willing to pay for a Chicago White Sox monthly streaming service? $20 a month? $30 a month? This may be the new model that leagues embrace to offset rising costs and maximize profits.
The truth is there’s no perfect solution here. One way or another, it’s going to become more expensive, and possibly more convoluted, to keep up with your local sports teams on television. The days of easy access to free sports on TV are coming to an end and you’ll be forced to put a price tag on how much you really care about your local team. It will not only impact fans today, but it will affect how teams can create long term fans in the future. Teams like the Chicago Cubs made nationwide fans by broadcasting on free local channels like WGN. Going forward, you’ll likely have to pay hundreds of dollars a year just to watch them on smart TV, let alone the already highly expensive experience of witnessing a game in person. At the end of the day, content is king and the time has come for the king’s court to pay their taxes.
Tom’s Thoughts of the Week
In the last two episodes of Friday Night Beers, Vince and I drank beers called King Sue and Truth. If you are a big fan of the beer Pseudo Sue, this Toppling Goliath beer is the follow-up to that one. We talked about the various thematic connections between the two beers and other things. Truth IPA was a fantastic beer and we talked about the concept of honesty quite a bit in that episode. Please subscribe, rate and review our podcast here and follow our Instagram page for relevant updates!
I’m a pretty self aware guy, but I recently realized that many of my friends and family closely associate me with the Mario franchise. I get it to an extent. I’ve written about it at length in this space and I’ve been an avid fan of the games for decades. But the amount of people who asked me if I was excited about The Super Mario Bros. Movie was a bit surprising to me. I was not clamoring for a movie depiction of these characters. I’m perfectly content playing the games. However, if they are going to make a feature film with this franchise, I’d prefer it to be a good movie. Well, guess what people, you can stop asking me if I’m going to see it. I did! Are you happy? So, how was it? In a word, fine. There’s nothing remotely surprising about this movie. I chuckled a few times at the various Easter Egg references throughout the film. The music is the stellar, signature Nintendo style that makes constant nods to the various games. Ultimately, this is a movie for young children, whom Nintendo wants to convert into new gamers, and their parents who have nostalgia for the franchise. Nintendo is a very conservative, family-friendly brand and it seems like their biggest note for the voice actors was “don’t screw this up.” They were never going to greenlight a movie that was irreverent or subversive about their legacy like The Lego Movie was. It’s a straightforward, short story that doubles as a feature length commercial for Nintendo video gaming. Your kids will like it and it’s inoffensive to adult fans of the games. Prepare yourself for future Mario adaptations on the big screen, too.
The MLB season began a few weeks ago and I suppose that means I’m overdue for a White Sox take. It’s no secret that I didn’t enjoy last year’s team in the slightest and neither did most White Sox fans. It’s one of the most disappointing years I’ve experienced as a Sox fan. They compounded this disappointment with an uninspiring offseason. They made minimal roster changes and hired a relative unknown in manager Pedro Grifol. Needless to say, the optimism for the 2023 squad is low to start the year. I don’t think this group has championship potential right now and, unless they see major organic improvement, it’s hard to envision them gaining it during the year. I’d say the best case scenario is they could win the AL Central, if they play their best. After that? I’m not bullish on their chances to make a title run. Prove me wrong, Chicago White Sox.
If there was an award for Most Confusing Streaming PR strategy, Warner Brothers Discovery would be a strong contender for the Lifetime Achievement Award. For the umpteenth time, the company made a glitzy announcement about their flagship streaming product. Starting on May 23, HBO Max will be re-named Max and include all of the content from Discovery+ in addition to the current shows and movies from the Warner and HBO library. As if this wasn’t confusing enough, Discovery+ will still exist as a standalone app and remain at a more efficient monthly price. This compromise, simultaneously merging the apps while also leaving them separated, is emblematic of the awkward and convoluted marriage of Warner and Discovery since they merged in 2022. As for why they’re ditching the HBO portion of the name, Warner claims that HBO is “not exactly where parents would most eagerly drop off their kids” and that Max will bring a more family friendly vibe to consumers along with the new Discovery content. There’s just one problem with that narrative. They still have all of the HBO stuff! I would argue that distancing itself from the most iconic content they own is more damaging than trying to seem more advertiser friendly. Warner also says that there will be 40 new TV shows and movies added a month to Max, which is the opposite of HBO’s notoriously slow-cooker approach to creating shows. Between this and their recent announcements about rebooting Lord of the Rings and Harry Potter, it seems like Warner Brothers is hellbent on angering and confounding as many of their customers as humanly possible. It’s a real shame because despite this constant corporate upheaval, this is probably the best app in all of streaming. Too bad they can’t get out of their own way.
I’ve been watching FX’s Dave since it began in 2020 and even though we are barely through the third season, it’s been quite a journey. In the first season, Dave Burd aka Lil Dicky chronicled the not-so-thinly-veiled-yet-slightly-fictionalized biography of his rise as an Internet rapper with hilarious comedic highs. In the second season, the character of Dave became unlikably narcissistic to the point of annoyance nearly every episode. It was frustrating watching Dave repeatedly alienate his friends and loved ones as his star power grew. But the second season ended on a promising note and I wanted to start the third season with a fresh slate. I think I’ve given up on the hope that Dave is going to be a laugh fest every episode like season one. With that said, I’m impressed with a lot of the show’s high concept satires of the Lil Dicky persona. If nothing else, Burd is more than willing to make himself the butt of the very inappropriate joke often. It’s strange to say, but there might not be a more insecure and deeply self absorbed “character” on television (it’s honestly hard to know when Burd is exaggerating his personality quirks for fiction or pulling directly from his real life). I appreciate Dave’s willingness to swing for the fences, even if it doesn’t always result in a home run. It remains an alluring and funny show for fans of comedy. I hope this season stays on the right track.
I wrote about Formula One last year around this time and the sport remains on an upward trajectory here in the United States. F1 recently announced a new streaming partnership with Paramount+ and I read a fascinating story about how one group in particular is driving a surge of new interest. Believe it or not, women are watching F1 in droves and now comprise 40 percent of all F1 fans. According to one survey in 2017, F1 viewership was 75 percent driven by men, so this is a large change within the sport. Streaming continues to be a huge priority for F1 and the Paramount+ partnership will increase their visibility amongst younger consumers. But it’s clear that younger women are flocking to F1 much more so than other sports here. Even ancedotelly, I have heard a number of women show direct enthusiasm or interest in talking about F1. I’m certainly not saying there have never been female sports fans, but I think F1 has done a tremendous job making women care about their athletes. Between the Netflix Drive to Survive series and savvy social media marketing, many F1 fans have personal affections for drivers and watching Grand Prix races on Sundays seems to be an ideal viewing window for many Americans. I don’t work for F1, but if I did I would say, keep it up ladies!
Finally, a quick word about purpose within corporate America. There was a time, not long ago, when no one cared about a corporation’s values or belief system. You either bought their products or you didn’t. Nowadays, many people not only expect companies to make explicit statements about various issues, they demand it. This developing form of corporate accountability has led to many clumsy attempts from companies trying to meet these new demands. I do believe most of these strategies come with good intentions, but it’s hard to take any corporate stance at face value. Many have artfully poked fun at the hypocrisy of brands taking a stance. But Rishad Tobaccowala is the first person I’ve seen to really summarize the issues with corporation purposes so concisely. In an interview on his podcast, What’s Next?, Tobaccowala and his guest Thomas Kolster identified that many companies try to “position themselves as heroes” and fail to realize that they customers they serve should be the focus. He also interviewed a man named Steve Harrison who believes corporate purpose is “over-hyped” and that many companies forget that they exist to “make things, sell things and create jobs.” This isn’t to say that companies shouldn’t have a purpose, but that any purpose created should be specific to their industry and clear. Purpose can be used to attract great talent for the company and to create principles. The irony of this surge in corporate purpose marketing is many companies do it to avoid pissing off various groups. But if you are really taking a hard line stance on something, you are inevitably going to alienate someone. That’s the entire point of having a purpose. He also said that one reason more people are looking to brands for guidance is because our media and government are failing us in many of these areas. I’d say that is indicative of a larger systematic issue here and I’m not sure asking Cheez-It what it thinks about that crisis is doing for anyone. Personally, I think we should all focus on creating our own purpose and values instead of outsourcing that work to a company that only wants your money.