The demise of regional sports networks is a hot topic, and it's time to explore the reasons behind their decline and what the future holds. The age of cable-based regional sports networks is coming to an end, and it's a controversial shift that will impact sports fans and teams alike.
In the 2010s, these networks were a win-win-win for sports teams, fans, and the networks themselves. They were highly accessible, with almost everyone having access to them through basic cable packages. And the revenue? Impressive! In 2010, the average regional sports network generated a whopping $137.8 million in revenue, according to SNL Kagan. But here's where it gets interesting: the economics of cable television played a crucial role.
Cable channels charge per customer, and higher-demand channels can command higher fees. During the peak of cable TV, providers believed that losing a popular channel could drive customers away. So, to keep regional sports networks, cable companies paid up. In 2012, CNN cost $0.50 per customer, while an RSN cost a significant $2.50 per customer. Imagine the impact of those numbers!
The key to these networks' success was the sports teams they featured. Without the teams, the networks had no value. And this is where the teams themselves emerged as the ultimate winners. Networks were willing to pay top dollar to keep these teams on their channels. For instance, in 2013, the Los Angeles Dodgers secured an $8.35 billion, 25-year deal with Time Warner Cable to start a new RSN. That's a massive commitment!
However, as time passed, these channels became increasingly expensive. And as streaming services gained popularity, the economics of regional sports networks started to shift. With more people cutting the cord, cable companies decided that the fees were no longer justifiable, especially with fewer customers.
The beauty of cable for these networks was that even non-watchers were paying for the channels. But as non-sports fans cut the cord at a higher rate, the number of people willing to pay for regional sports networks decreased, even though local sports viewership remained steady.
The situation was further complicated by long-term contracts between teams and regional sports networks. These contracts were not tied to the networks' performance, which meant that the networks were locked into deals based on outdated revenue and profit models.
So, what's next? The way you watch your local team is about to change. Teams and leagues that have already moved away from regional sports networks have adopted various approaches. Major League Soccer, for example, launched a streaming service with all games and no blackouts through Apple TV. However, the economics didn't work out, and this year, the MLS-specific service is no more. All games will now air through Apple TV+, along with Formula 1 and MLB's Friday Night Baseball.
Several NHL and NBA teams have taken their games to over-the-air networks, which has worked well for fans in primary markets. A simple $25 antenna can provide access to all the games, and these stations are often on basic cable. But in outer markets, games are often on subchannels, making it challenging to pick up games on an antenna, and these channels may not be carried by local cable providers.
The NBA and MLB are considering launching streaming RSNs. The details are still unclear, but essentially, they would sell TV rights to a streamer like Prime Video or ESPN Unlimited. This could eliminate blackouts, but it's uncertain how games would be distributed to local television. Reports suggest that MLB and the NBA believe this could be highly lucrative, but it remains to be seen if it will impact fan experience and engagement.
It's worth noting that while regional sports networks are struggling in some places, they are still thriving in others. Cable can still be a lucrative business, especially for teams in big markets. The economics of these deals vary widely by market size and sport, and teams like the Los Angeles Angels and Atlanta Braves are exploring new regional sports networks after ending their agreements with FanDuel.
While Adam Silver and Rob Manfred talk about making games more accessible, it's important to remember that these leagues are businesses first. For fans, a streaming RSN with games available over the air or on basic cable seems like an ideal option. But for the leagues, a standalone streaming RSN could be more lucrative. When it comes down to it, money often speaks the loudest.
What are your thoughts on the future of regional sports networks? Do you think streaming RSNs are the way forward, or do you prefer the traditional cable model? Let's discuss in the comments!
