RUNNING HEAD: Future of Regional Sports Networks 1

Preventing the End: Regional Sports Networks

Alek Timm

University of Nebraska-Lincoln

SPMC 464: Sports Media Relations and Promotion

Dr. Brian Petrotta

November 23, 2021

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Preventing the End: Regional Sports Networks

As the sports media landscape undergoes its almost certain generational shift in market

share, new technologies emerge to create coverage empires while others are unable to adapt and

fall to the media’s forsaken place of irrelevancy. In the present day, the regional sports network

(RSN) poses as a candidate for a lagging technology that may see its demise if alterations to the

current organization are not made, and the sports leagues and teams RSNs cover are destined to

suffer as a result.

Revenue shortfalls and failed negotiations with advanced media companies place RSNs

in a dire position as sports broadcasting turns from traditional cable to a stronger focus on

streaming. According to Sherman (2021), NBA Commissioner Adam Silver, whose league relies

heavily on RSNs to cover all non-nationally televised games, spoke on the current RSN format

and rights deals: “It’s clearly broken. Our regional sports networks - Sinclair in particular. They

paid $10 billion. It’s not clear it’s a good deal at $5 billion,” (para. 30). While RSNs were once

highly profitable media assets, it is imperative that rights holders and professional sports leagues

reevaluate and switch to a direct-to-consumer business model to leverage the growth of

league-wide streaming options as RSNs have failed to keep up in adapting to streaming.

RSN Failures

Since MSG Networks, the first RSN of its kind, was launched in 1969, local sports media

rights became lucrative to large national broadcasting companies as the sports industry grew.

Silvershein (2021) writes that sporting events have long been the largest viewer attraction on

cable television; therefore, national broadcasting companies began creating more subsidiaries to

specialize in sports coverage for a designated market (para. 1-4). Multichannel service providers,

typically known as cable companies, could traditionally use the inclusion of regional sports
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coverage in their cable bundles as a draw for customers because of the exhibited demand for live

sports. The RSNs understood this consumer demand and charged cable companies higher fees to

carry their network because no alternative sports viewing platforms existed. An RSN could

easily tie the hands of the cable company and force them to pay because they relied on sports

coverage for attracting and maintaining a customer base (Crupi, 2021, para. 5-8). Sports leagues

and teams understood this demand for viewing options and decided to ask for a greater share of

the profit from RSNs; therefore, media rights have skyrocketed. To cover the growth in rights

fees, RSNs have passed the cost to the consumer. In fact, Sherman (2021) writes, “Other than

ESPN, RSNs are the most expensive networks in the bundle. Many charge more than $5 per

month per subscriber . . . Cable bills have to rise to support the added cost, which leads to more

cancellations,” (para. 8). The evidence supports this theory behind growing cancellations in

contemporary television—viewership on RSNs is down by 12 percent since 2019 (Brown, 2021,

para. 3). With cable being the only platform to watch local sports on for decades, it was a

fool-proof plan to line the pockets of RSNs, but the high bill pushed folks away as soon as the

cheaper alternative, streaming, emerged.

As Americans save money and switch to streaming the specific channels they choose,

RSNs are not always included in those packages, and they miss out on the profit they once

generated from fees charged to cable providers (Gladstone & Rizzo, 2020, para. 13). The

all-encompassing, one size fits all channel bundle has become a thing of the past, and RSNs can

no longer survive charging the same price because cable companies view them as a burden on

customers instead of moneymakers. The non-sports fan can now save money by not having to

pay for RSNs any longer; therefore, sports fans alone are left footing the bill for coverage. If they
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cannot afford to and wish to switch to streaming, they are left without the ability to watch RSNs

and regional sports as RSNs continue to require a cable subscription for any access.

Sinclair Broadcast Group, operator of 21 RSNs and media rights licensee of 42

professional sports teams, reported 38 percent losses in their RSNs while requiring cable

subscriptions as streaming giants YouTubeTV, Hulu, FuboTV, and Dish Network cut Sinclair’s

RSNs from their package offerings to customers as the asking price to carry their channels was

impossible to meet. Whether they realize it or not, cord cutters left cable to escape the high

sports prices (Evans, 2021, para. 2). Sinclair paid $10.6 billion to acquire the RSNs from the

Walt Disney Company with the hope of building streaming options for the networks while still

relying on the hefty charge to carry an RSN in a cable package, but have failed to create a

successful streaming option for viewers (Armental, 2019, para. 1). RSNs cannot survive

churning out losses of this magnitude, and the solution lies within a direct-to-consumer model

that emphasizes streaming.

The Need for Streaming

With 25 million households cutting the cord on traditional cable television since 2012 and

an estimated 15 to 25 million more expected by 2025, leagues and RSNs must make the switch

to a focus on streaming platforms over cable to survive (Sherman, 2021, para. 9). Based on data

from Grabyo’s 2021 Sports Video Trends Report, Jones (2021) argues, “broadcasters and rights

holders must begin to tailor their strategies to match consumer demand or face being left behind,

with only 12 percent of global respondents to Grabyo’s survey saying they plan to continue

paying for broadcast TV packages exclusively,” (para. 3). The study also found that an estimated

45 percent of sports fans globally have moved away from paying for cable entirely and are

thereby without RSNs, (Jones, 2021, para. 2). While the number is likely lower in the United
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States where RSNs are more prevalent, there is a clear trend that streaming is the future of sports

coverage.

Unfortunately for sports fans in the United States, blackouts and other restrictions on

streaming availability have hindered sports streaming from meeting the demand of fans.

McCaskill (2021) writes:

Viewers are not abandoning pay-TV just yet because they don't feel enough content is

available on streaming platforms just yet. The suggestion is that unless rightsholders

ensure their events are shown on a streaming service – either in addition to or instead of

linear broadcasts then they could lose audiences. (para. 7)

The three major sports leagues that rely on RSNs for coverage the most, the NBA, NHL, and

MLB, each feature a direct-to-consumer league-wide or team-specific streaming option. On each

platform, fans can pay a flat annual or monthly rate and get access to a streaming option from an

RSN broadcast for non-nationally televised games (Silvershein, 2021, para. 13). The only caveat,

however, is a viewer cannot stream a game on the league platform if they reside within the

market that the RSN covers. The goal is to prevent competition to RSNs, but this has only hurt

them in developing streaming that does not require a cable subscription (McGregor, 2021, para.

2-15). The networks paid for the exclusive rights to broadcast games, and that right should be

honored. However, the RSN’s stronghold has begun to backfire in the streaming age.

RSNs dominate in these three leagues because they are traditionally viewed as regional

sports. It is more likely for someone to follow a team or one of the three sports closer if they

reside within the market in which the team or league plays, and it is the reason RSNs were

created. Not every game could be nationally televised, so local networks popped up with

wall-to-wall coverage in order to meet the needs of local fans (Silvershein, 2021, para. 1-4). The
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root of the entire issue lies in the fact that fans living within a certain market cannot watch their

favorite teams or sports without an expensive cable subscription to the RSN that holds the rights.

The willingness to cut the cord has outweighed desires of paying for a hefty cable

subscription; therefore, both sides remain at a standstill while RSNs refuse to budge from their

cable demands (Sherman, 2021, para. 13). A deal between league streaming platforms and RSNs

would drastically shift the sports broadcasting landscape and could save the networks from a

downward spiral in sports viewership.

The Direct-to-Consumer Model

The ultimate solution to the broken system of RSN coverage and need for streaming in

regional professional sports is for leagues and/or RSNs to embrace a direct-to-consumer (DTC)

model. Silvershein (2021) writes that, simply put, a DTC model would allow for sports fans

living in any market to pay either the league streaming service or RSN a flat fee for access to live

streaming options for games and other paywall-blocked content. This essentially creates a

pay-per-view service that eliminates blackouts on local coverage. The model would not require a

cable subscription, and the consumer would only receive access to the specific league streaming

service or RSN (para. 14-16).

The MLB has already begun exploring the option of releasing a nationwide streaming

service for home games that does not require an RSN or cable subscription, and they have

received support in the venture from the NHL and NBA (Kosman, 2021, para. 1-3). The plan

would pair with MLB.TV, a subscription service that allows fans to watch all out of market/road

games that are not blacked out under the current system. Kosman (2021) further writes that the

price goal for the home game service alone would be between $10 and $20 in comparison to a

$100-plus cable package, and local games would still be broadcasted by RSNs. To offset the
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losses of fewer cable subscribers, the MLB would offer RSNs a large portion of the profit as

compensation (para. 3-6). Sherman (2021) argues that with incredible shortfalls in revenue,

RSNs would be fortunate to earn money back from the leagues instead of continuing to take

losses (para. 60-62). This product would be considered a major victory in reinvigorating regional

sports coverage and should be pursued to the fullest extent.

Others, on the other hand, believe that RSNs have more leverage in shutting this idea

down because of the fact they pay billions of dollars in rights fees. This is impeccably true, and

RSNs wholly own the rights to broadcast games within their market, but it is clear that they

cannot continue to survive under the current system. While the MLB has not officially

announced a set plan for their DTC model, it may actually be a ploy to push RSNs towards

developing a DTC option of their own (Sherman, 2021, para. 62). Regardless of the MLB’s or

RSN’s success in creating this DTC platform, there is a realized need for creating a product that

is more accessible for a lower price than a cable subscription.

In their proposal, analysts believe the MLB would be willing to take on losses with the

RSNs to allow for future investment. Initially, Kosman (2021) writes:

Sinclair tried to persuade MLB to allow it to control the service for several years before

handing the reins to MLB. But the league wasn’t having it, citing Sinclair’s financial

condition and raising concerns that the company won’t be able to spend the money that’s

needed for high-quality broadcasts. (para. 16)

Instead, the league has expressed that they are open to a proposal from Sinclair that would cut $1

billion in rights fees to allow for Sinclair’s Diamond Sports Subsidiary time to recover losses by

pursuing other developments in their products (Kosman, 2021, para, 19).

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Slicing rights fees could ultimately be an investment in the future of MLB coverage. This

allows for stronger devotion to integrating sports gambling content into RSNs as Bally’s

Corporation, a company with an omni-channel presence of online sports betting, owns the

naming rights to all of Sinclair’s RSNs (Padano, para. 1, 2021). Greater inclusions of sports

gambling into MLB broadcasts would be a legitimate solution to RSN losses as Routman (2021)

writes, “the U.S. sports betting market is predicted to reach $37 billion by 2025, making betting

the next and frankly only new category in sports that will contribute this much new value to the

industry over the next five to 10 years,” (para. 1).

Sinclair and other RSN holding companies could also consider pursuing partnerships

with emerging streaming giants while utilizing their capital and technological capabilities to

reinvent the RSN concept. These partnerships could include companies such as Meta, Twitter,

Apple TV, Peacock, or Amazon, who already owns a minority stake in multiple RSNs (Sherman,

2021, para. 58-60). These companies would have the ability to assist in the development of

advanced DTC products and use their dominant branding and marketing capabilities to drive up

viewership. Also, in the rebrand to Bally Sports Networks, Silvershein (2021) writes, “As part of

the deal, Sinclair will spend $10 million to promote the role that regional television plays in

delivering live games and local team sports content,” (para. 16). More money can be dedicated

toward that campaign, especially with an Amazon or social media platform backing, to market

the product RSNs are capable of delivering.

Slicing rights fees in order to allow Sinclair to pursue these opportunities would

essentially act as a loan that can be paid back only if RSNs are willing to evolve to meet the

realities of the market. According to Kosman (2021), it would also allow for Sinclair to have

greater flexibility in refinancing the $8 billion loan they took out to complete the deal to begin
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with (para. 19). Both RSNs and the MLB benefit when fans watch games, and sacrificing rights

fees now could pay off if the money can be put towards developing a revolutionary product that

drives up engagement and consumption.

However, this proposal comes with a catch—the RSNs hold all the power right now. It

would take buy-in from Sinclair to understand that their product is broken and they will

assuredly lose money in the short term. Silvershein (2021) argues, “The numbers won’t add up.

In the traditional RSN/MVPD model, fees were spread across their entire consumer base.

Generating revenues from a fraction of the audience is a recipe destined to fail,” (para. 14). An

opposing argument could be made that RSNs are better off collecting money from the fractional

audience and gain a wider customer base than relying on those who still have cable to foot the

bill. Similarly, Silvershein (2021) further writes that teams could have to accept lower rights fees

if the leagues have to subsidize them (para. 16). Asking leagues bail out RSNs and completely

rebudget their expenses to factor in the value of regional media rights is no easy task coming off

a pandemic that cut television revenues alone by $2.2 billion by May of 2020 (Lange, 2020, para.

1).

Despite the significant economic undertaking necessary to offer a DTC model, the fate of

RSNs and coverage of professional sports hangs in the balance. Without viewership availability,

leagues miss out on engaging the fan, the asset needed to run their entire business. “RSNs

provide billions of dollars to sports leagues, which use the revenue as one way to pay player

salaries and invest in the organization,” (Sherman, 2021, para. 34). Leagues and teams are not

escaping guaranteed pay contracts with players, and the alternative is potentially bankruptcy if a

new system is not put in place to reinvigorate RSNs to start meeting the demands of consumers.

An Opportunity to Save RSNs

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Following a pandemic and shutdown of live sports, move to streaming by consumers en

masse, and stubbornness to expand beyond cable channels from RSNs, the future of live sports

coverage is bleak. The demise of RSNs would leave an overwhelming amount of fans without

access to their favorite sports and teams, pushing high-level advertisers away in the process.

There is little question that streaming is not going away—it will only continue to grow—and

severely hurt RSNs and leagues if they cannot adapt to satisfy their consumers.

The DTC model allows leagues to subsidize teams and RSNs for broadcasts rights and

focus their remaining capital on developing a better product through gambling/fantasy

incorporations, partnerships with tech giants looking to get into live sports coverage, or other

means of delivering a cheaper alternative that fits the price point streaming companies can still

generate profit from. There is tremendous incentive for all parties to consider taking losses at this

time to reevaluate how regional sports can be broadcast. If the RSN system is not changed, the

losses will reach a point of no return, and the system would face collapse. In the end, RSNs and

sports rely on local regular season viewership, and the DTC model with league subsidization

provides great potential to stave off disaster.

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Journal. https://www.wsj.com/articles/sinclair-announces-deal-for-21-regional-sports-

networks-from-disney-11556918105?mod=article_inline

Brown, M. (2021). MLB seeing local TV households decline dramatically compared with last

full season. Forbes. https://www.forbes.com/sites/maurybrown/2021/08/06/mlb-

seeing-local-tv-households-decline-dramatically-compared-to-last-full-season/?sh=69a55

dbb56f7

Curpi, A. (2021). Cord-cutting, ballooning fees doom legacy cable sports model. Sportico.

https://www.sportico.com/business/media/2021/rsns-dead-or-alive-1234637845/

Evans, P. (2020). RSN struggles continue. Front Office Sports. Retrieved on October 14, 2021

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Gladstone, A., Rizzo, L. (2020). Creditors brace for possible debt restructuring at Sinclair Sports

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https://www.wsj.com/articles/creditors-brace-for-possible-debt-restructuring-at-sinclair-s

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Jones, P. (2021). Grabyo 2021 Sports Video Trends report streaming growth. Sports Pro Media.

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nationwide-streaming-service-for-home-games/
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