TV giants clash over NBA, NHL, MLB games as local rights go up for grabs

Tensions are constructing amongst broadcast station homeowners and pay TV suppliers because the native rights to air NBA, NHL and MLB video games go up for grabs.

Broadcast station homeowners together with E.W. Scripps Co., Gray Television, Nexstar Media Group and Sinclair have been in discussions with leagues and groups about potential offers to hold video games on free over-the-air channels, based on individuals conversant in the matter, as long-held media rights for groups on regional sports activities networks unravel.

Regional sports activities networks have owned nearly all native sports activities rights for many years, however their viability is unsure after tens of tens of millions of Americans have been canceling cable TV lately. A shift to a mannequin revolving round broadcast stations and direct-to-consumer streaming would upend the business that noticed groups and leagues reap hefty charges. It would additionally increase broadcast station homeowners leverage in carriage negotiations — and probably speed up cord-cutting.

The discussions come quickly after Diamond Sports Group, which owns the most important portfolio of RSNs, filed for chapter safety and stopped paying rights charges for a few of the groups on its channels. Warner Bros. Discovery, which owns a slate of networks, mentioned it might exit the business by year-end, placing one other handful of groups on the desk.

The leagues and groups started contingency planning in March when Diamond filed for chapter, the individuals mentioned.

Broadcasters are viewing the chance to hold native NBA, NHL and MLB video games as an surprising pathway to spice up the charges they obtain from pay TV operators like Comcast, Charter or DirecTV for the best to hold their stations.

Broadcast corporations usually tie all of their stations collectively after they renegotiate contracts with pay TV carriers. That makes native sports activities unusually beneficial.

If corporations like Gray or Nexstar can land sports activities rights in a number of markets, they will probably use these rights as leverage to spice up charges for all of their stations. If pay TV operators push again on value will increase, the station teams can threaten to black out the video games. Leagues usually wish to keep away from native blackouts which disappoint sports activities followers.

That dynamic has led distributors, which have additionally proven curiosity in short-term offers to hold video games, to precise concern to the leagues about extra video games going to native broadcast stations being offered free to viewers with a TV antenna and no paid bundle, the individuals mentioned. They concern native sports activities transferring to broadcasting might additional speed up cord-cutting.

Top executives at DirecTV, together with President Bill Morrow, are anticipated to satisfy with NBA and NHL leaders in coming weeks as a part of an ongoing dialogue about native video games if RSNs are to drop groups, a few of the individuals mentioned.

Pay TV suppliers are additionally exploring options to maintain native video games within the bundle. Charter Communications is introducing a less expensive TV bundle within the fall with out RSNs to provide customers extra decisions.

While MLB groups are additionally in danger, the talks have thus far targeted on the NBA and NHL, a few of the individuals mentioned.

An NHL spokesperson mentioned the league “is closely monitoring the RSN situation … [and] prepared to address whatever circumstances dictate to provide our fans with access to our games.”

The regional sports activities community business mannequin has been below stress as customers ditch conventional cable bundles and switch to streaming as a substitute.

For many years, these RSNs have paid charges to leagues and groups, and cord-cutting has hit the mannequin particularly onerous. That, plus the debt load that stemmed from Sinclair’s acquisition of Diamond Sports in 2019, pushed the community’s proprietor out of business earlier this 12 months.

As a part of the chapter, Diamond shouldn’t be solely seeking to restructure its debt load but additionally reset a few of its media rights offers with groups to replicate so-called market charges. A chapter choose dominated Diamond needed to make these rights funds or groups can stroll away from their contracts.

“We are in ongoing discussions with our team and league partners about paths forward and are engaged in renewal discussions regarding the two distribution agreements that are up this year,” a Diamond spokesperson mentioned in a press release. “Our goal is to continue producing and broadcasting games for all teams in our portfolio.”

In addition to its contracts with groups, Diamond can be negotiating two carriage offers with DirecTV and Comcast, which can quickly expire, based on courtroom paperwork.

Though the networks are nonetheless worthwhile, the business — from the leagues to pay TV suppliers — is experimenting with options. Many networks, together with Diamond-owned Bally Sports channels, now provide direct-to-consumer streaming choices, typically priced at $19.99 or extra a month.

“The bottom line is you want to be seen in as many homes as possible and generating new revenues,” mentioned sports activities guide Lee Berke. “There’s not just one way to do it, but you can’t be fully devoted to pay TV alone. There needs to be different streams of revenue.”

Some of those sports activities offers have already been signed.

The NBA’s Phoenix Suns and Utah Jazz not too long ago reached offers to be be aired on native broadcast networks run by Gray and Sinclair, respectively. A Nexstar-owned broadcast station in Los Angeles will carry a set of Clipper video games, whereas the Las Vegas Golden Knights, this 12 months’s NHL Stanley Cup champions, might be aired on a Scripps community this fall.

“One thing is clear to us, regardless of whether [Diamond’s] Bally Sports had financial problems. The distribution of teams only through RSNs had become a really bad business for the teams,” mentioned Brian Lawlor, president of Scripps Sports, a programming division launched in December. “The teams and leagues have a reach problem.”

Before the Scripps deal, Lawlor mentioned, the Knights reached about 35% of households within the Las Vegas space on its authentic community, owned by Warner Bros. Discovery.

For these offers to work, broadcast station homeowners have to have current stations in the identical footprint because the groups in addition to an affiliate station within the space that is not a prime 4 broadcaster — ABC, NBC, CBS and Fox — in case it interferes with nationwide sports activities video games.

In some circumstances which means beginning new broadcast stations, and in others affiliate networks just like the CW Network or Scripps’ Ion might be used.

Nexstar’s CW has been more and more eager about including sports activities, with current offers for ACC school soccer video games and NASCAR, and can be eager about acquiring extra sports activities rights, together with for native video games, based on a few of the individuals conversant in the present offers talks.

The Phoenix Suns might be aired between two Gray networks, together with the newly launched KPHE, reaching greater than 2.8 million households and tripling its viewers attain. The Suns’ deal got here to fruition as Diamond opted to not renew its contract with the group. The Suns’ rights had additionally drawn curiosity from Scripps, a few of the individuals mentioned.

Some argue that whereas cord-cutting is depleting the normal RSN business, it’s nonetheless worthwhile and the profitable rights charges prop up the payrolls of leagues and groups. Deals with over-the-air broadcasters are unlikely to duplicate these charges, even when they broaden the attain.

“The reality is that the issue people keep talking about is the rights fees. But the rights fees aren’t necessarily the question,” mentioned Berke. “The question is what’s the range of revenue opportunities available for teams and media outlets?”

Wider attain means extra visibility for followers, Berke identified, paving the best way for promoting to make up for a few of that income.

Then there’s MLB.

Broadcast station homeowners have proven curiosity in airing native MLB video games, based on the individuals acquainted, however it will not be so simple as it’s for the opposite leagues.

MLB group territories are so giant and it might be troublesome to discover a single broadcast station that covers the world, one of many individuals mentioned.

In the previous couple of months, MLB has begun operating the distribution for San Diego Padres and Arizona Diamondbacks video games after Diamond opted out of paying their rights charges amid a push for direct-to-consumer streaming rights for MLB groups.

Diamond’s Bally Sports+ apps do not carry all of its MLB groups, not like the NBA and NHL, which have blanket streaming-rights offers with Diamond.

This season followers can watch Padres or Diamondbacks video games by cable TV or by the MLB.TV streaming service. Discussions about future carriage of those groups are nonetheless ongoing for upcoming seasons, a few of the individuals mentioned.

Disclosure: Comcast owns NBCUniversal, the mother or father firm of CNBC.