Hey we need an MLB 2023 thread with pitchers and catchers reporting in a few weeks…and the WBC…
…and also a big huge headache that’s looming this season for MLB that seems VERY under-reported given the potential for it to change the way baseball does business. Yes, it’s the collapse of Regional Sports Networks as we’ve (maybe) known them.
So let’s take a deep dive there.
Back in 2018 Disney agreed to acquire a BUNCH of FOX properties – the movie studio and its properties, its television program production company, and random networks (FX, FXX, and international cable/streaming/satellite stations in Europe, Asia, and Africa).
One other thing Disney got in the deal were the Fox Sports regional networks, like FoxSports Ohio or FoxSports Midwest, etc. The plan that Big Mouse had was to spin these RSN (“Regional Sports Networks”) into some kind of ESPN branding, since Disney already owns that network. A federal judge overseeing the purchase didn’t see it that way, and made the sale of FOX assets to Disney contingent on Disney selling the 22 FOX Sports RSNs within 90 days of the close of sale.
Which, Disney found a sucker sitting at the poker table in the form of Sinclair Broadcasting (everyone’s favorite purveyor of local TV news coverage), who paid $10.2 billion for the package of RSNs. Sinclair then got Ballys to sign on as a name sponsor and rebranded all the old Fox Sports regional networks as Bally Sports. (One popular misconception is that Bally’s owns these RSNs. They do not own them any more than PNC bank owns the ballpark in Pittsburgh, or AB InBev owns the ballpark in St. Louis. They ponied up a few million to be a title sponsor and not much else.)
Sinclair also inherited all the rights contracts for MLB, NBA and NHL teams that each of the RSNs held. Which is kind of the crux of the issue right now. And it’s an issue for the affected NBA and NHL teams too, for sure. But the big money contracts are with about 14 MLB teams:
Kansas City Royals
Los Angeles Angels
San Diego Padres
St. Louis Cardinals
Tampa Bay Rays
When Sinclair bought the RSNs for those teams, it didn’t take long for them to realize the mistake they’d made. Big providers like Youtube TV, Hulu TV, Dish, and others ended up dropping those RSNs completely. Carriage fees started to free-fall, as did the money the RSNs could ask in advertising dollars.
And so Sinclair spun off their RSNs as a subsidiary to be called Diamond Sports Group, and took a one time writedown of about $4.2 billion on their poorly considered purchase.
So OK, Diamond Sports Group (“DSG”) owns all those Regional Sports Networks. Cool cool cool. One problem: Diamond Sports Group as I type this is on the verge of bankruptcy.
And what that means…no one’s super completely sure about. For a while it looked like MLB might step in and purchase DSG for $3b. But then right before Christmas that deal fell apart.
And so now it appears that DSG likely will go completely belly-up sometime by the middle of the year if no one else rides in to buy them. And then it gets really tricky and painful for all involved.
Because first up are rights contracts between DSG and those various MLB teams. They owe about $600 million between now and 2030 to the Texas Rangers. They owe nearly $720 million to the Padres between now and 2032. They owe about $650 million each to the Royals and Cardinals to 2032 and 2035 respectively. There’s about a billion left in their contract for rights to the LA Angels.
And while MLB teams have a nice contract with FOX and with ESPN, those are absolutely nontrivial revenue streams. And they’re about to be completely voided when DSG goes belly-up. And they’re not going to be the only ones affected, either. By all accounts, the RSN model is failing across the board. NESN, YES Network, MASN…they’re all taking on water faster than they can bail.
So here we are. MLB is going to have about 3-10 months to figure out how to replace RSNs, and how to replace that revenue stream. And that’s also going to involve fixing the league’s stupid blackout rules for local broadcasts, among a plethora of other issues.
So yeah. Buckle up.