We’re casually going to ignore the fact that we didn’t send out a Sunday email when we said there DEFINITELY WAS GOING TO BE ONE.

Apparently, one of us didn’t check the ‘send’ button after finishing the issue.

We won’t say who.

We’re sorry.

Okay, moving on.

Today is about the Demise of Regional Sports Networks.

If you’re not into sports, you’re the key audience, since it’s not really about sports.

Notes:

Welcoming a couple of new subscribers to the party. Let’s all say hello to PE/Family Office guy and Top Ten B-school student

The NBA on Local TV? A 3-Point Breakdown

The owner of the Phoenix Suns (Matt Ishbia) announced they’ll be broadcasting 70 games on local television instead of their Regional Sports Network (RSN for short, we’ll explain). 

A RSN is a network that airs your local sports teams throughout the year. It’s an extra package in your cable selection. Here are some examples:

• NESN - Boston/New England

• AT&T SportsNet - Pittsburgh

• Monumental Sports Network - Greater DC

Here’s the outline of Ishbia’s rationale regarding the deal:

1. RSNs: The Business Model

• Aside from the ESPN + TNT national deals in place with the NBA, there are about a 1,000 games that would go un-aired if not for Regional Sports Networks (RSNs).
  

• RSNs air your local team's games throughout the season. Celtics have NBC Sports Boston, Wizards have Monumental Sports Network, and so on…
  

• How do they make money? They collect subscriber fees off cable packages in hopes that those fees exceed the media rights payments they have to shell out to the team.

2. The Problem with RSNs right now

• As the number of cable subscribers decrease overall, so do the revenues for these networks.
  

• The key income stream for these channels is fans purchasing that extra cable package in order to earn the incremental revenue needed to pay teams the rights to air their games.
  

• There are a few RSNs right now that are in hot water over media rights payments.
  

• The most high profile of these? Bally sports group: The regional affiliate going through bankruptcy right now. MLB Teams are primarily impacted(the Guardians and the Twins to name a few). Bally continues to air their games while refusing to pay

3. Why go Local and Lose the RSN money?

• Aside from payment issues for a few bad networks, it isn’t a widespread problem…yet.

So why go ahead and lose those media rights payments in favor of airing your games on local TV?

One word: Reach.

• Phoenix’s deal with Gray Television will expand the the team’s access to fans by 3x. It also could mean a younger audience that’s opted out of cable entirely.
  

• The wider reach across the region also means paving the way for a better, more direct relationship with fans, meaning more merchandise sales, higher demand for tickets, etc.

But right now, it’s too early to tell whether these possibilities would outweigh the benefits of a pure media rights payment.

BONUS: Well guys, why don’t RSNs just start a standalone streaming service. That should solve everything, right?

No, you dullard.

• Launching a streaming service in an already saturated network while also trying to hold onto cable revenues is a bitter pill to swallow. It’s why you haven’t seen more RSNs try to do this.
  

• Not to mention ESPN slated to start + ramp up its own DTC service in the coming months/years.
  

• Well…okay, maybe it’s not that crazy. The Red Sox and Yankees have done something like this (NESN 360 and MSG+), but it helps when you own the entire network and have a crazy expansive fan base to lean on.

  • This is probably the exception and not the rule.

Well, you could work with ESPN and work out a deal so fans can sign up for their local affiliate within their streaming service, couldn’t you?

Well that’s a better idea. We’d probably look for that to happen, as the NHL has something that looks like this model.

We’re sorry for calling you a dullard.

What AI made this week

Have a great week!

Ahmed and Peter