Diamond Sports Group is indeed about to go bankrupt as foretold last month, and the sports media is losing its collective shit over what this will mean both for baseball’s $10 billion in annual revenues and for baseball fans who might want to keep watching games on TV. The operators of Bally Sports, the collection of former Fox Sports Net stations now owned by Sinclair, missed a $140 million interest payment last week, and now appears likely to file for Chapter 11 next month, putting nearly half of all baseball broadcasts in jeopardy just as spring training gets underway.
What does this mean in practical terms? Chapter 11 is the reorganization kind of bankruptcy, so clearly the hope all around is that Diamond will be able to simply stiff its creditors while continuing to broadcast ballgames. But MLB commissioner Rob Manfred has hinted that the league might like to take advantage of the chaos in the cable industry — which has been slowly collapsing for more than a decade — to finally offer a streaming service that allows fans to watch their home teams’ games with no blackout rules:
“I hope we get to the point where, when you go to MLB.tv, you can buy whatever the heck you want,” baseball’s commissioner told reporters Thursday. “You can buy an out-of-market package. You can buy local games. You can buy two sets of local games. Whatever you want!”
Sounds great! (Except for the “two sets of local games” bit, whatever that means, but it wouldn’t be a Manfred quote without something that sounds AI-generated.) Only it leaves out one small complication: MLB doesn’t actually own the broadcast rights to its games, individual team owners do. And those owners are not going to hand over those rights for nothing.
The list of teams with Bally Sports contracts spans the big- to small-market spectrum: the Los Angeles Angels, Atlanta Braves, Milwaukee Brewers, St. Louis Cardinals, Arizona Diamondbacks, Cleveland Guardians, Miami Marlins, San Diego Padres, Texas Rangers, Tampa Bay Rays, Cincinnati Reds, Kansas City Royals, Detroit Tigers, and Minnesota Twins. Angels owner Arte Moreno gets about $125 million a year for his local TV rights; Royals owner John Sherman gets about $50 million a year. That’s a sizable difference, and it’s unlikely that the Morenos of the baseball world are going to give up that market-size advantage and accept an equal cut of some future MLB.tv+ package.
Which brings us to another Manfred quote, about the league’s formation of an “economic reform committee” of owners:
“It came out of a recognition of a couple of issues — one new, one old — that were particularly acute for us,” commissioner Rob Manfred said. “The new one’s the local media situation. I think that people see it as an opportunity to rethink the revenue side of the house a little bit, which has been hard in our sport. People entrenched in their local (media dynamics).”…
“When you start thinking about the opportunities in terms of a more national (broadcasting) product, it did lead into a conversation about our disparity issues on the revenue side,” Manfred said. “We have businesses that are literally not similar in terms of the overall revenue that they’re generating. And to the extent that you could find a new distribution model that actually helped on that disparity side, that would be the daily double. So people are having conversations that haven’t been had in baseball, and it’s really been owners talking to owners, which is a good thing.”
CBS Sports read this as a hint that owners may be preparing to try to impose a stricter salary cap. But while MLB owners would no doubt love to force themselves to stop bidding up the price of places, there’s a simpler explanation, which is that Manfred, as he says — in too many garbled words — wants to “find a new distribution model that actually helped on that disparity side.” That would mean using the collapse of Bally Sports to shift toward more of an NFL model of TV revenue, where most of the money is national, not local. The NFL doesn’t have MLB’s problems of having to jury-rig revenue-sharing plans to shift money from rich teams to less-filthy-rich ones to ensure they can all compete for players, because NFL revenue is mostly all shared from the start: The Kansas City Chiefs can easily win a Super Bowl because they get the same Fox checks as the New York Jets.
(We will now pause briefly here to note that the Kansas City Royals have actually won a World Series more recently than the New York Mets or Yankees. Market size is not destiny, even in baseball.)
Okay, so more local games on TV, better competitive balance — what’s the catch? And what does this all have to do without stadiums, this is going to end up being about stadiums, right?
The problem with freeing baseball teams from the tyranny of market size is that this is what has led to MLB’s relative franchise stability: Only one team has moved in the last 50 years, the Montreal Expos to Washington, D.C. to become the Nationals, and that’s 100% because where you play matters so much more in baseball, thanks to those cable deals. An NFL owner can happily decamp from, say, Houston to Nashville without thinking at all about TV revenue, because they’ll be getting the same amount regardless of where they play; an MLB owner, meanwhile, has to think twice before giving up a lucrative cable contract. Take that out of the picture, and baseball teams could be far more footloose, willing to play in any two-bit town that coughs up money for a shiny new stadium.
(We will now pause again briefly here to note that baseball teams do have to sell 81 games worth of tickets vs. eight for NFL teams, so market size would still matter some to MLB owners in a post-local-cable world. But it wouldn’t matter as much as it does now.)
So, if Manfred has his way, it could soon be easier to watch your home team’s games without signing up for cable, but it could also be easier for your home team to eliminate your blackouts by picking up and moving to a different city entirely. Not that they don’t threaten to do that now already, but it would give the threat more teeth, and the last thing anybody wants is sports team owners with sharper chompers.
The “two sets of local games” bit plays big in Iowa. We are screwed currently with 6 teams claiming the entire state as home territory (Cubs, Sox, Brewers, Twins, Royals, Cards). There is not a single tv provider in the state that provides coverage for all six, let alone more than 2 teams. Iowa is in blackout purgatory right now and we have no teams.
So if Manfred is talking about shifting MLB.tv from a “watch all games except those that are blacked out” model to an a la carte “subscribe to whichever teams you choose to pay for” model, that would change things again, since each team could get revenue from its subscribers alone. Or not! Clearly the economic reform committee has a whole lot of big-braining to do.
If they are really thinking about going a la cart…or at least de-bundling from cable, I would love to know how they forecast getting those $ rights fees back. (unfairly) using the Angels as an example. the back of the envelope math would be $10 monthly sub * 6 months, they would need over 2 million subscribers to get that annual $125M back.
A la cart always sounds better for the consumer until you realize they aren’t changing the model to lower the amount the team makes.
I live 10 minutes from the Big A and have no idea where Angel’s games are broadcast. As far as I can tell, everyone here is a Dodger’s fan.
Something I don’t see mentioned in a most of these articles is about late season NBA games. I presume this is because MLB is much more reliant on these RSNs and the season is almost over but it seems like the impact on the NBA is being ignored.
The Suns for example play on Bally and have seven non-nationally televised games between March 15th and the end of the season.
The two sets of local games does sound odd. I wonder if he means you have the option to purchase either the home or road broadcast of the game.
I think BG above has hit on it: It’s for an a la carte system where you need to subscribe separately to watch home games for each team in your TV market. That’s not just an issue if you’re in NY or LA — Buffalo, for example, has four different teams blacked out as “local” (though not the actual closest team, the Blue Jays).
A la carte isn’t how MLB.tv operates now, but this definitely signals that it’s something they’re thinking about. In which case big-market teams could still get a bigger cut of subscriber revenue, which would mean no increase in move threats but also no impact on competitive balance. Manfred really needs to pick a lane and stick with it.
This could open the way for ESPN to get in the RSN market, even through they had to sell the FOX RSNs for Antitrust reasons, the demise of DSG removes any possible charges of anti competitive practices.
Cox, Spectrum, Comcast, and other cable companies could take up any leftover markets.
Local Broadcast television stations could also use their digital channels as a way to expand their reach beyond MEtv, and COZI.
“MLB doesn’t actually own the broadcast rights to its games, individual team owners do.”
Absolutely right.
However, given the make up of the Bally’s 14 (or whatever you want to call them), there’s really only a couple of truly big market teams involved (Angels and Rangers)… and both of those are very much the second team in their markets at present.
I’m not sure that the Angels and Rangers alone can kill what Manfred clearly wants to do, or that their larger market (and non-Ballys) owner’s club pals really want to help them with that.
I could see some sort of compromise where the Angels, Rangers and Cardinals form their own RSNs (or some equivalent… the Cardinals should not have a shortage of suitors for their rights) while the remainder of the teams agree to shared payments from a combination of group streaming sales through MLB.tv (and a much bigger share than they have been getting) and the usual ‘thanks for backing the commish on this one’ MLB slush fund payments.
It’s clearly what Manfred wants and, although I can’t believe I’m saying this where Manfred is concerned, might actually be the best option for baseball and it’s fans.
The teams that can run their own RSNs or sell their rights privately do so, the others have the option to pool.
If you are a small market team would you rather try to sell your rights exclusively in a challenging tv environment (and usually a lousy team), or allow the 16 other pooled market games to also be made available and take your share of that revenue as well?
I know which I’d pick if I were the Reds, Pirates or Brewers ownership.
I’m coming around to thinking that Manfred wants to make MLB.tv a platform where you would have to pay extra for your home team’s games. But MLB would take a cut somehow (?) that it would use as revenue sharing?
It doesn’t seem well thought-out, which is why it’s probably what Manfred is thinking.
I agree it’s impossible to know what/if the Manfred Man is thinking. He’s basically the Dan Quayle of commissioners.
Having said that, I could see some sort of split streaming rights thing working. People would certainly have to pay for their home team’s streaming games (which they do now on RSNs anyway)… but they would be available. The teams that want to continue with/own RSNs obviously would opt out of this, or agree to allow some sort of simulcast where they get the money for the local streams anyway.
Meanwhile the smaller market teams can benefit from pooled revenue sharing. Not everyone can win at this zero sum game, of course, but it might mean extra revenue overall if MLB can rid itself of the main obstacles to people purchasing MLB.tv… the fact that the very games you buy it to see you cannot get.
MLB isn’t the only one with this problem… the NHL’s RSNs in some markets preclude viewers from watching many out of market games (I know, pretty much the opposite) if the local team is playing the same day.
So, if you want to watch STL and Chicago or Montreal and Toronto when the team to which you have been designated a hostage is playing, you are generally screwed unless you buy the NHL’s direct package (which includes every game for every team…) or the game you want is deemed a ‘national’ broadcast.
I’m really not a major hockey fan so I just watch some other sport, but this process really does seem designed to drive fans away rather than bring them in…. just what MLB.tv is doing at present.
I would trade Manfred for Dan Quayle in a heart beat
The other shoe dropped yesterday. Warner Bros. Discovery is getting out of the RSN business, telling the teams that air on AT&T SportsNet and Root Sports to take back their TV rights by the end of March. Should that not happen WB Discovery plans to put its RSNs into a Chapter 7 liquidation proceeding.
The collapse of the RSN industry is the biggest sports media story in a generation and, apart from trade sites such as Sports Business Journal, sportswriters are carrying on as if it’s still 1993.
All I want for Christmas is for MASN to go the way of the buffalo.