RSNs are under the gun, but it’s the NBA that has the most to lose.
One of the oddest #sportsbiz situations in recent memory was resolved last week, but its effects linger. Altitude Sports, a(n essentially) team-owned Nuggets/Avalanche regional sports network (RSN) out of Denver, struck a carriage deal with AT&T/DirecTV after being utterly and completely blacked out for two months.
When the Worldwide Reader says “blacked out”, it means blacked-the-F-out. Nobody in the Denver area could watch local Avs or Nuggs games. Nothing via cable, satellite, stream (legal stream, that is), or sports bar. Altitude Sports never had deals with streaming packages (Sling, Hulu, DirecTV Now, et al.). The only three traditional providers servicing Denver metro are Dish, DirecTV, and Comcast, while all had Altitude pulled after carriage contracts expired at the end of August.
The Altitude situation was resolved last week, and the resolution appeared to be political. A few days after Colorado’s AG announced that he was investigating AT&T/DirecTV and Comcast for fraudulently charging customers an un-reduced “RSN fee” while one of Denver’s two RSNs was blacked out (AT&T’s “Rocky Mountain” network is Denver’s Rockies-partnered RSN), a deal was announced between Altitude and AT&T/DirecTV. Far be it from the Reader to be cynical, but this looked for all the world like the Colorado AG was going to force AT&T to either drop its RSN fee altogether while the Rockies are in the offseason, or make a deal with Altitude.
Altitude Sports remains blocked from Dish and Comcast subscribers, and perhaps the Reader’s readers are wondering why, especially since Comcast continues to charge RSN fees. The Reader’s read on Comcast is twofold: AT&T/DirecTV’s capitulation likely satisfies Colorado’s AG because sports bars are a lot more likely to have DirecTV than Comcast, and Comcast had less to lose than AT&T, because Comcast does not have a Colorado RSN. As for Dish, they don’t charge an itemized RSN fee, so the Colorado AG would have had a tougher time leaning on them. (Dish, ever so crafty, avoids the political minefield of RSN fees by having two identical packages, America’s Top 120 and America’s Top 120+, where the only difference between two is that the “plus” package costs five bucks more per month, and includes local RSN[s].)
For those who track Dish, which happens to be the Reader’s cable/sat provider of choice, the fact that Altitude remains unavailable comes as no surprise. Dish has declared covert (when talking with customers) and open (when talking with investors) war on the “RSN model”.
The RSN model can be summarized thusly: they are local/regional sports television networks which have A) stripped their programming to the point that their only valued asset is live games from local pro sports teams, B) charge the highest per-subscriber carriage fees of any channel besides ESPN, and C) demand a 50+% minimum subscriber guarantee from any cable/sat company that offers them.
That model was great back in the days when 90% of America subscribed to cable & satellite television. RSNs could point out the fact that local pro sports games are typically the most-watched programs in a given area, thus justifying high fees and guaranteed subscribership. Today, with less than 70% of the country subscribing to multi-channel cable/sat/streaming, TV providers are wondering why they should pay huge fees w/ guaranteed sub minimums, when nobody watches the channels, except when a game is on.
Dish, ever the rascal of the television community, has decided to be the bulwark against the RSN model. Charlie Ergen, the company’s founder and chairman, has essentially given RSNs three choices: reduce your carriage fees, reduce your subscriber guarantees, or go a la carte.
Ah yes, “a la carte”. Such a popular term in the early days of cord-cutting, that has gone the way of the fidget spinner. Remember when very fine media members were prattling on about cable/sat companies’ intransigence in refusing to offer a la carte channel packages? Remember the calls for political intervention, to break up the big, bad monopoly that was protecting the “outdated” model of channel packages? Seems quaint today.
To RSNs, “a la carte” feels more like “de la muerte”. The forthcoming Cubs-owned Marquee RSN in Chicago could say, “You know what? Let’s make Cubs games available to EVERY Cubs fan. Let’s let all subscribers of Dish and Comcast — and even cord-cutters! — have a Netflix-esque relationship with the Cubbies, where they can pay a flat fee per month, and watch their heroes lose to the Brewers.” They won’t, because the vast majority of Chicagoans wouldn’t subscribe, and thus Marquee would have to charge $25/month (or more) to draw the same revenue that they hope to draw under guaranteed-subscriber-minimum contracts with cable/sat providers. But the Reader digresses…
If Ergen has bet right — and he is known as an avid, skilled poker player — then the future of RSNs includes either a dramatic reduction in carriage fees (think $2 to $3 per subscriber, rather than the current $4 to $7), or a similarly sized reduction in minimum subscriber guarantees (think 20% of customers, rather than the current 50+%).
Either way, that’s a heck of a haircut for RSNs. To use the Altitude example, there are about 1.6 million TV households in Denver. The number of cable/sat subscribers is probably a shade over a million, and probably around 800,000 had Altitude Sports on their channel guide before the recent blackout went down. At $4 per subscriber, per month, that’d be a touch under $40 million/year in carriage fees for Altitude. A reduction in carriage fees and/or the minimum sub guarantee would likely cause an eight figure annual haircut.
The survival instinct is downright cockroachian in the TV business, so the Reader doesn’t expect RSNs to back down immediately. Sports networks will hope that Dish’s subscriber numbers crater, as people wait longer and longer for their team’s local games to return. The Reader predicts, however, that eventually Dish will win. The reader senses that, although live sporting events routinely top the ShowBuzzDaily charts, most people who subscribe to cable/sat services aren’t compulsive about watching every game their local team plays.
Which brings the Reader to the juiciest point of this screed — only fourteen paragraphs in! — the threat to the NBA.
Although the Reader loves the puck (third-row LA Kings season tickets are among the Reader’s most prized possessions), the teams making the big bucks from local sports broadcasts reside in MLB and the NBA. While a Dish victory — and, therefore, a broader tilt in favor of cable/sat providers in RSN distribution deals — would ding baseball teams, the hardwood would be hurt worse. The reason is a simple ratio: top NBA teams have a far lower percentage of their attractive games exclusively on RSNs, compared to top MLB teams.
Milwaukee is a prime example of the differences between MLB and the NBA, as it pertains to RSNs. The Bucks are enjoying their most successful stretch in decades. Fox Sports Wisconsin (FSW) saw last season’s Bucks games draw the network’s highest ratings since 2003. The problem is, a whopping 24 games have been gobbled up by national television, leaving only 58 regular season games exclusive to FSW. What’s more, ESPN, TNT and ABC are taking the lion’s share of the attractive games. Only one game vs. the Sixers (out of four) is exclusive to FSW… which isn’t so bad compared to FSW having exclusive rights to ZERO Bucks games against the Celtics, Lakers, Warriors, or Rockets. The Brewers, on the other hand, had 158 games on FSW last season, with the RSN missing out on no more than one game per opponent.
If the Reader were Fox Sports Wisconsin, the question becomes, “why are we paying the Bucks $27 million this season for leftovers?” Then, of course, the Reader would realize that FSW gets its carriage fees no matter how many Bucks games are gobbled up by Warner and the Mouse, and the Reader would mix a gin martini (double-splash of vermouth), light up a Camel Regular (unfiltered cigs are great in moderation folks, let me tell ya) and wonder why such a stupid question was asked.
If the Reader were Dish or Charter/Spectrum or AT&T/DirecTV, however, the same question hardly produces the same chilled response. The Bucks are attracting eyeballs to FSW for less than 10% of a fan’s TV-watching hours, even for the hardcore folks who watch every game. For casual fans, it’s more like 3%. And for this, cable/sat providers are supposed to pay more than twice what’s charged by actual popular channels like TNT and Bravo? Not for long.
Given the NBA’s recent softness in national TV ratings (a double-digit percentage decrease last season; on track for a repeat in 2019-20) and attendance (half the league averaged below the formerly automatic 18,000 fans per game last season, with one-third of the league at or below 90% capacity), the local TV rights situation may not have the attention of the Association’s financial folks. If the RSNs start losing the fight against Dish & company, that will surely change.