More on RSNs departing baseball and the sport’s financial state

Recently we learned that Diamond Sports, the operator of the Bally Sports regional sports networks, was likely to file for bankruptcy. This move could put some rights fees payments to MLB teams in jeopardy. Commissioner Rob Manfred, at his Cactus League media day news conference, said the league has some contingency plans to produce and broadcast those games if the RSNs don’t, or can’t.

Now, three more RSNs that carry MLB games, owned by Warner Bros./Discovery, are getting out of the sports business entirely, according to Sports Business Journal:

The company, which operates three AT&T SportsNet-branded channels in Denver, Houston and Pittsburgh and has a minority stake in the Root Sports channel in Seattle, has told teams that they have until March 31 to reach an agreement to take their rights back. If the RSNs can’t reach deals with the teams, the channels eventually plan to move forward with a Chapter 7 liquidation filing.

In a statement provided to SBJ, WBD said, “AT&T SportsNet is not immune to the well-known challenges that the entire RSN industry is facing. We will continue to engage in private conversations with our partners as we seek to identify reasonable and constructive solutions.”

Again, this puts rights fees to at least three teams for this season in jeopardy.

Maury Brown has written this article for Forbes describing this issue in great detail, and I recommend you read it in its entirety. Here’s the summary of the issue noted above:

The league is prepared to take rights back from Sinclair for all or some of the Bally Sports RSNs and with it, go direct-to-consumers (DTC) through the league’s MLB.TV streaming service. Blackouts would be dropped and fans would be able to choose teams individually in-market. The issue here is that the DTC model will assuredly see lower revenues than what has been garnered through bundled traditional cable or satcaster distribution. And that matter of economic disparity increases under this model. Clubs like the Yankees, Dodgers, Cubs and Red Sox would assuredly fare better than the Pirates, Rockies, Rays, or A’s of the league.

The bottom line here: Yes, the games will be broadcast, and yes, MLB will figure out a way to charge for viewers who stream them. But those payments are likely not going to come anywhere close to the rights fees that the teams were collecting from RSNs.

There’s the biggest financial issue for the future of the sport, and that’s why, as I posted here last week, MLB owners have created an economic study committee to determine the future of the sport’s finances.

Baseball is awash in revenues right now. There’s no question about that, and we have seen where a lot of that money has gone in some of the massive contracts that have been signed this past offseason.

But Maury Brown’s article is headlined: “MLB Could See A Painful Lockout When Labor Deal Expires In 2026, And That’s Just The Start,” and he writes:

Manfred & Co. will look to get concessions out of the players. As part of bargaining for the current labor deal that started in 2022, several concepts were in offer packages that hit on what are nearly sacred mechanisms the players earned the right to. In one offer, the owners offered up to dissolve salary arbitration in favor of a whole new system. The players balked at it as a non-starter, but if that was before the looming economic pressures of the RSN model changing, why wouldn’t they come back to such concepts or ones even more radical in 2026 when the current CBA expires?

I have no doubt owners will come back with things like that, especially if revenues begin to decline with the crash of the RSN model. That model has been on shaky legs for the last few years and with more and more people cutting the cable cord, it seems as if most teams won’t have such deals in the next few years. The Cubs, for now, are not affected, as Marquee Sports Network seems to be on solid financial footing, and there’s supposed to be a DTC (“direct to consumer”) Marquee streaming app coming soon, though there’s been nothing official on those lines. The Dodgers, Red Sox, Yankees and Mets, all of whom own part or all of their RSNs, should also not be affected — but you can see how this could create a divide between the haves and have-nots of baseball. Brown writes:

In other words, there will be a push for the owners to deal with the economic disparity through revenue sharing and centralized revenues rather than through some mechanism that ties MLB into something that isn’t largely a free market.

Easier said than done, I think, with 30 team owners not always on the same page financially.

Meanwhile, MLBPA chief Tony Clark made some remarks as Spring Training began, quoted by the Washington Post’s national baseball writer Chelsea Janes:

But on Saturday, less than a year later, before most teams had even played their first spring training games, MLB Players Association Executive Director Tony Clark sat in the union’s Scottsdale, Ariz., office, surrounded by reporters, and made his side’s case for the next battle.

“We’re never going to agree to a [salary] cap,” Clark stated unequivocally, reinforcing a position the union has held for generations and fending off the notion four years before he and his staff will have to rebuff any attempts by owners to implement one. From Clark’s perspective, he was just returning fire.

A proposal for a salary cap is nothing new in MLB. It’s the reason we lost a third of the 1994 season, that year’s World Series, and were looking at losing a big chunk of 1995 before a federal judge ordered the sport back to work — more details here.

We have four MLB seasons to play under the current CBA. They’ll be played, and we will enjoy baseball, but make no mistake — there is an undercurrent of financial trouble for the sport that’s going to have to be dealt with, starting with “Where and how is MLB going to replace the RSN rights fees?”, or we could be looking at, as Maury Brown stated, “a painful lockout” in 2026.

Enjoy the games, everyone.