Forget pitch clocks and defensive positioning — the biggest story in baseball right now is the collapse of a regional sports network and what that means for the future of how fans watch games. A change is coming that could affect broadcasts, blackouts and, ultimately, the economic landscape of sports.
Shortly after the World Series ended in November, MLB hosted its quarterly owners’ meetings at the commissioner’s office in New York. At their conclusion, Commissioner Rob Manfred told members of the media that a lengthy report had been made to the owners on the future of the RSNs. He addressed the need to serve both cable subscribers and cord cutters, praised the league’s new partnerships with streaming services such as Apple and Peacock and predicted a “relaxation of that exclusivity” that has long characterized lucrative RSN deals.
It was perhaps the least bombastic way he could have announced that there might be an imminent solution to one of baseball fans’ biggest frustrations.
MLB invented streaming. The internal technology behind MLB.tv was, in many respects, first and foremost. But from the very beginning, blackouts were considered a structural inevitability. In short, RSNs give teams so much money because they receive exclusive the right to broadcast matches in a certain area. Making games available to local fans online would violate what RSNs pay for, so while MLB.tv technically enabled game streaming, existing economic structures required the service to blackout games in local markets, essentially excluding what was literally the target audience. (In addition, certain parts of the country are subject to severe overlapping power outages, sometimes without the ability to watch those games on TV.)
In the two decades since the dawn of MLB.tv, people’s expectations of their ability to watch whatever they want, wherever they want, without the limitations or inconsistencies of traditional television, have exploded. With the increasing consumption of à la carte content, blackouts have become a serious obstacle in the development of the game and chief among fans’ concerns.
However, as the local television business grew and accounted for an ever-increasing percentage of the teams’ revenue – calculations by FiveThirtyEight in 2020 estimated about 22% of the average team’s total revenue — blackouts with RSN enabled seemed intractable. Although cord cutting has become a growing threat to the cable bubble, it was hard to see how MLB would make the transition to something equally lucrative and more modern in scope.
In December, at baseball’s annual winter meetings, Manfred doubled down on his allusion to some impending resolution of the exclusivity issue. In January, the league announced it had hired the RSN veteran for the newly created role of executive vice president of local media, responsible for “overseeing MLB’s management and distribution of local media rights.”
Less than a month later, Diamond Sports Group – known to viewers as Bally Sports and which broadcasts games for 14 MLB teams – defaulted on interest payments, which triggered a 30-day grace period and was seen largely as an announcement of bankruptcy. The company is facing financial difficulties due to both the exodus of cord-cutters and the huge amount of debt that Sinclair — of which DSG is essentially a subsidiary — took on when it bought a suite of RSNs in 2019.
At the time, MLB was bidding for the rights that ultimately went to Sinclair/DSG for what the league somewhat predictably considered an exorbitant price and has been monitoring the situation ever since. The league hasn’t forgotten that DSG’s bankruptcy, while introducing an uncomfortable level of uncertainty in the immediate future, could allow MLB to begin changing its broadcast options to suit a more modern market.
Indeed, Manfred said as much in press conferences to open spring training in Arizona and Florida.
“I think our aggressiveness about getting involved in case Bally’s can’t go on the air is partly driven by the fact that we saw it as an opportunity to fix the blackout,” he said two weeks ago in Florida.
(He also said, “I don’t like any of this,” which, frankly, seems a little much also many protests—so many, in fact, that some might consider it evidence to the contrary.)
In the event that DSG declares bankruptcy and loses the ability and rights to broadcast games — eliminating the complications of bankruptcy court and the possibility that not all teams and RSNs are affected equally — Manfred says MLB is prepared to produce and broadcast local games.
“We know we can put those games in conjunction with MLB.tv digitally, and we’re in the process of trying to do a deal that will put us in a position to make those games available within the cable package as well,” he said.
What he’s talking about is making the games of teams lost by DSG available on both traditional TV and streaming, which would seem like a solution to the blackout problem, at least for the affected markets. It’s also possible that MLB is taking this as an opportunity to renegotiate the exclusivity terms with DSG that have proven so restrictive, although it would only affect the 14 teams broadcast on Bally.
Additionally, Warner Bros. Discovery, which operates the RSNs for four teams, recently notified the teams that it also intends to divest itself of its stake in the RSNs. Together, that would account for nearly two-thirds of baseball’s teams, with the ultimate goal clearly being for MLB to control the distribution of all of its games.
“I hope we get to a point where, on the digital side, when you go to MLB.tv, you can buy whatever you want,” Manfred said. “You can buy a package off the market. You can buy local games, you can buy two sets of local games, whatever you want. I mean, to me, that’s the definition of what’s going to be a valuable digital offering in the future.”
In other words, the à la carte streaming options that consumers are used to.
“There’s going to be a lot of work on this project,” Manfred said. “But I think, by definition, as you go national, you’re going to have more central revenue.”
And now we come to some more far-reaching implications of the bursting of the cable balloon. Currently, it has been determined that local broadcasts make up a significant portion of each team’s revenue. This is true for all, but the actual dollar amounts vary widely; recent FanGraph estimates put the range at more than $200 million per year.
But as Manfred said, if the local TV product was centralized in production and distribution, presumably that revenue would come through the league office and could be distributed more equitably.
Or, as the commissioner put it: “More national product produces more centrally distributed income, which reduces income disparities, which in turn would hopefully reduce wage disparities.”
Making the logical leap to more equal pay conditions is a convenient preemptive justification as long as the correlation between income and pay (or lack thereof) ultimately rests with individual owners. (Just ask Padres owner Peter Seidler, whose local TV revenue ranks 22nd out of 29 teams tracked by FanGraph, below the Rays, A’s and Orioles.)
Still, a sport with a fully centralized TV revenue probably looks quite different. First, the distribution of that revenue should be collectively negotiated with the MLB Players Association.
“They have the ability to reach out to the RSNs and they told us they have a plan,” MLBPA CEO Tony Clark said recently in a meeting with members of the media. “What we don’t know is anything beyond that and how it will affect the system. That will require a conversation.”
Like Manfred, Clark expressed his belief that while the potentially lengthy and painful end to the RSN model could cost teams momentarily, “long term, the growth will still come.”
More specifically, growth will happen if MLB can work its way from an already outdated model to something more nimble and accessible. Right now, the league is publicly expressing confidence without much specifics, making it difficult to judge.
Ultimately, though, the results will define the legacy.