TV Answer Man, can you explain why the regional sports networks are having so much trouble? They seem to get decent ratings but it looks like Bally will declare bankruptcy and now the AT&T RSNs look like they are in trouble. Why is this happening? — Junior, Manhattan Beach, California. 

Junior, you’re right. The regional sports networks industry is in freefall with Bally Sports’ operating unit, Diamond Sports, possibly headed for bankruptcy in March while Warner Bros. Discovery, which owns and operates three AT&T-named RSNs (and has a minority stake in Root Sports), said last week that it wants to exit the business and return the broadcast rights back to the teams/leagues.

It’s unclear how the two situations will play out. Diamond appears interested in continuing to run its 19 Bally Sports RSNs under new financial arrangements with its creditors (which include the teams and leagues). But Warner Bros. Discovery, which is now run by the cost-cutting CEO, David Zaslav, seems hell-bent to abandon the business entirely.

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Later today, I will offer some perspective on what this crisis means for viewers, including whether it could lead to MLB blackouts being eliminated and if the games will continue to be broadcast if either Diamond or Warner Bros. Discovery call it quits. But in this post, let’s look at how we got here.

The regional sports networks, whether it’s Bally, the AT&T channels, or a one-channel RSN unit such as SportsNet LA, have paid billions of dollars to the leagues and teams for the regional broadcast rights. (By example, SportsNet LA agreed to pay $8.35 billion to the Los Angeles Dodgers over 25 years.) The RSNs planned to make their money back, and then some, via advertising and carriage fees from pay TV operators.

When the RSNs signed the licensing deals with the leagues and teams, this looked like a good bet. But over the last several years, the cable and satellite operators have lost millions of subscribers due to cord-cutting and other factors. (For instance, DIRECTV has lost 12 million subscribers since 2015.) Since the pay TV distributors pay the RSN a fee for each subscriber it reaches, this means that the carriage fees have fallen sharply. Advertising has also taken a hit because the RSNs are now seen by fewer viewers.

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The RSNs had an opportunity to make up for those losses by signing carriage deals with the new live streaming services favored by some cord-cutters, such as YouTube TV and Hulu Live. However, most live streamers have decided that the RSNs are too expensive to carry. (Dish, the nation’s second largest satellite TV service, agrees; it hasn’t carried the Bally channels since 2019 and now doesn’t carry a single RSN.)

You could argue that the RSNs should have dropped their rates to entice the streamers to come aboard. But that’s easier said than done. If they drop them for the streamers, the cable and satellite operators would cry foul and ask for the same discounts. And if the RSNs started offering discounts to everyone, they wouldn’t be able to meet their obligations to the leagues and teams. It’s the ultimate Catch-22.

This RSN crisis is a fast-moving one that seems to change daily and many questions remain unanswered such as whether it will affect every RSN. But the TV Answer Man today will try to answer as many questions as possible so come back today for more reporting and analysis on this topic.

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Until then, happy viewing and stay safe!

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— Phillip Swann