Thursday, June 21, 2018

The Value of Regional Sports Networks


In statements about their respective bids to acquire 21st Century Fox assets, Comcast and Disney have each indicated that they are willing to sell Fox’s 22 Regional Sports Network (RSN) to help secure regulatory approval of the deal.  Why sell?

An RSN is a cable channel that distributes sports programming exclusively in a local professional team’s market.  The market boundaries are determined by the team’s league.  The carriage fees charged by the RSN owners to distributors (cable, satellite, telcos) can range from $2 to $4 per month.  While the broadcast networks and ESPN compete for the rights to distribute first-tier sports programming nationally, there is no similar competition at the local level.

If Disney could keep Fox’s RSNs that include the distribution rights of 17 NBA teams, 15 MLB teams, and 12 NHL teams, the one-two punch of control of sports programming in those markets would be huge and would strengthen Disney’s scale and leverage in carriage negotiations as well as the content distributed over ESPN+, its new direct to consumer platform.  Selling the RSNs would be a BIG concession for Disney.

For Comcast, the Fox RSN networks do not overlap with the nine owned by NBC Sports.  Purchase of the RSNs would give Comcast local sports coverage in more local markets, but those additional networks are not in Comcast PayTV and broadband territories so vertical restraint concerns do not exist.  Selling the RSNs would be a SMALLER concession for Comcast.

Note: Despite their high fees, the RSNs can be an important part of the [virtual] TV bundle (or add-on to it) for the sports enthusiast.  Owners of that content know that.  But, they must be careful.  Failure to get distributors to carry the RSN can lead to losses of affiliate and advertising revenues.  For example, for four years, AT&T/DirecTV, Dish, Verizon, and Comcast, accounting for 70 percent of the Los Angeles market, refused to carry Spectrum SportsNet, the RSN of the Dodgers, citing the monthly fee of $4 per subscriber as excessive.[i]  


[i] Bill Shaikin, “Now in its fourth season, there’s no end in sight for the Dodgers’ TV blackout.”  Los Angeles Times, June 17, 2017.  http://www.latimes.com/sports/mlb/la-sp-dodgers-tv-shaikin-20170617-story.html

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