With Sinclair’s RSNs in flux, ESPN potentially spun off by Disney and MLB exploring a new direct-to-consumer service allowing for home-market broadcasts, Major League Baseball’s streaming plans could come in for a long-awaited overhaul.
The current MLB streaming arrangement isn’t the result of any well-planned blueprint, but rather the end result of a sloppy evolution process involving home-game blackouts, fealty to local rights holders, and weird territorial rules that allows for no regional MLB broadcasts in certain parts of the country, like eastern Iowa and Las Vegas. If you were to design an optimal plan for optimizing revenue from streaming in a way that appealed to the highest number of fans, you would not design the current streaming map.
But three developments could end up leading to a new streaming framework that includes a new direct-to-consumer service, potentially in conjunction with the NBA and NHL. Could, as talks are certainly in preliminary stages. We are seeing big money entering professional sports at an accelerated pace, however, and should some of these pieces fall into place, we could see the big money changing things sooner than later. So let’s look at some of the pieces.
First: It’s no secret that Sinclair, which controls the Bally regional sports networks, is in financial straits. While Sinclair expressed interest this summer in expanding via an acquisition of NBC’s sports networks, a first step toward a direct-to-consumer service, it’s not know how active this plan is. In fact, Sinclair is reported as having some early talks to sell the RSNs in the face of some $1.8 billion in debt service.
And some of those meetings took place with Fanatics. In the big picture, MLB is in business several different ways with Fanatics, serving both as an investor and partner (Fanatics runs the MLBshop.com website and was the beneficiary of MLB’s surprising decision to switch from Topps for trading-card rights). Any financial gain for Fanatics also benefits MLB, as it raises the value of MLB’s investment.
While SBJ says talks between Sinclair and Fanatics have cooled, there’s no reason they can’t be revived–and given Sinclair’s debt, there’s no reason to think they won’t be revived, with SBJ specifically raising the prospect of a Sinclair bankruptcy. And a streaming service run by Fanatics that’s more like Amazon Prime than ESPN+, offering up merchandise, tickets and wagers in a hyper-ecommerce atmosphere, would certainly fit into what Fanatics is looking at in the future. In the end, Sinclair’s business options are increasingly limited thanks to its deals with MLB teams. One big legal issue with any direct-to-consumer streaming service from Sinclair’s Diamond Sports is that MLB must sign off on it. Given that MLB covets streaming rights, it’s highly unlikely the commissioner’s office would sign off on any Sinclair deal the way things stand now; Sinclair would need to present a revamped financial plan with better financial terms to enter the streaming world.
But MLB doesn’t necessarily have a clear path to a streaming service if Sinclair was involved; as a rights holder, Sinclair would need to sign off on any MLB direct-to-consumer streaming service. Let’s say Fanatics ends up buying the regional sports networks and adds AT&T and NBC units to the mix. (Yes, big leap, but given how involved private equity is becoming in the sports world, not necessarily that much of a stretch.) The New York Post is reporting that MLB Commissioner Rob Manfred is open to the idea of sharing streaming revenue with the regional sports networks to make up for any loss of cable subscribers. Such a deal may be much easier to reach if the regional sports networks were owned by Fanatics and not by Sinclair; having that stake in Fanatics gives MLB more power in the relationship. Or, given that Fanatics also has the NFL, NHL, NBA, NBAPA and MLS among its investors, there’s some business logic to let Fanatics acquire RSNs and put together its own ecommerce-centric streaming service that includes NBA, NHL and MLB. Under the Post’s scenario, MLB.tv would continue to exist in its present form; a streaming package with home games would be a separate offering.
Add to all of this one complication: the possibility that Disney may spin off ESPN as a standalone business. Right now ESPN is looking at some serious challenges: as fans drop their cable subscriptions, ESPN loses valuable revenue. Some of this revenue is recouped as fans sign up for ESPN+, and to date ESPN+ has been a valuable part of Disney’s rapid growth in the streaming space, part of a bundle that includes Disney+ and Hulu. The reporting is along the lines that Disney is discussing a possible spinoff, not that there are solid plans for such a move. ESPN, of course, is a valuable rights partner for MLB, NBA and NHL as well. Normally Disney doesn’t miss a beat, but it’s been slow to jump on the NFTs/ticketing/legalized gambling trends now beginning to take over professional sports.
Much of this talk, of course, comes from the private equity world, which seems to be seeking larger and larger deals. And you see the same names, such as Silver Lake Partners (more on them later this week) and RedBird Capital, pop up regularly when it comes to sports investments big and small. How big and small? RedBird is part of the investment group behind the relaunch of pro baseball on Staten Island, and it’s also a part of the recent investment round in LeBron James’s SpringHill Company, a round that also included Fenway Sports Group, Nike and Epic Games. RedBird was also part of the acquisition of the YES Network by the New York Yankees, Sinclair and Amazon.
In a post-cable world, a direct-to-consumer service is the Holy Grail. We’ve been saying the sports-broadcasting world is on the cusp of major change, and the only surprise is how slowly any transition has happened. Maybe 2022 will really be the year we see the emergence of a streaming service that will please sports fans across the country.