WBD opts to pay teams lower-than-expected fees: Could RSN market be cooling?

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Warner Bros. Discovery is reportedly paying its regional sports network’s pro sports partners less than expected in recent weeks, a move that comes on the heals that Sinclair Broadcast Group’s Bally Sports missed a key interest payment and is likely headed to bankruptcy — leading some to question if the RSN market is faltering.

Three AT&T-branded SportsNet properties, one in Pittsburgh and the other two serving the Rocky Mountain and Southwest region, became part of the WBD empire after it merged with WarnerMedia, which itself was previously part of AT&T.

WBD also holds a stake in Root Sports Northwest.

The payments in question appear to be largely for the licensing rights WBD has to pay each of the teams it carries coverage from.

It isn’t clear if the lower payment puts WBD in default on its financial obligations, but the company has been heavily focused on overall cost-cutting since the merger between WarnerMedia and Discovery closed.

WBD’s RSN business is comparatively smaller than Bally, which are essentially rebranded versions of Fox Sports channels that 21st Century Fox sold to Disney. Because of Disney’s interest in ESPN, it was forced to sell-off the RSNs and Sinclair ended up with them.

Sinclair inked a deal to license the Bally’s name for the networks, while also shuttering two.

Earlier in February 2023, the company said it would miss payments on debt, signaling a likely Chapter 11 bankruptcy filing in March 2023.

The world of sports licensing is dicey and pricey.

Regional networks, which are designed to bring more games to local fans, were once an easy additional revenue stream for teams. The networks, meanwhile, rely on the steady stream of regional viewers to sell make it appealing for businesses to buy advertising to make back their licensing fees plus a profit.

Having the rights to pro sports teams games was once considered essentially a legal monopoly, especially when regional blackouts applied that might prevent a national sports network such as ESPN from feeding a certain game to a certain part of the country.

However, cording-cutting and shifts to streaming has cut back on the value of these networks, which are often carried on cable tiers and not over the air. Most RSNs also make money from fees that cable and satellite providers pay — and if those subscriber bases are drying up, that’s less revenue for them and could also drive those providers to cut back on what channels they pay for or force them into optional add-on packages so that not every subscriber gets the channel in question.

Some teams have also started to wonder if it’s worth involving a third party instead of launching their own network and pocket more of the advertising revenue and having more control over content. For example, Sinclair is also a partner with the Chicago Cubs on Marquee, a channel devoted entirely to that team. While its rating have slipped significantly since launching, it is technically separate from the Bally’s channels.