Top Ad
I DIG Radio
www.idigradio.com
Listen live to the best music from around the world!
I DIG Style
www.idigstyle.com
Learn about the latest fashion styles and more...

How MLB's RSN mess is rocking this winter

Written by 
Published in Baseball
Thursday, 21 December 2023 08:39

Earlier this month, the Los Angeles Dodgers guaranteed Shohei Ohtani more money than the entire American League Central committed to its payrolls during the 2023 season. It's a testament to Ohtani's singularity, a uniqueness that helped make him the highest-paid athlete in North American professional sports history despite the uncertainty that surrounds his pitching future. But it also helps underscore what is being viewed in some corners as a widening financial gap within Major League Baseball, fueled by a deteriorating cable model that might finally be coming to a head.

In many ways, MLB's offseason has been shaped by it.

Diamond Sports Group, the Bally Sports operator that originally held the television rights for 14 major league teams, is nearing the end of its bankruptcy restructuring phase and could leave the regional sports business altogether after the upcoming baseball season. By 2025, about half of MLB's teams could be without the television contracts that annually provided them with tens of millions of dollars, if not more. This has triggered an uncertainty that some teams point to -- with strong pushback from player agents and union officials -- as a primary reason for their payroll constraints.

MLB seems optimistic that it can eventually leverage its rights for long-term gain under a centralized plan, but it has also told teams to brace for short-term losses in the local media space, which accounts for 20% of industry revenues.

The immediate focus, though, is certitude.

MLB officials have been working to gain more clarity from Diamond on which teams it plans to keep in 2024 but also seeks assurances it can honor those contracts for the full year, fearful of the month-to-month uncertainty that hovered over this past season.

The league has built out a local television department and has continually stated that it is prepared to handle broadcasts for teams that fall out of their TV contracts, ensuring that fans don't miss games. This past season, MLB made good on that promise. When the San Diego Padres and the Arizona Diamondbacks were dropped by Diamond, the league provided their games blackout-free on MLB.TV and placed them on a separate channel for cable subscribers. MLB commissioner Rob Manfred said during the World Series that the league is prepared to do the same with as many as 16 teams next season.

There will be at least three -- the Padres and D-backs once again and, sources said, the Colorado Rockies, who have been left without a TV deal now that Warner Bros. Discovery has essentially left the regional sports business. The Minnesota Twins, whose Bally Sports contract expired at season's end, could also join MLB for the 2024 season. So might the Texas Rangers and Cleveland Guardians, two teams Diamond will likely shed this offseason.

But there are nine other teams in Diamond's portfolio -- the Kansas City Royals, Cincinnati Reds, Los Angeles Angels, Atlanta Braves, Detroit Tigers, Miami Marlins, St. Louis Cardinals, Tampa Bay Rays and Milwaukee Brewers -- that aren't guaranteed anything beyond September 2024. And so, in the eyes of some high-ranking executives who have spoken to ESPN in recent weeks, this winter has been defined by a long-standing demarcation that has become increasingly more stark:

There are the handful of big-market clubs with secure television contracts and major spending power -- and then, with some exceptions, there's everybody else.

"When you have a seismic interruption in the market," an industry source said, "the weaker [teams] feel it first."

Already this offseason, the Padres, the first team to fall out of its Bally Sports contract, traded Juan Soto in an effort to bring their payroll back down to what it considers a more manageable level. The Twins are shedding payroll in the wake of winning their first playoff round in 21 years. The Rangers, who could fall out of a Bally Sports contract that was scheduled to pay them about $110 million next season, haven't followed their World Series championship with the same aggression that carried them through the last two offseasons. The Guardians, meanwhile, are dangling star pitchers Shane Bieber and Emmanuel Clase in an effort to add offense without increasing payroll.

Their financial situations are vastly different -- and none of them will open their books -- but all of the aforementioned teams have publicly or privately pointed to uncertainty with their TV revenue as at least part of the reason for reductions in spending.

Sources within the MLB Players' Association and in the agency realm push back on that notion, with some viewing the uncertainty over regional sports networks as a convenient excuse for teams aiming to cut payroll as a way to maximize profits. Those sources brought up recent increases in both central revenue and the revenue-sharing pool to highlight continued profitability and are quick to point to two notable exceptions: The RSN-less D-backs and the Royals, a Bally Sports team that faces its own uncertainties, have been among the most aggressive spenders this offseason.

One thing all sides seem to agree on: The rights themselves are coveted.

"I think that clubs -- certainly I do, and I think clubs in general -- believe in the inherent value of the content," Manfred said during the World Series.

Two months later, as part of his annual winter meetings scrum in early December, Scott Boras was also bullish on the value of baseball media rights, a rare moment when the industry's most powerful player agent found himself in lockstep with the league's messaging.

"Everyone I've talked to is very, very excited about what's going to happen," Boras said, "and they think it's far for the better."

MLB's ultimate goal is to centralize local media rights by placing all 30 teams under a national umbrella, leveraging the scale with major streaming companies looking to expand their offering of live sporting events. The league believes one of those streaming services -- Apple TV+, Hulu, Amazon Prime Video, Netflix, ESPN+, etc. -- could come into play as early as 2025, when it projects to have 15 or more teams to offer.

The upcoming season, however, has been described as a bridge year. The league promised to backstop teams (up to 80% of what they lost) that saw television deals dry up this past season, but it won't do so again in 2024. Some of that lost revenue will be made up through advertising, blackout-free MLB.TV subscriptions and distribution deals that the league negotiates on the teams' behalf. An industry source estimated that teams can make back somewhere in the neighborhood of 60% to 80% of the revenue they're accustomed to under that model, but another source cautioned that there isn't enough sample-size data to prove that yet. MLB, the latter source added, still hasn't struck distribution deals for 2024, largely because it doesn't know how many teams it will have to offer.

The league and Diamond appeared to make progress toward that front on Friday, when an MLB lawyer said in bankruptcy court that the two sides have "a framework to move forward." The hearing, centered on MLB's motion to compel Diamond to either accept or reject its rights deals before the end of the year, was adjourned to Jan. 10.

Diamond has already cut a deal with the NBA to revert rights back to the league after the 2023-24 season and is nearing a similar deal with the NHL. No such deal has been struck with MLB, though the understanding within the industry has long been that Diamond will use the revenue from its agreements with distributors to pay back creditors and liquidate assets by the end of the upcoming regular season, if not sooner.

Earlier this week, The Wall Street Journal reported that Amazon is in talks to invest in Diamond to essentially secure all of its MLB, NBA and NHL streaming rights, a new wrinkle that presents the possibility of Diamond emerging from bankruptcy in an altered form. Diamond owns the streaming rights for all of its NBA and NHL teams, but it only has them for five small-market baseball teams (the Royals, Brewers, Rays, Marlins and Tigers). The rest belong to MLB, a distinction that makes this far from a panacea if it comes together.

Uncertainty seems to only be growing at this point. And few teams represent that better than the Seattle Mariners, who will assume full control of their RSN, ROOT Sports Northwest, early next year because of Warner Bros. Discovery's liquidation. The team is bracing for a major dent in viewership after Comcast Xfinity nearly doubled its subscription costs in October. The Mariners subsequently shed more than $40 million in player salaries this offseason, at a time when many believe they should be adding.

Seattle emerged from a rebuild with a young, ascending team that snapped sports' longest postseason drought in 2022 and went into this offseason with a need to augment its roster with upper-echelon talent. Instead, the Mariners have cut from their payroll -- by trading Eugenio Suarez, not offering Teoscar Hernandez a qualifying offer, and attaching Jarred Kelenic with the bloated contracts of Evan White and Marco Gonzales in a deal with the Braves -- and have yet to reinvest it.

They weren't in on Ohtani, whom their fans clamored for when Seattle hosted the All-Star Game, or on Soto or Jung Hoo Lee, both left-handed-hitting corner outfielders the team could desperately use. Reigning National League Cy Young Award winner Blake Snell is a Seattle-area native who is said to be partial to a return home, but they're not believed to be in on him, either.

Mariners president of baseball operations Jerry Dipoto told reporters earlier this month that the payroll is "very likely to be higher than it was a year ago." But The Seattle Times has reported that the Mariners won't climb much higher than that $140 million figure, leaving the team with roughly $25 million left to spend this offseason.

The Mariners can file some of their maneuverings under prudence. Their trades cleared a lot of strikeouts from their lineup, a stated goal at the start of the offseason, and their restraint in free agency can help them lock up some of their most promising young players in the near future. But it's clear that the Mariners won't be spending anywhere near what was anticipated at this point in their trajectory, a development that has irritated their fans and dominated the coverage around them all offseason.

Executives and agents who have dealt with the Mariners have said they've blamed local media uncertainty as the primary reason for their compromised budget. Regardless of whether it's valid -- and many of those who represent players would argue it isn't -- the league is viewing the RSN uncertainty as its most pressing topic.

The goal is clear, but the path feels hazy.

Long term, the league wants to maximize both its reach and the value of its rights by providing fans with three different viewing options -- on cable, through an over-the-air offering and (most notably) digitally, on MLB.TV and eventually through a major streaming service.

Cable companies for years saw streaming companies as enough of a threat to negotiate exclusivity into their deals with RSNs, leading to the blackouts that severely hindered MLB's reach. But streaming services don't feel the same threat from cable companies, which is why a source familiar with the league's thinking believes MLB can negotiate nonexclusive deals with distributors that would not impact what they can generate from a streaming service. Apple, for example, probably wouldn't care if a team they have rights for also appears on a cable provider that might eventually phase out anyway.

A well-placed industry source projected that it could take three to five years for teams to make back what they were accustomed to on their TV deals, though others have cautioned that it's way too early to say that with much certainty.

The league's blueprint is one founded on reach, driven by the existence of an underserved audience and built on the premise that, at a time when people consume content on their own time, live sports remains appointment viewing. MLB's hope is that eventually it will capitalize on this enough to make up the revenue teams will lose from the elimination of their TV contracts. But some worry that it could ultimately hinge on big-market teams like the Dodgers, New York Yankees, New York Mets, Boston Red Sox and others joining the mix and agreeing to share some of their revenues -- and there are no signs of that happening anytime soon.

"The waters ahead could be choppy," said a high-ranking executive for a smaller-market team, speaking on condition of anonymity due to the sensitivities around talking about league finances. "But when you take a long-term view, which is what I'm choosing to do but I think it's also appropriate here -- I think over the long haul, yeah, there is a path to having a platform with all the clubs there. Is it going to take more than two to three years? Yeah, it's going to take some time. But I think in the long haul, there's a viable path."

Read 55 times

Soccer

Lyon edge PSG, set up UWCL final against Barça

Lyon edge PSG, set up UWCL final against Barça

Lyon grabbed a superb 2-1 win at Paris Saint-Germain in their all-French women's Champions League se...

Ten Hag calls for 'patience' as UCL hopes end

Ten Hag calls for 'patience' as UCL hopes end

EmailPrintOpen Extended ReactionsErik ten Hag has pleaded for "patience" after it was confirmed that...

Hayes slams ref: 'Worst call in UWCL history'

Hayes slams ref: 'Worst call in UWCL history'

EmailPrintOpen Extended ReactionsEmma Hayes has said that Chelsea were "robbed" in their Champions L...

2026 FIFA


2028 LOS ANGELES OLYMPIC

UEFA

2024 PARIS OLYMPIC


Basketball

Bucks to be without Giannis, Lillard for Game 4

Bucks to be without Giannis, Lillard for Game 4

EmailPrintOpen Extended ReactionsMilwaukee Bucks stars Giannis Antetokounmpo and Damian Lillard have...

Luka Doncic's pink-and-purple wrapped Camaro catches eyes

Luka Doncic's pink-and-purple wrapped Camaro catches eyes

EmailPrintOpen Extended ReactionsLuka Doncic made sure to pull up in style to Game 3 of the Dallas M...

Baseball

Mets put Smith on IL, Marte on bereavement list

Mets put Smith on IL, Marte on bereavement list

EmailPrintOpen Extended ReactionsNEW YORK -- The banged-up New York Mets are minus two more importan...

Red Sox swing deal with Cubs for 1B Cooper

Red Sox swing deal with Cubs for 1B Cooper

EmailPrintOpen Extended ReactionsThe Boston Red Sox acquired first baseman Garrett Cooper from the C...

Sports Leagues

  • FIFA

    Fédération Internationale de Football Association
  • NBA

    National Basketball Association
  • ATP

    Association of Tennis Professionals
  • MLB

    Major League Baseball
  • ITTF

    International Table Tennis Federation
  • NFL

    Nactional Football Leagues
  • FISB

    Federation Internationale de Speedball

About Us

I Dig® is a leading global brand that makes it more enjoyable to surf the internet, conduct transactions and access, share, and create information.  Today I Dig® attracts millions of users every month.r

 

Phone: (800) 737. 6040
Fax: (800) 825 5558
Website: www.idig.com
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

Affiliated