We are heading toward a future where all games will be streamed on one platform. It will, however, take a while. Meanwhile… where’s the money going to come from?
As I noted here last week, the 12 teams that were hanging on by a thread to Diamond Sports’ TV production of their games are getting close to the end of the line with the company who runs the Bally Sports regional sports networks, but is now in bankruptcy court.
That “end of the line” is getting ever closer with Major League Baseball’s announcement Tuesday that three teams that had been on Bally channels will now have their games produced and distributed by MLB. Those three are the Brewers, Guardians and Twins. The Texas Rangers, whose games were also carried a Bally channel, were said in MLB’s press release to “have determined that they will no longer be partnering with Diamond Sports Group and are considering their local media options for the 2025 season.” According to this Sports Business Journal article, the Rangers are going on their own:
The Texas Rangers are developing their own direct-to-distributor broadcast model independent of MLB, including an accompanying streaming app, that will end their relationship with Diamond Sports Group after Sunday and potentially leave Bally Sports Southwest teetering as a viable business, sources told SBJ.
The yet-to-be named network will then be available in roughly four-hour windows on gamedays, which would include a pre-game show, the game telecast and then a post-game show. Once a game ends, the channel would go dark. Sources described it as “a pseudo RSN, but not really an RSN. It’s a direct to distributor model that will look a lot like what MLB has done for the San Diego Padres. But it’s going to be owned by and run by the Rangers directly.’’
As part of the launch, the Rangers are expected to produce the games, cut their own distribution deals and sell their own advertising. In addition, their complementary streaming app would carry not only the game and pre- and post-game shows, but additional ancillary programming or content.
That will make a total of seven teams with this sort of TV setup, including the Diamondbacks, Rockies and Padres, who had ended their local deals with Diamond Sports and began streaming games either last year or this year. Those teams also made agreements to have their games distributed by cable and satellite operators. But in an ominous development for the future of local televised baseball, none of the teams made as much money from these hybrid streaming/cable/satellite operations as they did from RSN fees.
Here’s what MLB’s release says about the Guardians, Twins and Brewers potential audiences:
Last season, the Guardians reach on its RSN was approximately 1.45 million households and the Twins reached approximately 1.08 million homes. With MLB’s direct-to-consumer streaming option, Cleveland’s games now can reach up to approximately 4.86 million households (+235%) and Minnesota expands to approximately 4.40 million homes (+307%). With a similar household audience, Milwaukee had a direct-to-consumer streaming option available with their previous local media arrangement and will continue to do so with MLB moving forward.
“Reach,” however, does not equal “subscribers.” Here’s one thought about where the Twins could be headed:
This is the same setup the #MNTwins seemed on the verge of doing last offseason, but instead they re-signed with Bally Sports on a reduced one-year deal that made no one happy.
Now, coming off a far worse season, their ability to get direct-to-consumer subscribers is diminished.
— Aaron Gleeman (@AaronGleeman) October 8, 2024
Here, for example, is how the Padres were reportedly doing as of mid-season 2024:
Rob Manfred said the Padres’ streaming broadcasts (now run through the league) have close to 40,000 subscribers.
— Bill Shaikin (@BillShaikin) July 16, 2024
Do the math. The Padres (as well as other teams in this setup) are charging $20 a month (or $100 for the entire season). That’s $800,000 of revenue per month. If we assume that most subscribers to such a service would only do it for the six months of the regular baseball season, that’s $4.8 million. For the entire season. For a comparison point, that’s a bit more than the Cubs paid Justin Steele this year ($4 million).
Here’s what Commissioner Rob Manfred said about that last summer:
“We think that reach is a really important change,” commissioner Rob Manfred said in July. “San Diego is kind of the leader in the clubhouse there, approaching 40,000 subscribers, which is a really good number. Having said that, from a revenue perspective, it is not generating what the RSNs did. The RSNs were a great business, lots of people paid for programming they didn’t necessarily want and it’s hard to replicate that kind of revenue.”
So, 40,000 is a “good number”? Again, do the math. And Manfred is correct, it will be very difficult for tams to make up the RSN revenue.
Clearly, that sort of revenue loss is going to mean payroll cuts for teams doing it. It did for the Twins, who had a player payroll of about $156 million in 2023. This year, Minnesota’s player payroll wound up at about $131 million, a drop of about 16 percent. Was that the reason they missed the postseason this year? It certainly couldn’t have helped.
“With the media landscape continuing to evolve, Major League Baseball is committed to serving our fans by ensuring they can see their favorite Clubs, removing blackouts where we can, and ultimately growing the reach of our games,” said Noah Garden, MLB Deputy Commissioner, Business and Media, in the league’s release. “We are proud to bring Guardians, Brewers and Twins games to their passionate fan bases with the same high-quality production that we have demonstrated in Arizona, Colorado, and San Diego.”
That’s great for fans, for sure, especially eliminating blackouts. The games are produced by MLB Network’s staff and they are indeed very good quality productions, but streaming options like this simply don’t bring in the kind of money that RSN fees did. This is the financial problem that these teams face going forward. The Rangers, in fact, had signed a 20-year, $3 billion deal with Fox Sports Southwest, a channel that eventually became part of Diamond Sports. So, that deal didn’t make it to the 20-year mark and I can pretty much guarantee you that the Rangers won’t be getting $150 million a year from their new setup as described above.
We are entering a new world where MLB teams don’t get as much revenue from local TV as they have over the last 25 years or so. How are they going to make up that revenue?
¯_(ツ)_/¯
And that’s why I will continue to believe that when the current MLB/MLBPA collective bargaining agreement ends in December 2026, we’re headed for another lockout — and one that could be worse than the last one.
As always, we await developments.