With teams cutting the cord and shifting their distribution strategies, what does the future of sports TV look like?
What’s old is new again in the world of sports TV. Teams are ditching their regional sports networks in favor of free, old-fashioned, over-the-air, bunny ears television. The Utah Jazz are the latest in a growing list of teams to abandon the collapsing RSN model — and lower the barrier to entry for fans looking to watch their local teams play – striking a deal with Sinclair last week that will move Jazz games to the independent local channel KJZZ and CBS affiliate KUTV.
The NHL’s Vegas Golden Knights have also announced a deal to air games on local broadcast television next season with Scripps Sports, and there are likely more teams to come. With the ongoing bankruptcy proceedings of Diamond Sports Group — owner and operator of 19 Bally Sports RSNs — and Warner Bros Discovery’s plans to shutter its AT&T-branded RSNs following the current MLB season, a number of NBA, NHL, and MLB franchises will be looking toward alternative forms of distribution.
Back to broadcast
The deterioration of the RSN model has been well documented, and as many have looked toward direct-to-consumer streaming as the solution to reach fans in a post-RSN world, shifting game inventory to over-the-air broadcasters widens distribution beyond those that would pay for a streaming service.
AT&T SportsNet, the RSN that aired Jazz games this past season, reached approximately 39% of Utah homes. Under the new over-the-air deal with Sinclair, Jazz majority owner Ryan Smith believes the team can approach 100% penetration in Utah — and capture markets in neighboring Idaho, Wyoming, and Montana, per Sports Business Journal.
Such a substantial jump in penetration seems overly optimistic, but Smith’s approach is intended to meet viewers where they are. Television consumption is trending away from cable and towards over-the-air broadcasts and direct-to-consumer streaming. While the number of cable subscribers continues to decline, the share of over-the-air antenna users remains stable. Moreover, antenna users tend to be younger and more multicultural than cable subscribers, capturing demographics that advertisers pay a premium to reach, according to a 2022 study by Horowitz Research.
Those trends paint a rosy picture for teams looking to ditch their RSNs in favor of over-the-air, but the situation is not as simple as it sounds. Local broadcast stations are facing many of the same cord cutting trends that are currently hamstringing RSNs. Much of the revenue for local over-the-air stations comes from retransmission fees assessed to cable, satellite, and virtual multichannel video providers — or simply put, revenue generated from pay TV subscribers. As revenue from retransmission fees declines, and games are available for free via antenna, media rights fees will be reduced — but teams hope to make up for this by reaching a broader audience.
From a team perspective, there are pros and cons to each distribution method. The RSN model provides stability and sizable rights fees, provided your RSN remains financially viable. The broadcast model provides wider distribution than cable, but part of your audience is freeloading off of a shrinking number of pay TV subscribers via free over-the-air antenna. The direct-to-consumer model allows cord cutting and/or out-of-market fans to pay a premium to access games, but is likely cost prohibitive for a portion of the fan base.
Fan impact
In the near term, fans can expect a mix of all the distribution channels above if they’d like to watch all of their team’s games.
The Balkanization of live sports rights is something fans have become accustomed to in recent years – and there are no signs of slowing down. For teams like the Jazz (and others inked to Bally Sports or AT&T SportsNet affiliates), the calculus of going entirely over-the-air and direct-to-consumer is a bit simpler than say, the New York Mets on franchise-owned SNY. The transition, however, may not be as simple as advertised for fans.
In the new Jazz deal with Sinclair, games will be split among two local affiliates: the independent affiliate KJZZ, and the Salt Lake City CBS affiliate KUTV. Already, this will result in a level of confusion for fans. While most are probably familiar with their local CBS affiliate, only more seasoned Jazz fans will remember that games aired on KJZZ from 1993 – 2009. Since then, the station has largely aired re-runs of syndicated shows like Divorce Court.
Despite the messaging around over-the-air distribution largely focusing on games being available for free, even the one in five television viewers using an antenna for broadcast television may be out of luck with this new model. The local CBS affiliate has a higher-powered broadcast signal to reach viewers beyond the confines of Salt Lake City with an effective radiated power (ERP) of 423 kW. The local independent broadcaster may run into difficulties transmitting such a broad signal with an ERP of 312 kW — and reaching antennas in neighboring states seems like wishful thinking for either station.
ATSC 3.0
The end goal for the teams is to maximize each revenue stream, be it cable, broadcast, or direct-to-consumer. One aspect of broadcast that could prove appealing for teams in the medium term is the adoption of ATSC 3.0.
ATSC, or the Advanced Television Systems Committee, sets technical broadcast standards for over-the-air transmission. A key part of the new standards in ATSC 3.0 that could prove to be a massive shakeup in how broadcast television is consumed is the ability for the broadcaster to encrypt signals sent to the viewer. The ability to encrypt over-the-air signals may open the door for broadcasters to paywall certain content.
The paywalling of content on broadcast television is certainly not imminent, but as the live sports model shifts from being subsidized by non-sports viewers to sports fans bearing most of the burden, an a-la-carte offering of games on broadcast would help supplement declines in traditional revenue streams.
Final thoughts
For now, each team finds itself in its own unique situation. There will not be a sudden, wholesale jump from RSNs to broadcast or direct-to-consumer. What fans should prepare for is more of the same, wherein a combination of cable, broadcast, and streaming will be necessary to watch every single game for a given team. The price of sports on television will continue to increase for the viewer. Teams will start getting creative to maximize their reach. The result will be confusion and frustration, until fans adjust to the new norm.
Frustration in the interim could make way for a more positive endgame. The reliance of RSNs as the primary revenue driver for rights fees made cable a necessity if you wanted to watch sports. A diversified revenue stream can provide fans more options in how they consume live sports and broaden the viewership tent beyond die-hards with a cable subscription. For hardcore sports fans, this means paying for many streaming services in addition to a cable package, but for casual fans, it means more accessibility, and potential to nurture their fandom beyond that of a casual.
If the RSN-era of rights agreements were about maximizing carriage fees from television providers, the new era of rights agreements will be about maximizing reach. The more that teams can meet fans where they are, and convert casual fans into hardcore fans, the better positioned they’ll be for this new era.
