Collapse of Regional Sports Networks (Diamond Sports Group files bankruptcy, Warner-Discovery looking to leave business, Xfinity drops Bally)

[Bear of Bad News]

538 article focused on baseball, but the conclusions apply here:

Why One Floundering Company Might Change The Economics Of Baseball Forever

Generally speaking, buying a Major League Baseball team is one of the best investments you can make. Franchise valuations have skyrocketed over the past few dec…

fivethirtyeight.com

 

[eddygee]

There are some underlying issues with the NHL will be fine take. What does fine mean? If we're talk survival OF COURSE! NHL isn't going anywhere.

The issue arises if Diamond cuts RSN payments in half or drops some teams. There's no getting around the fact that half the US teams losing half or all Local TV deal money will affect NHL. That will be a moderate inconvenience if the cap has to go down a few mil or stays flat. The real issue that goes beyond NHL will be fine is in 4 yrs when they're talking the next US TV deal or looking at the next Canadian deal in 2yrs.

I think the NHL has hit its ceiling with US TV rights based off ratings. Same way MLB did with ESPN. I think if a league like MLB was forced to have to even more fragment its rights to seek extra revenue piece mesling "extra deals" with NBC and Apple. NHL may have a tougher time doing that.

Good thing is while they likely are going to take a hit to the cap with Diamond we have about 4 yrs to figure out something. Unless Bettman is happy with future flat National TV money. IMO I don't see another extra $325mil for NHL like we got 2 yrs ago when US TV Deal talks start up in 4 yrs. Not in this environment, ratings would really have to increase alot. Forecasting the next rights deal talks in 4yrs will be as much about NHL finding a way to replace the loss of $10m yr on avg per team from local RSN deals from the Diamond Sports debt restructuring.

 

[KevFu]

Massive re-alignment has really been in play since the collapse of the SWC..

I'm not sure how much of that is on ESPN or just television money in general, with all major networks contributing (ND can stay independent due to their NBC money).

The 1984 court case is what really allowed it to happen. The schools formed an association (CFA) to negotiate TV rights for them, so there wasn't a realignment rush THEN. But when Notre Dame pulled out of the CFA to sign their first NBC contract, the schools realized their CONFERENCE should sell bundled TV rights for all their home games... The SEC noticed a rule that if you had 12 football members, you could have divisions and play a championship game, which was a huge draw to TV networks. So the SEC expanded to 12... and THAT is what turned conferences from "regional groups of peer institutions" into TV inventory cartels.

Of course it's "television money in general" but this was happening in the 1990s, when "sports on TV" was FIVE networks, and 60% of them were one company: ESPN?ESPN2/ABC; and CBS and NBC. CBS (12) and NBC (1) had 13 teams. ESPN had... EVERYONE BUT Notre Dame home football and the SEC game of the week.

Pretty sure ESPN hated the death of the Big East since that was a premier college basketball tournament for it the time (when the ACC poached the Big East again in the 2010's to get two powerhouse basketball programs in Syracuse and Louisville).

Every conference move being made, the conferences are consulting with ESPN on what it does to their TV deal. ESPN is most definitely BEHIND most the conference realignment moves. They're consolidating inventory.

Before 2003, they WERE paying three big contracts to the ACC, Big East and C-USA (since C-USA basketball also had major metro areas and powerhouse programs Cincinnati, Louisville and Memphis).

2003: ACC 9 teams, Big East 14, C-USA 15. (40 total)
2014: ACC 15 teams, American 13 (27 total)

They lost four schools to B10/B12 expansion (who they also had TV deals with), replaced Charlotte, Southern Miss and UAB with SMU, UCF and Tulsa; and they just stopped paying the Catholic 7, who don't play football.

Massive consolidation of inventory, and eliminated a payment to C-USA. If you REALLY want to see ESPN's chicanery, the Texas/Oklahoma and American vs Big 12 episode shows it off nicely. ESPN tried to get the Big 12 to collapse to void the $1.6 billion they owed them for four UT/OU lame duck seasons.

 

[KevFu]

Major College sports realignment dates back to the 80’s when the schools and conferences wrestled away the tv rights from the NCAA in court.

While early expansion wasn’t driven by ESPN the mid-00’s to mid-10‘s expansion was to a great extent. I don’t think ESPN was saddened by the breakup of the Big East given they were the ones that enabled the ACC to drive a stake into the Big East’s heart.

This guy gets it.

To Kevfu’s point the NHL will be fine overall. It provides and large inventory and brings a slightly difference audience. As we saw in the NBC days the league can be an anchor league for a broadcaster, where you can pair it with other sports to build a portfolio (like NBC did with EPL and Nascar).

Right now those who should worry are those in leagues/organizations that have same/similar sport programming than others but are further down the totem pole where broadcasters can turn to alternatives. That means secondary college leagues (like the PAC 12 right now), Indycar (in comparison to NASCAR), soccer leagues (where MLS struggled to find linear partner in compared to EPL, and La Liga and Bundesliga trail behind EPL in the US for cultural reasons, though obviously they have their home markets).

That's exactly my point. ESPN screwed over the bottom teams of C-USA by their "ACC raids Big East, Big East raids C-USA; C-USA is dropped by ESPN" stuff.

The NHL is 23 US markets with over 120 million people in them. While not everyone likes hockey, not everyone likes college sports, either. College conferences are much smaller footprints than the NHL is.

And I'm not talking about the SEC and Big Ten, I'm talking about the Pac-12, Big 12 and American. Those guys are getting cut out of the "medium pro league" sized TV money before the NHL does.

No only are the market shares A LOT smaller, but the NHL is a closed league where there's ONLY 30 teams. Every NHL fan likes one of those 30 teams.

Just because the Pac-12 has teams in major west coast markets like the Bay Area, Phoenix, Seattle, Denver and Salt Lake City... there's still like 40 other Division I colleges people in those markets could root for. The Bay Area alone has eight.

No one is like "Screw the NHL, I'm an AHL guy!" But tons of people have a "Screw the Power 5 Conferences, I'm a fan of one of the other 27 conferences" mentality.

 

[eddygee]

The 1984 court case is what really allowed it to happen. The schools formed an association (CFA) to negotiate TV rights for them, so there wasn't a realignment rush THEN. But when Notre Dame pulled out of the CFA to sign their first NBC contract, the schools realized their CONFERENCE should sell bundled TV rights for all their home games... The SEC noticed a rule that if you had 12 football members, you could have divisions and play a championship game, which was a huge draw to TV networks. So the SEC expanded to 12... and THAT is what turned conferences from "regional groups of peer institutions" into TV inventory cartels.

Of course it's "television money in general" but this was happening in the 1990s, when "sports on TV" was FIVE networks, and 60% of them were one company: ESPN?ESPN2/ABC; and CBS and NBC. CBS (12) and NBC (1) had 13 teams. ESPN had... EVERYONE BUT Notre Dame home football and the SEC game of the week.




Every conference move being made, the conferences are consulting with ESPN on what it does to their TV deal. ESPN is most definitely BEHIND most the conference realignment moves. They're consolidating inventory.

Before 2003, they WERE paying three big contracts to the ACC, Big East and C-USA (since C-USA basketball also had major metro areas and powerhouse programs Cincinnati, Louisville and Memphis).

2003: ACC 9 teams, Big East 14, C-USA 15. (40 total)
2014: ACC 15 teams, American 13 (27 total)

They lost four schools to B10/B12 expansion (who they also had TV deals with), replaced Charlotte, Southern Miss and UAB with SMU, UCF and Tulsa; and they just stopped paying the Catholic 7, who don't play football.

Massive consolidation of inventory, and eliminated a payment to C-USA. If you REALLY want to see ESPN's chicanery, the Texas/Oklahoma and American vs Big 12 episode shows it off nicely. ESPN tried to get the Big 12 to collapse to void the $1.6 billion they owed them for four UT/OU lame duck seasons.

Yup the Big 12 Commish Yormak went on record in a war path saying he had evidence of ESPN's tampering involvement. Of course ESPN denied it but went from trying to implode the Big 12 to eventually doing a deal with them instead pushing the Pac 12 on the outside looking in.

As I said they're shrewd in business, they make good business moves. Its not always above board as you said they'll skip out on paying a mid tier property what it's worth and elevate a cheaper lower tier property instead.

Another good example the MLB deal. MLB's old deal was $700m yr. MLB was expecting a ESPN renewal of close to $1B. ESPN says no thanks we're paying too much and we're going to take less inventory pay you $560m yr and we want you to increase PLayoff Inventory and give us those extra games.

The genius of it all they then turned around signed NHL for $400m yr and ended up getting 2 properties for the price of one had they renewed MLB at the prior expected increase rate. So MLB+NHL for under a billion yr> vs MLB prior deal $700m yr to $950m-$1Byr.

 

[eddygee]

This guy gets it.



That's exactly my point. ESPN screwed over the bottom teams of C-USA by their "ACC raids Big East, Big East raids C-USA; C-USA is dropped by ESPN" stuff.

The NHL is 23 US markets with over 120 million people in them. While not everyone likes hockey, not everyone likes college sports, either. College conferences are much smaller footprints than the NHL is.

And I'm not talking about the SEC and Big Ten, I'm talking about the Pac-12, Big 12 and American. Those guys are getting cut out of the "medium pro league" sized TV money before the NHL does.

No only are the market shares A LOT smaller, but the NHL is a closed league where there's ONLY 30 teams. Every NHL fan likes one of those 30 teams.

Just because the Pac-12 has teams in major west coast markets like the Bay Area, Phoenix, Seattle, Denver and Salt Lake City... there's still like 40 other Division I colleges people in those markets could root for. The Bay Area alone has eight.

No one is like "Screw the NHL, I'm an AHL guy!" But tons of people have a "Screw the Power 5 Conferences, I'm a fan of one of the other 27 conferences" mentality.

I agree overall NHL is good for now intermediate teem 4 to 5 yrs they just have to figure out a way to recover half the 25 US teams losing half(best case) All(worst case) local rsn revenue.

You don't want to sit around thinking and getting comfy in your "position" given ESPN'' track record ask the Pac-12 and Big 12. Lucky for the Big 12 their commissioner Brent Yormak is smart as a fox and played the country bumpkin aww schucks role well while he collected dirt on ESPN tampering. The PAC 12 is looking like the only once Power 5 conference without a seat in musical chairs.

The NHL can't get cozy may seem like a lot but 4 yrs isn't a long time it comes fast. I wouldn't rely on ESPN and CERTAINLY not Turner now with their President David Zaslav cutting everything insight he can. To turn around and 4 yrs to give NHL this big deal. Nothing says expect that. May be more of a NBC NHL situation in 4 yrs time .

I hope we're not sitting around we got our money $625m yr based off what you mentioned market foot print etc. We were grossly underpaid for years. NHL is now paid market value. Can't expect much more moving forward especially in this cable universe.

 

[KevFu]

Yup the Big 12 Commish Yormak went on record in a war path saying he had evidence of ESPN's tampering involvement. Of course ESPN denied it but went from trying to implode the Big 12 to eventually doing a deal with them instead pushing the Pac 12 on the outside looking in.

Yeah. That's what makes it so blatantly obvious. You're bad-mouthing the network you need to save your conference? That's categorically insane... unless it's true. And ESPN ponied up in response.

It was quite telling that, while the American Athletic Conference already had a 13-year contract in their hand from ESPN when the Oklahoma/Texas news broke:
- the American commish was talking about poaching Big 12 schools INSTANTLY when everyone else was still in shock.
- Bloggers covering AAC schools suddenly had DETAILED TV data reports making their case about why the Big 12 was worthless as a conference now and those schools should join the AAC.
- ESPN talking heads were doing "Can the Big 12 survive?" segments (and saying no)
- ESPN-affiliated reporters were tweeting about Kansas to Big Ten; Oklahoma State, Baylor, Texas Tech and TCU to the Pac-12.

The whole thing was designed to make the remaining schools panic and get three to jump ship; so that the conference would dissolve and ESPN wouldn't have to pay the 4 years at $400 million each, and Texas/Oklahoma could go to the SEC after one year, not four.

In hindsight, the Pac-12 SHOULD have offered TCU, Houston, Kansas and Oklahoma State on the spot. ESPN basically decided to kill ONE OF those two conferences and now it's the Pac-12 all-things equal, it makes no sense for the Pac-12 to be in any danger what-so-ever. Their markets are huge compared to the Big 12.

But the Pac-12 is getting destroyed because the Big 12 outted ESPN and got a contract in hand, and now the Pac-12 doesn't have one and ESPN is pushing the narrative that they're on life support.

The NHL can't get cozy may seem like a lot but 4 yrs isn't a long time it comes fast. I wouldn't rely on ESPN and CERTAINLY not Turner now with their President David Zaslav cutting everything insight he can. To turn around and 4 yrs to give NHL this big deal. Nothing says expect that. May be more of a NBC NHL situation in 4 yrs time .

I hope we're not sitting around we got our money $625m yr based off what you mentioned market foot print etc. We were grossly underpaid for years. NHL is now paid market value. Can't expect much more moving forward especially in this cable universe.

Sure, but the plan for the NHL to avoid that situation is to grow the game's popularity by increasing fan viewers and engagement.. no different than they're always trying to do (they just need to be better at it).

 

[eddygee]

Yeah. That's what makes it so blatantly obvious. You're bad-mouthing the network you need to save your conference? That's categorically insane... unless it's true. And ESPN

In hindsight, the Pac-12 SHOULD have offered TCU, Houston, Kansas and Oklahoma State on the spot. ESPN basically decided to kill ONE OF those two conferences and now it's the Pac-12 all-things equal, it makes no sense for the Pac-12 to be in any danger what-so-ever. Their markets are huge compared to the Big 12.

But the Pac-12 is getting destroyed because the Big 12 outted ESPN and got a contract in hand, and now the Pac-12 doesn't have one and ESPN is pushing the narrative that they're on life support.

Exactly it makes no sense because it doesn't. ESPN knew the Pac-12 was the more lucrative conference and was trying to kill off the Big-12 before it got sloppy and got caught. I think it was likely a Big 10 connect that informed him what ESPN was up to since the Big 10 already had plans in the work to leave ESPN.

 

[rsteen]

I agree overall NHL is good for now intermediate teem 4 to 5 yrs they just have to figure out a way to recover half the 25 US teams losing half(best case) All(worst case) local rsn revenue.

I don't think we know what best case is yet. Worst case won't be zero revenue from local broadcasts, it will be the RSNs replaced by something league-owned or team-owned that looks kind of like an RSN but makes significantly less money. Someone still has to produce the non-national broadcasts.

 

[Golden_Jet]

I don't think we know what best case is yet. Worst case won't be zero revenue from local broadcasts, it will be the RSNs replaced by something league-owned or team-owned that looks kind of like an RSN but makes significantly less money. Someone still has to produce the non-national broadcasts.

Daly said on the weekend, there are 12 teams, he hinted it would be more likely Bally continues and pays less.
But said they’d have a better idea in a month, which way this goes.

Won’t really affect this year much, more subsequent years he said.

 

[StreetHawk]

Daly said on the weekend, there are 12 teams, he hinted it would be more likely Bally continues and pays less.
But said they’d have a better idea in a month, which way this goes.

Won’t really affect this year much, more subsequent years he said.

It’s short notice to find a replacement. Contracts go for a few years normally and you know the timing of when they are due so that competitors can crunch their numbers to see if it makes sense for them to put in an offer.

Like Miami Heat having to find a new naming rights for their arena with the downfall of that Cryto company.

 

[Golden_Jet]

It’s short notice to find a replacement. Contracts go for a few years normally and you know the timing of when they are due so that competitors can crunch their numbers to see if it makes sense for them to put in an offer.

Like Miami Heat having to find a new naming rights for their arena with the downfall of that Cryto company.

Yes , but as Daly said, much worse for baseball, as this season is 70-75% over, baseball is starting soon.

League will have until the fall to pivot, he said.

 

[varsaku]

Daly said on the weekend, there are 12 teams, he hinted it would be more likely Bally continues and pays less.
But said they’d have a better idea in a month, which way this goes.

Won’t really affect this year much, more subsequent years he said.

So then we will definitely be seeing a flat cap or decrease in the near future

Will be fun though to see how many teams at the cap ceiling adjust their plans to this news.

 

[StreetHawk]

So then we will definitely be seeing a flat cap or decrease in the near future

Will be fun though to see how many teams at the cap ceiling adjust their plans to this news.

23-24 will be tough as we are 7 months from preseason and 8 from the next nhl season. They expected a $1 mill bump in the cap. Might be a larger than expected escrow from the players to account for the loss of revenue if another carrier isn’t signed in time.

 

[rsteen]

The 1M bump in the cap isn't from a revenue increase, it's what was agreed in the MOU if HRR is over a certain threshold but the covid escrow isn't paid off. If the escrow were to be paid off by the end of the season, Bettman predicted the increase at 4M.

Friedman had talked about the league and the PA negotiating an increase between 1 and 4, but with Bally in limbo they probably just go with 1M to prepare for potential loss of HRR next season from the Bally RSNs.

 

[Lt Dan]

On the Bob McCowan podcast Friday, here is part of description.

We talk to Bill about the Bally Sports situation and get an idea on how the company's bankruptcy impacts the NHL. We find out what, if any, contingincy plans the NHL has put in place if Bally is unable to broadcast hockey games and find out how this all happened in the first place.

I wonder how many new facts are going to be on that podcast vs just conjecture.

We know how and why this happened, the future is the only question

 

[Golden_Jet]

I wonder how many new facts are going to be on that podcast vs just conjecture.

We know how and why this happened, the future is the only question

Good interview, suggest you give it a listen.

 

[Lt Dan]

Good interview, suggest you give it a listen.

listening now.

Much better than I expected. TY for the recommendation

 

[Golden_Jet]

listening now.

Much better than I expected. TY for the recommendation

No problem, I find Daly doesn’t BS, he either answers the questions or says he can’t.

 

[Lt Dan]

No problem, I find Daly doesn’t BS, he either answers the questions or says he can’t.

Agreed
I think he will be a much better commish than GB

 

[joelef]

Can’t we just go back to having everything packaged together like cable I’m sick of having a la carte freedom”

 

[KevFu]

I don't think we know what best case is yet. Worst case won't be zero revenue from local broadcasts, it will be the RSNs replaced by something league-owned or team-owned that looks kind of like an RSN but makes significantly less money. Someone still has to produce the non-national broadcasts.

Yes , but as Daly said, much worse for baseball, as this season is 70-75% over, baseball is starting soon.

League will have until the fall to pivot, he said.

MLB's role in this has a huge factor on how it plays out for the NHL and NBA.

MLB is in a position where they COULD take their rights back, produce themselves, distribute themselves because they already have a platform in place for in-market streaming that they own/operate. The in-market streamers would just buy MLBtv, geo-blocking for those markets would be turned off, and MLB collects consumer's money. They'd sell produced games to cable providers directly, for $$. Just probably not the amount Bally's owes them. (They can ask the bankruptcy court for Bally's to pay them the difference to make them whole at a later date).

IF MLB were to actually go though with that, that would lower the burden of what Bally's owes, which could allow Bally's to pay the NHL/NBA teams on time.

The NHL doesn't have a system in place that they own/operate that could do that, I don't think. Maybe NHLtv that's still in Canada could. But it would depend on the NHL contract with ESPN/Disney Streaming Services.

 

[Golden_Jet]

MLB's role in this has a huge factor on how it plays out for the NHL and NBA.

MLB is in a position where they COULD take their rights back, produce themselves, distribute themselves because they already have a platform in place for in-market streaming that they own/operate. The in-market streamers would just buy MLBtv, geo-blocking for those markets would be turned off, and MLB collects consumer's money. They'd sell produced games to cable providers directly, for $$. Just probably not the amount Bally's owes them. (They can ask the bankruptcy court for Bally's to pay them the difference to make them whole at a later date).

IF MLB were to actually go though with that, that would lower the burden of what Bally's owes, which could allow Bally's to pay the NHL/NBA teams on time.

The NHL doesn't have a system in place that they own/operate that could do that, I don't think. Maybe NHLtv that's still in Canada could. But it would depend on the NHL contract with ESPN/Disney Streaming Services.

Daly discussed those options, just don’t recall exactly what he said , as I listened about 6 days ago.

 

[Lt Dan]

MLB's role in this has a huge factor on how it plays out for the NHL and NBA.

MLB is in a position where they COULD take their rights back, produce themselves, distribute themselves because they already have a platform in place for in-market streaming that they own/operate. The in-market streamers would just buy MLBtv, geo-blocking for those markets would be turned off, and MLB collects consumer's money. They'd sell produced games to cable providers directly, for $$. Just probably not the amount Bally's owes them. (They can ask the bankruptcy court for Bally's to pay them the difference to make them whole at a later date).

IF MLB were to actually go though with that, that would lower the burden of what Bally's owes, which could allow Bally's to pay the NHL/NBA teams on time.

The NHL doesn't have a system in place that they own/operate that could do that, I don't think. Maybe NHLtv that's still in Canada could. But it would depend on the NHL contract with ESPN/Disney Streaming Services.

The NHL should piggy back on what the MLB does and have the MLB help stream their product
Their seasons are opposite, they aren't really competing sportsl ike the NHL and NBA

 

[eddygee]

MLB's role in this has a huge factor on how it plays out for the NHL and NBA.

MLB is in a position where they COULD take their rights back, produce themselves, distribute themselves because they already have a platform in place for in-market streaming that they own/operate. The in-market streamers would just buy MLBtv, geo-blocking for those markets would be turned off, and MLB collects consumer's money. They'd sell produced games to cable providers directly, for $$. Just probably not the amount Bally's owes them. (They can ask the bankruptcy court for Bally's to pay them the difference to make them whole at a later date).

IF MLB were to actually go though with that, that would lower the burden of what Bally's owes, which could allow Bally's to pay the NHL/NBA teams on time.

The NHL doesn't have a system in place that they own/operate that could do that, I don't think. Maybe NHLtv that's still in Canada could. But it would depend on the NHL contract with ESPN/Disney Streaming Services.

In theory ESPN/Disney could scoop up the in market NHL games that are now on Bally's but that require Ballys coming to a agreement with NHL/Disney and would effectively end Bally's which Diamond Sports is just trying to restructure debt through bankruptcy.

There's also no way Disney is going to pay as much as Bally's was paying NHL teams(which Bally's cant even afford) to get just 12 teams. So it doesn't really work.

Maybe if it was possible that to get rights of 18-20 of the US teams maybe they throw NHL a amount they'd be willing to pay. But it won't be the $20m on avg payment for those teams that they were receiving from RSNs