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Sports Broadcasting's Shifting Landscape Is No Slam Dunk For Local TV Stations

Tim Hanlon

Norbert Braun/@medion4you/Unsplash

The recent upheaval in Regional Sports Networks (RSNs) - headlined by the multi-market implosion of the Bally Sports-branded, formerly-Sinclair-owned Diamond Sports Group - marks a significant shift in the sports broadcasting landscape, one that might initially seem to offer a golden opportunity for local broadcast TV stations. However, the transition is not as straightforward or as durably beneficial as it might appear.

Over the last few decades, RSNs have been the backbone of local sports broadcasting, providing fans with access to the majority of their favorite teams' in-market games. These regional pay TV channels have been crucial in building and maintaining local team fan bases by offering extensive live-game coverage and expansive shoulder programming that local broadcast stations simply couldn't match due to broader programming obligations.

With RSNs teetering - driven by financial instability and a shift in viewer habits towards streaming and cord-cutting - there's an assumption that local TV stations might naturally step in to fill the void.  Some station groups are already active in offering teams new over-the-air broadcast homes - like Scripps (e.g., NHL Las Vegas Golden Knights, the former NHL Arizona Coyotes); Gray (WNBA Las Vegas Aces, Phoenix Mercury & Atlanta Dream; NBA Phoenix Suns, Cleveland Cavaliers, New Orleans Pelicans, Oklahoma City Thunder & Milwaukee Bucks); Tegna (WNBA Indiana Fever, NHL Seattle Kraken); and even Diamond's former owner Sinclair (NBA Utah Jazz).

The reality, however, is that broadcast stations are likely to face significant challenges in becoming a long-term economic media replacement strategy for increasingly revenue-hungry sports franchises and leagues, beyond that of a near-term stopgap solution.

RSNs have been historically lucrative to sports owners, due to their ability to reliably charge high carriage fees to cable and satellite providers - fees largely passed on to all pay TV subscribers regardless of whether they watched games or not (just ask any Chicago cable subscriber who's not a Cubs fans/Marquee viewer). This model has allowed RSNs to pay substantial sums to local sports teams to fund ever-increasing operational costs and player contracts - often to the outsized benefit of those in major media markets.

In contrast, local broadcast TV stations generate a substantial amount of their revenue through the more highly-variable stream of advertising, which is much more susceptible to viewership performance (linear TV viewing is in secular decline, especially among younger audiences), and extremely vulnerable to marketing expenditure trends (local TV ad spending is largely flat/not growing, aside from biennial political windfalls). And while pay TV retransmission (retrans) fees are certainly a significant part of the mix, those are exposed to the same cord-cutting declines buffeting RSNs, and mostly eaten up by network affiliation agreements to boot.

Even as local TV becomes a near-term haven for local sports broadcasts, teams and leagues are simultaneously eyeing direct-to-consumer (DTC) streaming as a viable alternative to RSNs - and have held those very valuable digital rights back from their broadcasting partners accordingly. Team-/league-owned DTC platforms offer several operational and economic advantages that broadcasters cannot not match:

  • Control Over Content & Branding: Teams can control the presentation and monetization of their games more directly, tailoring the viewing experience to their fans' preferences

  • Data & Viewer Insights: DTC platforms provide teams with valuable data on viewer behavior, preferences, and demographics, which can be leveraged for targeted marketing and to enhance fan engagement

  • Revenue Opportunities: While initial revenues from DTC platforms may not match those from RSN deals, there is potential for growth through subscriptions, advertising, and incremental sales like merchandise or tickets directly linked to the streaming service - powered by direct billing relationships with viewers

  • Market Reach Expansion: DTC streaming can potentially reach a global audience, providing teams/leagues the opportunity to expand their fan base beyond local geographic constraints

For broadcasters, the big opportunity lies in how to help teams/leagues balance DTC subscription streaming revenue opportunities with ensuring broader accessibility to live games, where the reach of "free" broadcast TV can add significant value.  In other words, integrating broadcast TV's "power of reach" into more overall marketing, promotions, branding, and community engagement efforts, where local stations can share in team/league revenue upside and strengthen brand affinity for both parties in the process.

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