Warner Bros. Discovery, owner of AT&T SportsNet Pittsburgh, wants to exit the regional sports network business — and soon — in a move that could potentially leave the Pittsburgh Pirates and Penguins without a primary TV home.
The Wall Street Journal first reported that WBD informed the professional sports teams and leagues it intends to exit the regional sports business and cease operating the channels, possibly in a matter of weeks.
The Journal reviewed a letter sent to teams Friday that warned “the business will not have sufficient cash to pay the upcoming rights fees,” which are believed to be due to the teams by late March.
Per the Journal, “the letter proposes that AT&T SportsNet transfer ownership of the networks and programming rights to the teams for no purchase price consideration beyond a release by the teams of any future claims against the networks.”
Failing that, WBD suggested the networks will file for chapter 7 bankruptcy litigation.
News of the letter comes after a Sportico.com report last week that AT&T SportsNet Pittsburgh and other WBD-owned regional sports channels submitted lower-than-their contracted payments to their respective MLB clubs, though they have until late March to make a final payment.
AT&T SportsNet Pittsburgh broadcasts Pirates baseball games and Penguins hockey games.
AT&T SportsNet general manager Shawn McClintock declined to comment, as did a Penguins spokesperson. A Pirates spokesperson did not immediately respond to a request for comment. Last week, the NHL issued a statement saying, “The NHL is closely monitoring the RSN situation. We will be prepared to address whatever circumstances dictate to provide our fans with access to our game.”
MLB commissioner Rob Manfred said last week the league is prepared to take over control of broadcasting games if needed.
The current environment for RSNs is dire as the cost of sports rights increases as fewer viewers tune in and more cable subscribers cut the cord — double-digit annual declines in cable/satellite subscriptions are now common — reducing RSNs’ income.
Diamond Sports Group, a division of Sinclair Broadcast Group that operates Bally Sports regional sports networks, missed a $140 million debt interest payment last week as it considers possible “strategic alternatives,” which include a possible bankruptcy filing.
Last week, the situation at AT&T SportsNet Pittsburgh did not appear to be as grim, with Sportico reporting that the channel “still manages to deliver solid numbers, thanks to local loyalists. Pittsburgh’s channel also is the biggest per-capita earner among the AT&T RSNs, raking in an average monthly affiliate fee of nearly $4.50 per subscriber.”
Since last year’s merger of WarnerMedia and Discovery Networks to form Warner Bros. Discovery, WBD has been slashing costs through layoffs and tax write-downs (see: “Batgirl” benched) as it attempts to whack away at more than $48 billion in debt.
On Friday The Hollywood Reporter said productive conversations between the leagues in question and WBD have been ongoing about the future of WBD’s RSNs, which suggests a deal may be attainable.
In a statement provided to Sports Business Journal, a WBD representative said, “AT&T SportsNet is not immune to the well-known challenges that the entire RSN industry is facing. We will continue to engage in private conversations with our partners as we seek to identify reasonable and constructive solutions.”
Sports Business Journal reported the Pirates deal in Pittsburgh as one that is especially advantageous to the team, bringing in an average of $60 million per year from its local media deal.
Thursday’s episode of PuckNews podcast “The Town” addressed the ways in which media consolidation and competition for eyeballs with streaming services threaten the economic viability of RSNs.
“The world changed a lot and there were a lot of video options and entertainment options that didn’t exist before and then we had cord-cutting,” said Brandon Ross of Lightshed Partners, a media research firm. “The people who (now) subscribe to the cable bundle are only the sports fans and people who only want news networks. All the general entertainment is being viewed on streaming services like Netflix.
“The truth of the matter is this (RSN) business will never ever be as profitable as it once was because all of these RSNs were over-earning,” Ross said, “and as a result of that they were able to pay the teams more than they should have been, which means the teams were also over-earning (and) the players were over-earning.”
Ross said the catch-22 in teams offering a team-branded subscription streaming service in lieu of RSNs, a possible future scenario, is that “only the biggest local sports fans would actually subscribe to that. And you’ll also lose the casual viewer in all of these local markets, which is not good for the health of the league.”
He described the transition from cable to a prospective streaming future as similar to threading a needle.
“Most of the time when you try and thread the needle, you can’t exactly do that and there’s going to be some sort of pain,” Ross said. “So do you want that pain to be economic pain? Or do you want it to be fan-interest pain, or a little bit of both? All of these leagues are grappling with that and all have different perspectives.”
WBD, which inherited its RSNs when acquiring control of WarnerMedia assets from AT&T last year, has rights deals that serve teams in Pittsburgh, Houston, Colorado and Utah, carrying professional baseball, basketball and hockey games.
You can reach TV writer Rob Owen at rowen@triblive.com or 412-380-8559. Follow Rob on Twitter or Facebook. Ask TV questions by email or phone. Please include your first name and location.
Categories: AandE | Movies/TV | Pirates/MLB | Sports | Top Stories | TV Talk with Rob Owen
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