Cord cutting has been a significant problem for ESPN, which has been hemorrhaging lost subscribers over the past year. But trouble could be on the horizon for all sports channels, not just their worldwide leader.
Moody’s Investors Service forecast a grim outlook for all pay-TV channels and the eventual end of cable bundles, as consumers continue to choose over-the-top streaming outlets for their television entertainment. But such a trend figures to hurt sports channels more than other networks because of the exorbitant rights fees they have to pay to sports teams and leagues for game broadcasts.
From Moody’s report (via Sports Business Daily):
“Regional sports networks … will likely see a significant drop-off in subs when teams are inactive and under-performing, which could result in some mergers between RSNs.
“High-dollar commitments for long-term contracts for the RSN rights in the face of lower subscribers and ad revenues in a direct-to-consumer environment could spell disaster for many RSNs and the teams they are linked to. Overall, we expect much greater credit risk to fixed long-term sports rights contracts and pain for leagues and players unless the disruptors fill the void and open their wallets.”
Depending on the product of the local team whose games are being carried, regional sports networks are enjoying strong ratings in several markets throughout the country. But those numbers are at the mercy of team success, and those viewers can be difficult to get back until that sports team starts winning many games and contends for championships.
An over-the-top product might make matters even worse for those channels, as the costs for rights fees now being paid by cable customers would have to be passed on to individual subscribers. Would it then be practical for regional sports networks to partner up with streaming providers such as Netflix, Amazon and Hulu? Is the model for those outlets even suited for local media packages? RSNs may end up learning the answer to those questions the hard way.