Speculating about alternate histories is known as sliding doors. What would have been the outcome of WWII, at least in the Pacific, if the Japanese won the crucial 1942 Battle of Midway, which by all military analysis they should have? Going centuries back, what if King John of England had not died of dysentery while battling the French dauphin for control of England? His death sparked rebel barons to move away from the dauphin, but had Bad King John’s death not happened when it did, a different historical door would have opened to the French ruling both countries.
In sports, sliding doors are known as what ifs. What if Mo Lewis was a half step slower and hadn’t knocked out Drew Bledsoe, which opened the way for an unknown named Tom Brady to take the field? Open that door to peer into an alternate NFL. And in sports media: what if the Department of Justice in 2018 had not required Walt Disney to divest itself of the Fox Sports regional sports channels to win approval of a larger asset deal with 21st Century Fox?
Forced to sell, Disney offloaded the Fox RSNs to Sinclair Broadcast Group in 2019, which slathered that transaction with deleterious debt that would come back to haunt the RSN business.
Now of course, the secular forces battering traditional media, like the RSNs, obviously wouldn’t have been stopped if the DOJ had not interceded. But the landscape may not have been as difficult, and almost certainly a wrenching 19-month Chapter 11 for the country’s largest RSN provider could have been avoided.
“The marketplace completely missed, DOJ is forcing, they’re not allowing the strategic to acquire a package of channels that were assembled for a strategic and that plunged the value,” said Patrick Crakes, a former Fox Sports executive.
Strategic means a company in the same business, so in this case sports media (Disney owns ESPN). DOJ didn’t want a company already in sports media to buy it. Given what transpired it is safe to say DOJ made the wrong decision.
Sinclair by contrast had little to do with sports media when it bought the RSNs in 2019 for a value of $10.6 billion, a deal that would end acrimoniously in Chapter 11 in March 2023. The Chapter 11, filed by Diamond Sports Group, the Sinclair unit that housed the networks, sped up the slashing of media rights deals for the NBA, NHL and MLB teams that aired on its networks.
“They became more naked with less leverage, with a smaller company that didn’t have all the resources that Fox did, including its amazing affiliate distribution negotiation staff, “ Crakes said. In other words, Disney would have had the leverage of its ESPN networks to push pay TV distributors to take the RSNs and avoid a bloodbath.
Disney might have also consolidated the RSNs; there were 20 when Diamond filed for Chapter 11 covering 42 NBA, NHL and MLB teams. To get to the other end of the Chapter 11, Diamond dropped 12 teams, slashed rights fees, and created an existential dread in the business.
“You could have milked years of more rights out of them, had you not had them exposed in negotiations with pay TV distributors without all that support resources and things like that,” Crakes said. “You basically orphaned them to business models that were less attractive.
Diamond’s titanic struggles to create a streaming option for its RSNs likely looks different if the power of ESPN is behind those efforts.
“’I’m not saying the Grim Reaper doesn’t come for RSNs, or they don’t decline,” Crakes said. “But the slope of their decline and the kind of existential crisis that happened with the Sinclair, Diamond, Main Street bankruptcy probably would have been averted for a long time.”
Main Street is the name of the reconstituted, slimmed down post-Chapter 11 Diamond Sports. Ironically, reports have ESPN talking to Main Street about distributing the RSNs through Disney’s highly touted direct to consumer offering scheduled to launch this summer.
There is a second sliding door that could have created another alternate universe. The losing bidder in 2019 was Liberty Media, which has gone on to great success as the owner of Formula One and the Atlanta Braves.
Liberty would have had even less leverage with pay TV distributors than Sinclair, which had its local stations. But Liberty’s leader is John Malone, an early pioneer in RSNs in the 1970s.
“John Malone kind of invented the RSN, he was one of the fathers of the regional sports network,” Crakes said. But Malone declined to match Sinclair’s highest offer, and Disney sold to the highest bidder, not necessarily the best buyer for the future of the assets.
Had Disney kept the RSNs, one more recent question arises: would Disney have ended its MLB deal two years early? Disney and MLB are terminating their agreement at the end of this season.
If Disney had been in the RSN business, it would have presumably had a closer relationship with MLB, and been more invested in the success of the sport.
On this point Crakes doesn’t think it would have mattered. The personal relationships forged by the RSNs wouldn’t have overcome the economics Disney faced.
“So my personal experience is it doesn’t hurt, but it’s not the thing that makes the difference,” he said. “The national rights remain separate from the local rights.”
