The idea of over-the-top direct-to-consumer sports streaming packages is much desired by many cord-cutters, but American networks have been reluctant to fully take that leap. Yes, more and more sports programming is winding up on DTC platforms, including ESPN+, Peacock, DAZN, and more, but there’s a lot that’s still not there. With ESPN, for example, there’s currently no way to buy content from their TV networks outside of a multichannel bundle (be that with a virtual MVPD like Sling or with a traditional MVPD like cable or satellite), a contrast to Canada where both major TV sports networks can be purchased over-the-top. Another prominent hole is with regional sports networks, and that had many people intrigued by Sinclair’s plan (first announced in December, spelled out in more detail last month and this month around their fundraising endeavors) to offer their Bally Sports RSNs (formerly the Fox Sports RSNs) direct-to-consumer. But the path there may have more hurdles ahead, especially now that some distributor pushback has become public.
The current approach by many networks to not offer over-the-top options for a lot of prime sports content isn’t because they don’t think there’s demand. It’s pretty obvious that there’s demand for OTT options at this point, especially with the success other OTT video services like Netflix, Disney+, and Amazon Prime are seeing. And there would be at least some demand for this Sinclair offering, even at the proposed price of $23 a month.
A larger reason networks have been reluctant to fully embrace OTT for sports is because of the pushback from distributors. Full over-the-top sports options would likely lead to more people abandoning bundles (be those traditional or digital), hurting those distributors. And these networks still make good money off the per-subscriber fees they get from distributors. So that made it surprising when Sinclair CEO Chris Ripley said on their Q1 earnings call last month that “We’ve already cleared the path with the distributors to launch direct-to-consumer.” And, as Sports Business Journal’s John Ourand wrote Monday, there are at least a couple of distributors who don’t agree with that characterization:
Execs from two big distributors, both of whom asked to remain anonymous, told me that they haven’t had meaningful contact with Sinclair and are in the dark about the company’s DTC plans.
The distribution execs warned that they would consider dropping the RSNs — either through contractual provisions or through expirations of contracts, which typically last three years — if Sinclair moves forward with plans to launch an unauthenticated DTC service that allows people to watch MLB, NBA and NHL games without the need for a pay-TV subscription.
They both said they feel emboldened by Dish Network, which dropped the RSNs in 2019 and does not look likely to carry them any time soon. Dish Net’s deal with Sinclair’s local broadcast stations is believed to be expiring this summer. Sinclair may try to use the local station negotiations to get Dish to carry the RSNs. But the distribution execs believe Sinclair’s DTC announcement makes it less likely that Dish will agree to an RSN deal.
This is notable, especially as Ripley’s language last month wasn’t very ambiguous. He said that they had “cleared the path with the distributors,” not with “some distributors,” and didn’t say something more moderate like “We’re having promising talks with distributors.” His comments there made it seem like there was wide distributor signoff. And while a fair bit of distributor signoff remains a possibility, it’s certainly notable that execs from two big distributors are disputing Ripley’s characterization of a “cleared way” and threatening to drop the RSNs if this DTC plan goes ahead. And as Ourand goes on to note, there’s already been some public distributor pushback on the idea of RSNs going OTT, including from Altice USA CFO Michael Grau to Sarah Winegardner of Cablefax last week:
Altice USA CFO Michael Grau is skeptical that regional sports networks will be able to achieve the same economics in the streaming ecosystem as the ones they have now thanks to distribution deals with MVPDs and vMVPDs.
He said approximately 15% of Altice USA’s video customers are reasonably or heavily engaged in watching the RSNs. So when those streaming offerings start to enter the marketplace, Grau said it will create an interesting dynamic for the video consumer.
“You’ll notice [the RSNs] are some of the last to come to that game for a reason because they’re getting such good prices from distributors like us and Comcast and Charter,” he said. “To the extent a video consumer wants to assemble their own video offering by buying multiple OTT products and self-packaging it, when you put it all together, it’s probably more expensive than what we’re offering.”
Now, that’s not necessarily true for each consumer, as it all depends on what things the consumer wants. If the main thing the consumer wants from cable is their local RSN, even $23 a month is cheaper there. And most cable/satellite/digital bundles don’t include most of the current OTT offerings, so, for example, a video package of Netflix/Disney+/Amazon Prime/Hulu/Bally RSN is cheaper than a video package of Netflix/Disney+/Amazon Prime/Hulu/cable. But Grau’s general point is well-taken; distributors are providing RSNs with a lot of per-subscriber fees, including from many people who never watch the RSNs and would never buy a RSN OTT offering, and so they feel they have some leverage in these discussions.
And this is perhaps especially true with the Bally Sports RSNs, which have quite limited carriage with many providers at the moment. That’s especially true on the digital MVPD front, where they’re currently only with AT&T TV. And while the 2019 Dish/Sling decision to drop those RSNs did seem to cause some early subscriber loss (and a slight February 2020 overture from Dish CEO Charlie Ergen), those providers have seemed to be doing okay recently without bringing back those RSNs. In fact, they went on to drop NBC Sports’ RSNs this year. So other distributors may see that as proof that they can be fine without Bally Sports.
None of this means that the Bally Sports DTC offering is definitively not going to happen. Some of those distributor/Sinclair talks were projected to be difficult anyway, and while Sinclair does have an advantage in being able to package its local broadcast affiliates with RSNs in many markets, that isn’t necessarily going to lead to continued or expanded RSN carriage. And we don’t know who these distributor executives who talked to Ourand are, and thus we don’t know how likely their companies were to keep the RSNs without this; if that answer was “not terribly likely,” this may not prove much of a disincentive. And there does seem to be a fair bit of Sinclair shareholder enthusiasm around this DTC idea, and there’s certainly consumer enthusiasm for it. But this distributor opposition does suggest that Sinclair actually pulling this off by early next year now looks even more difficult than previously thought.