In his capacity as a Columnist for California Sports Lawyer®, Founder Jeremy Evans has written a column about the San Diego Padres and Major League Baseball (MLB) moving to an open market streaming model to watch games on MLB.tv.
You can read the full column below.
Sinclair Broadcast Group-owned Diamond Sports Group is going through the bankruptcy process and has failed to make payments to several Major League Baseball clubs for the contractual licensing rights to broadcast their games. Sinclair originally purchased the regional sports networks (RSN) owned by Disney for $10 billion in 2019 that Disney obtained in the sale of Twenty-First Century Fox. Disney was forced by government regulators to sell to Sinclair as part of the Disney-Fox deal. Bally Sports also paid $85 million over 10 years to Sinclair/Diamond to secure the branding rights to the RSNs.
The San Diego Padres signed a 20-year, $1.2 billion deal with Fox Sports Networks in 2012, which would have ended in 2032, paying the club $60 million per year. By comparison, the Los Angeles Dodgers receive $334 million per year ($8.35 billion over 25 years) from Spectrum for its broadcast rights displayed on the RSN. Major League Baseball already streamed Padres games on MLB.tv, but there was a blackout for local residents (e.g., San Diego County), which is the case for all clubs in home markets in the United States. (See complete blackout map). Meaning, fans living in Los Angeles and parts of surrounding counties must watch Dodgers games on the Spectrum-run channel through a cable, satellite, or another streamer or service provider. The purpose of the blackout was to benefit the RSN provider so fans would have to watch through a certain channel—otherwise RSN providers would pay far less money without the exclusivity or certainty of some additional payout.
As RSNs have become less popular in light of the growth of streaming and a changing interest in sports in general, a pivot was necessary. The Padres will be the first club to experiment with having local fans watch all games without blackouts or restrictions. Frankly, it is something that should happen for all thirty Major League Baseball clubs as access to games and particularly on a streaming app will increase views where cable subscriptions continue to drop every year. The Padres will have to make up the loss of $60 million in revenue per year minus any payout from the Diamond Sports Group/RSN bankruptcy, or Major League Baseball may find a way to compensate the team in exchange for taking over the broadcast. The games are still available on traditional cable outlets. Diamond Sports Group has a debt of $8 billion so it is uncertain how much of a payout the Padres will receive as other clubs and creditors battle for the same funds.
There is a growing interest in continued collaboration among streamers to share content and this may or may not be a watershed moment to capitalize on a trend to move towards cooperation in the name of business and views. More options for people to stream, even if is means streamers like MLB.tv sharing revenues with the RSNs and other traditional broadcast distribution businesses to move away from contractual exclusivity in the local markets, the collective benefit is likely to mean more views, advertising dollars, and money. There is also a growing interest is sports content, but filtered through the ask of shorter windows, life stories, and engagement. LIV Golf, Pickleball, and other sports are proof that content is growing and established leagues and sports will have to compete and adjust. The Diamond Sports Group bankruptcy might be lemons to lemonade for all parties since the RSNs are struggling and their owners needed a way out, while the clubs are looking for new ways to reach fans. 3.2+ million local fans will now have immediate access to Padres games—if a similar adjustment occurred in Los Angeles, it would be groundbreaking.
About Jeremy M. Evans:
Jeremy M. Evans is the Chief Entrepreneur Officer, Founder & Managing Attorney at California Sports Lawyer®, representing entertainment, media, and sports clients in contractual, intellectual property, and dealmaking matters. Evans is an award-winning attorney and industry leader based in Los Angeles and Newport Beach, California. He can be reached at Jeremy@CSLlegal.com. www.CSLlegal.com.
Copyright © 2023. California Sports Lawyer®. All Rights Reserved.