Game Changer

Game Changer

Fox Sports North is headed for a rebrand. But is the regional sports network model in need of more than a new logo?

If there’s any justice in the world, the Twins will be in the World Series when this magazine arrives on your doorstep. But there’s not a lot of justice in the world, so odds are they aren’t. What I can tell you with greater assuredness is that Fox Sports North (FSN), the local outlet that broadcasts their games, will not exist in its current form when the Twins open their season in Oakland next March.

The biggest change in how Americans watch sports over the last two decades has been the gradual replacement of free over-the-air broadcasts with games produced and aired over regional sports networks (RSN) like FSN. The Twins took their last games off free TV a few years ago. The last big domino to fall occurred in September, when WGN in Chicago aired its final Cubs broadcast, ending a continuous string since 1948, a record unmatched in broadcasting.

The Cubs are creating their own RSN, à la the Yankees’ YES Network. All the other Chicago teams will migrate to the legacy RSN, now known as NBC Sports Chicago. NBC is the rebranded Comcast Sports Net, which also operates in six other markets. AT&T owns RSNs in a few markets, formerly under the Root Sports brand, (Denver, Seattle, Pittsburgh, Houston), but Fox is the most prevalent RSN brand, with 21 outlets and 14 of the 30 MLB teams. (Most markets only support one RSN.)

The Fox RSNs were sold earlier this year when News Corp. spun off Fox’s entertainment properties to Disney. The Justice Department told Disney that its existing ESPN empire and the Fox RSNs would give it too much market share, so Disney sold the RSNs to Sinclair Broadcasting in September for $10.6 billion, well below Disney’s asking price, according to Ad Age.

Sinclair is a newcomer to sports. It operates the Tennis Channel on cable (and will operate the Cubs’ new RSN). It owns mostly local TV stations around the country and has become notorious for enforcing a right-wing tilt to its local news content.

The marketplace expects Sinclair to rebrand Fox’s RSNs before the start of the next baseball season. Baseball is the tail that wags the RSN dog. It’s 140-plus days/nights of live programming at a time of year (summer) when it’s harder to attract eyes to a TV. NBA and NHL teams put half as much programming on RSNs, and to a smaller audience; soccer is an RSN fledgling. (The NFL doesn’t use RSNs.)

RSNs are a lightning rod. They make most of their revenue from per-subscriber carriage fees charged by cable/satellite systems, which pass those fees on to subscribers. My cable bill includes a regional sports fee of $8, separate from my programming package. After ESPN, RSNs charge cable systems the highest fees in the cable universe. Dish Network this year dropped many RSNs around the country after deciding they were too expensive, and now you can’t watch Fox Sports North on Dish. The L.A. Dodgers created its own RSN, with fee demands that left the team off most televisions in Los Angeles for years.

So some are asking if the RSN model, which has only been mature for a couple decades, is teetering, given the rate of cord-cutting, AT&T’s plan to divest its RSNs, and Disney’s difficult sale of the Fox holdings.

Keep in mind, broadcast makes up roughly half of most baseball teams’ revenue pie. If the nation’s RSNs suddenly couldn’t pay the major sports franchises what they’d been paying, that has serious implications for player salaries, ticket prices, etc. Some analysts believe sports broadcast revenues have peaked in the United States.

It’s a complicated calculus. When P.K. Wrigley put his Cubs on WGN in 1948, he believed he was exposing his team and ballpark to new fans. Other owners, such as the Twins’ Calvin Griffith, viewed TV as cannibalizing attendance, but that view has largely faded.

“TV is the single most powerful marketing tool most teams have,” explains Twins president Dave St. Peter. “We are the
No. 1-rated program many nights in this market.”

And sports has a more exceptional market position than ever. “[Live sports] is the last bastion of appointment television” in a world of time-shifting and on-demand streaming, explains consultant Lee Berke, president and CEO of LHB Sports Entertainment and Media.

Berke is bullish on RSNs. He says they continue to command higher fees and revenue from teams and now are on the “skinny” streaming packages consumers are shifting to: “RSNs are solid businesses with tremendous cash flow.”

Part of that is due to relentless price increases. Consultant Kevin Cattoor, who ran Midwest Sports Channel, the region’s first RSN, notes that MSC charged cable systems 25 cents a subscriber in the 1990s. Normal inflation since the Twins 1991 World Series would make that 47 cents today. A 2014 SNL Kagan study found FSN, at $4.50 per subscriber, to be the nation’s most expensive RSN on a per-subscriber basis; it’s likely now between $5 and $6, estimates Berke.

Cattoor thinks FSN is worth $300 million to $500 million (Forbes recently valued the Twins at $1.2 billion), but he suggests chronic attendance problems at many college and pro games are connected to the ubiquity of sports programming on TV.

Other than Berke, most in the industry openly worry about what will emerge when the bottom drops out of the cable/satellite business and how live sports will function in that universe.

Read more from this issue

Next year, FSN will have a new name. But the changes in the RSN business are probably just beginning.

Adam Platt is TCB’s executive editor.

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