Last Friday (Oct. 23), Hulu became the fifth television distributor to drop Sinclair Broadcast Group’s portfolio of regional sports networks (containing 21 Fox-branded RSNs, YES and Marquee Sports Network) from its channel lineup within the last 15 months, joining YouTube TV (September 2020), fuboTV (January ’20), Sling TV (July ’19) and DISH Network (July ’19). While some industry insiders have painted Hulu and YouTube TV’s respective decisions to drop the cable channels as a negotiating ploy and expect the RSNs to return to programming lineups sooner than later (remember, there are no NBA, NHL or MLB games scheduled to be played for at least the next 60 days), Raine Group senior advisor and former Turner Sports president David Levy believes the cable networks need to make themselves “more relevant to the consumer and the distributor” if they’re going to regain carriage (and avoid further subscriber attrition). He suggested, “One way to do that [would be] through sports betting [integration].”
Our Take: It’s reasonable to suggest the lack of live sports programming over the coming two-month period made the call to drop the RSNs an easier one for Hulu and YouTube TV. The fact that Dish Network and Sling TV have managed to endure long-term outages also likely emboldened the two OTT streaming services to make do without the costly channels. But the main reason why distributors dropped the Sinclair-owned sports channels is the cost-benefit ratio. The channels were simply too expensive to justify carriage, considering the relatively small percentage of subscribers who watch them—particularly for virtual multichannel video programming distributors concerned with keeping the costs of their bundles down. For perspective, YES Network commands $6.49/sub/month (the price is expected to climb to $7.27 by ’22) and there are roughly seven million homes in the New York DMA (nearly all of which pay for the channel monthly). However, Yankees games draw an average of just 261K viewers (+4% YoY). In other words, there are millions of TV subscribers in New York paying for expensive content they don’t watch.
Considering their cost and the headwinds working against them (like cord cutting), Levy says RSN operators (like Sinclair) need to focus on making the channels more valuable to both the sports fan and distributor. As it stands, “if there isn’t a live game, [viewers] just don’t go [to regional sports networks],” he said. While the Raine Group senior advisor didn’t offer up a programming solution that would turn the channels into 24/7 destinations, he suggested, “Betting [integration] is one of the variables that would make [the RSNs] far more attractive to consumers and distributors alike.” In Levy’s vision, the creation of new sports betting content (Sinclair has already said it plans to invest in programming for the RSNs) and the introduction of alternate sports betting game feeds would supplement the technological advancements.
The reason sports betting integration would be enticing to distributors is because it’s believed that “people will sign up [for a service] if they are able to bet through the system,” Levy said. (Such a service would be differentiated from linear television.) There may also be opportunities “for [the distributor] to participate in some of the [gambling] revenue [generated],” he added. The introduction of new sports betting-focused game feeds would also give distributors extra channels and high quality content to sell against at no additional cost.
Carriage aside, sports betting integration would also be a boon to RSN operators as it should make viewership stickier. “[Someone who] bets on a game is 98% more likely to watch that game. If [fans are] 98% more likely to watch that game, [the RSN] is probably going to [draw] higher ratings. And if [the RSN] gets higher ratings, it can command higher advertising dollars,” Levy explained.
It’s hard to dispute television is moving towards more of an interactive, immersive environment. But Matt Cacciato (Executive Director, AECOM Center for Sports Administration at Ohio University) wonders if it’s wise for Sinclair to try and compete with the digital native competition. He said, “There’s this little company out there called Amazon, that owns another little company called Twitch and they have [the social viewing] marketplace wrapped really, really tight. [Sinclair] would be trying to compete and take share away from [Twitch]—which is really difficult.” Cacciato was more bullish on Comcast’s ability (with NBC Sports and PointsBet), from a technological standpoint, to compete with the likes of Amazon and Google (which owns YouTube TV). It’s worth noting Sinclair has also yet to ink a sports betting partnership.