Monumental Sports & Entertainment (MSE) recently entered an agreement to purchase the remaining 67% of NBC Sports Washington from NBCUniversal. The cable network holds the exclusive local broadcast rights to two of MSE’s professional sports franchises: the Washington Wizards and the Washington Capitals. Financial terms of the transaction were not disclosed.
Doubling down on a segmented regional sports network, at a time when the pay-TV universe is dwindling, runs counter to the commonly accepted logic. But Zach Leonsis (president of media and new enterprises, Monumental Sports & Entertainment) said MSE believes there’s upside and value in having control of live, local media rights.
“There’s more that can be done with our local media rights than what’s done today,” Leonosis said, “and clearly digital is going to be an increasingly relevant channel—the distribution of sports rights via a variety of different pathways.”
JWS’ Take: Leonosis said MSE understands the RSN business has been “choppy of late and may continue to be a little turbulent at times in the short-term future.” But the primary catalysts behind the company’s pursuit of full ownership of the RSN were its ambitions to “do more with [Wizards and Capitals local] rights, our ambitions to create a more cohesive [fan] experience and get to know our fans even better than we already do.”
The desire to grow top- and bottom-line performance also played into the decision. While Leonsis declined to discuss how the acquisition will impact the privately held entity’s P&L, he did say the value of the teams’ live local media revenues is “significant.”
MSE views itself as a strategic buyer. “This network will never be more valuable to anyone than it is to our teams,” Leonsis said. “Our live local rights for the Capitals and Wizards obviously have a direct connection to our existing business.”
Having a fully integrated RSN enables MSE to deliver a cohesive experience across every platform on which fans engage with the clubs. It should also prove fruitful from a data insights perspective.
“We get four million people across all of our turnstiles on an annual basis, and we really know who is coming into our building,” Leonsis said. “Now it will be interesting to layer on and see if we can correlate people’s attendance with viewing behavior and the like. Can we start to create unique profiles where we understand the entire fan experience across digital, linear and ultimately in person experiences?”
When Leonsis talks about doing more with Wizards and Capitals local rights, he is referring to the games’ presentation. He also envisions an expanded distribution.
“We’ve only scratched the surface in terms of what we can do with alternative feeds and enhanced viewing experiences, in terms of gaming integrations and the like,” he said. “People are digesting programming via a lot of different platforms and channels.… We imagine being able to eventually distribute our games in lots of different flavors.”
MSE believes the various feeds and channels will collectively enable Monumental to grow its fan base, improve the viewing experience for those fans and drive value for distributors. However, unless the enhancements made become a reason for fans in the market to have a pay-TV bundle, it is not clear they’ll be willing to increase the sub fee. Monumental declined to comment on the substance of network distribution agreements.
But even if distributors aren’t willing to pay any more for the network, Monumental should benefit from the ability to control its own destiny moving forward—at least from a local media rights standpoint.
“The whole is more powerful and ultimately more valuable than the sum of the parts,” Alex Michael (co-head, LionTree Growth) said. “An aggregated, full, end-to-end, property distribution package will see an uplift from a value perspective versus the disaggregation.” LionTree represented MSE on the transaction.
Wizards and Caps fans should not expect much to change to the game presentation or distribution strategy this upcoming season. MSE will use the next 12 months to build their own production plant and develop “capabilities that get [it] closer to digital studio and closer to 4k,” Leonsis said. The company will also be constructing a new digital platform and developing the partnerships that will enable it to deliver unique integrations and functionalities through the 2022-23 season. The “new” version of NBC Sports Washington, which will include a rebrand, will roll out next offseason.
Standalone regional sports networks tend to work best when they have the rights to an MLB franchise, because of the volume of inventory they deliver and the lack of competition that exists in the summer. However, as it stands, NBC Sports Washington only controls local rights to the market’s NBA and NHL franchises. Reports have suggested Monumental founder and CEO Ted Leonsis is a “suitor” for the Washington Nationals. Zach Leonsis declined to discuss the subject. However, speaking more broadly, he did acknowledge scale is beneficial in the media business.
It is worth noting that the Nationals rights are currently tied up in a contentious arrangement with MASN, a network controlled by the neighboring Baltimore Orioles.
It is hard to suggest MSE’s purchase of NBC Sports Washington will spark a trend of sports organizations buying their local RSN. NBC Sports Washington is unique in that both the Wizards and the Capitals—clubs for which it has live, local rights to—are owned by the same entity. MSE is also one of just a few organizations across sports that has multiple teams in a single market.
However, NBC Sports Washington is unlikely to be the last RSN bought by a club, or a media company operating on behalf of a club, either. “It is a natural evolution for IP owners to be able to distribute their own IP to their fans and no one is better suited to do that than teams, because teams know their fans best,” Leonsis said.
There could be some additional RSNs on the market sooner than later. Sinclair’s RSNs are reportedly back on the market.
