New England Sports Network (NESN) recently became the first regional sports network to introduce a true over-the-top direct-to-consumer streaming service—NESN 360. For $29.99 a month, fans without a pay-TV subscription can get live in-market Boston Red Sox and Boston Bruins games (along with some additional content) on the web and on mobile and streaming devices. Annual subscribers will also receive eight tickets to Red Sox home games during the 2022 season.
Chris Russo (CEO, Fifth Generation Sports) said the bundled offering is indicative of a new reality. Teams and their local broadcast partners will have to collaborate in new ways to sell subscriptions. Figuring out what drives fans to sign up for an expensive streaming service will be “one of the more critical experiments happening in sports” over the next six to nine months, he said.
JWS’ Take: Sports rights owners have historically sold their broadcast rights to media companies, and those entities then monetized the rights in the form of carriage fees and advertising. Ultimately, the cable or satellite company was responsible for marketing to the fan, getting the fan to sign up and collecting money from the fan.
The dynamic began changing in 2018 with ESPN’s introduction of ESPN+. Suddenly there was a national sports network “soliciting consumers and building their business as a direct-to-consumer company,” Russo said. DAZN introduced a fight sports-centric DTC service in the States that same year.
Nearly five years later, regional sports networks are following their lead. Dan Cohen (EVP, global media rights consulting, Octagon) explained the RSNs have been a bit slower than their larger, national counterparts to make the transition to streaming largely because of the capex required to do so. Existing affiliate contracts and the fragmented, geographic nature of the rights posed additional challenges.
Local sports broadcasters also didn’t have the rights to stream games in market. “[Those rights] were packaged by the leagues [and some still are today] in order for them to offer their own SVODs,” Cohen said. “It was not until recently that MLB relinquished centralized control of these rights [and] MLB teams were allowed to negotiate their own local market streaming deals.”
RSNs are looking for a means of recapturing cord-cutters (and cord-nevers) and the revenues associated with those customers. But pro sports teams are equally motivated to see a new DTC streaming service succeed. Local TV remains a large component of NBA, NHL and MLB team revenues and the presumption is if no alternative revenue stream arises to offset lost carriage fees, RSNs will struggle to pay the rights fees—never mind fee increases—teams seek.
Pro sports teams are also motivated to serve fans and prospective fans living outside the pay TV universe. “The next generation of fans are largely digital first video consumers,” Cohen said. “We are all aware that the cable universe is shrinking [at ~7.5% rate annually] the past few years. As [the number of] cord-nevers and -cutters increase, [sports teams] need to build their next fan audiences where [those] fan audiences naturally live—off-cable. The key during this transformative time is to be able to offer local market fans the option to watch on cable or via a SVOD offering, be it standalone or through a vMVPD [the latter proving difficult for RSNs of late].”
NESN is the first RSN operator with a streaming service, and Sinclair’s Diamond Sports Group, which owns the 21 Bally Sports branded RSNs, is not far behind. The publicly traded telecom conglomerate plans to roll out its untethered OTT offering—Bally Sports—later this summer (Diamond Sports has the rights to five MLB clubs). Russo expects to see a host of similar offerings introduced in markets across the country over the next 12-24 months.
Standalone local sports offerings are not going to be cheap. NESN 360 will reportedly cost $29.99/mo. (or $329.99/year), while Sinclair’s service is expected to sell for $19.99/mo. or $189.99 annually. Russo says for DTC services to succeed at those price points, the clubs will need to start acting more like partners than content dealers.
That may require many clubs to develop new skill sets (remember, tickets are really the only thing they sell DTC) and to operate differently than they have in the past. In the past, teams have tried to assist their broadcast partners by “providing production support and access. They were not concerned with how many subscribers were being added to the service,” Russo said. “Now, whether they are obligated to [in the rights agreement] or encouraged [economically] to promote these DTC streaming services, they are going to have a much more important role in signing people up.”
The emergence of local streaming services will also likely influence how future RSN deals are structured and what they consist of. Russo envisions RSNs telling teams they will pay the rights increase sought if the club comes up with some way to sweeten the pot for subscribers and commits to promoting the service. For example, fans who sign up for an annual NESN 360 subscription will receive eight tickets to Red Sox games. But baseball teams have more ticketing inventory than clubs in other sports, and it may not be feasible for NBA or NHL organizations to offer that kind of package deal.
Russo suggested merchandise, promotional items, subscription content and/or entertainment services could potentially be included within bundles to entice fans to sign up. “It’s about providing a value proposition that justifies what might appear to be a high price point.” Expect to see a “laboratory of experimentation” in the months ahead as teams and operators try to figure out what combinations resonate with consumers.
Sports betting is not yet legalized in the state of Massachusetts, but it is easy to envision RSNs creating additional value for fans (and themselves) with the integration of a sports betting partnership. “They could offer [several hundred] dollars in free bets if [the fan] signs up for the service,” Russo said. A tie-up might also allow the streaming service to add ancillary sports betting content to the platform—including sports betting focused streams of the games that would appeal to bettors.
Fenway Sports Group owns the Red Sox and a control stake in NESN, so cross-marketing and collaborating between the two to promote NESN 360 should be easy. Russo also believes teams and networks owned by separate entities will find ways to work in harmony. “Their interests are so aligned that there is a good chance of cooperation and collaboration. … Both of them need this desperately to work.”