While Diamond Sports Group appears set to default on $140 million in interest payments, a move which is expected to trigger a bankruptcy filing in the coming weeks, its 19 Bally Sports properties aren’t the only RSNs feeling a financial pinch. According to multiple league, finance and network sources, the three AT&T SportsNet brands in recent weeks have handed over lighter-than-expected envelopes to their respective MLB franchise partners.
An executive with direct knowledge of the RSNs’ financial dealings confirmed to Sportico that the AT&T outlets in Denver, Houston and Pittsburgh submitted their most recent rights payments to their MLB clubs in a timely fashion, although the disbursements were not commensurate with the contracted rates. The teams impacted by the shortfall are the Colorado Rockies, Houston Astros and Pittsburgh Pirates.
The precise amount of the funds withheld is not known but is said to be significant enough to have catalyzed concerns about the long-term viability of the three networks. According to one insider, the partial payments may be interpreted as a signal that new-ish owners Warner Bros. Discovery are eager to get out of the RSN business.
WBD assumed ownership of the RSNs as part of Discovery’s $43 billion merger with AT&T’s WarnerMedia business, which closed in April 2022. A fourth affiliated channel, Roots Sports Northwest, is majority-owned by the Seattle Mariners in a 60-40 split with WBD; as such, it has not been impacted by the payment squeeze.
When asked about the skimpier-than-expected rights payments, WBD higher-ups said they were unaware of the issue.
Since the merger, WBD has been working toward alleviating its $48.6 billion debt load, slashing content costs and reducing headcount across multiple divisions. All told, the company has earmarked $3.5 billion in development write-off charges and consolidation activities. The cuts may peter out in 2023; last month, WBD chief financial officer Gunnar Wiedenfels told investors at Citi’s Communications, Media & Entertainment Conference that the purge is nearing an end, and that the bywords for this year are “relaunching and building.”
AT&T was looking to offload the RSNs four years ago, but the auction sputtered out after the initial bids were well shy of the company’s initial expectations. (Having anticipated a $1 billion sale, the offers came in at about half that amount.) As it happens, the lead bid was submitted by Sinclair Broadcast Group, the owner of Diamond Sports Group.
Although it’s been nearly a year since the Discovery-Warner Bros. deal closed, the three RSNs remain freighted with the imprints of their previous owner. Despite the change in proprietorship, no actions have been taken to update the networks’ logos and branding.
When the Astros are on the field, AT&T SportsNet Southwest is among the five most-watched RSNs in the country. From their perch within the massive Houston market, the reigning World Series champs generate tens of millions of household impressions each season, trailing only the Yankees, Mets and Dodgers. And while the Pirates have finished last in the NL Central in each of the last four seasons, the team’s home RSN still manages to deliver solid numbers, thanks to the local loyalists. Pittsburgh’s channel is also the biggest per-capita earner among the three AT&T RSNs, raking in an average monthly affiliate fee of nearly $4.50 per subscriber.
Though the Rockies don’t put up electrifying ratings on AT&T SportsNet Rocky Mountain, the channel’s distribution numbers are enviable. Other than Boston’s NESN, the Denver-based RSN is the only local sports channel that can boast full distribution in its home market, while the average penetration for the segment hovers around 69%.
Whatever back-office intrigues are in play, the reduced payments are, for the near term, not expected to interfere with the transmission of MLB games in the three markets. Whether the owners of the impacted teams interpret this as a call to action or a brusque bit of brinksmanship remains to be seen; in the meantime, the usual slate of Spring Training programming is on deck, as the Houston RSN begins its Cactus League coverage with a Mets-Astros exhibition on Feb. 25.
