Warner Bros. Discovery Announce Plans To Exit RSNs; Added With Bally Sports Puts Two-Thirds Of MLB On Edge

When Warner Brothers Discovery-owned AT&T SportsNet shorted their payments to the Pirates, Astros, and Rockies just over a week ago, it largely flew under the radar. After all, the news that the Bally Sports branded regional sports networks owned by Sinclair were on the edge of bankruptcy had a more seismic effect on MLB given 14 clubs air on those nets. Nonetheless, it was an additional sign that the regional sports network model was on the edge of collapse.

While the NBA and NHL also call these RSNs home, those leagues are nearing their playoffs, and for at least the moment, don’t seem to be leaping into action.

On Friday, Warner Bros. Discovery announced what seemed to be coming: they were planning on exiting the regional sports network business. The aforementioned Pirates, Astros, and Rockies are directly affected.

The Wall Street Journal was the first to report the story.

The WSJ was able to obtain a letter from unit president Patrick Crumb in which he states, “the business will not have sufficient cash to pay the upcoming rights fees,” adding that WBD will not fund the shortfall.

According to the report, clubs have been informed that they have until March 31 to reach agreements to reclaim their media rights or the RSNs will move into Chapter 7 bankruptcy.

While WBD is a minority partner in ROOT Sports Northwest — the RSN that sees majority ownership by the Seattle Mariners and airs Portland Trail Blazer and Settle Kraken games — is not part of the AT&T SportsNet package of RSNs that WBD is looking to unload.

According to industry sources that spoke on background, discussions with MLB by Warner Bros. Discovery have been productive regarding the future of the RSNs. That is almost assuredly due to what the letter says is a willingness to offload ownership of the networks and programming rights to clubs for no purchase price consideration beyond a release by the teams of any future claims against the networks.

Comments by MLB commissioner Rob Manfred have made it clear that the situation with the Sinclair-owned RSNs is quite different.

“We’ve been very clear with them from the beginning that we see both those sets of rights as extraordinarily valuable to baseball, and we’re not just going to throw them in to help Sinclair out,” Manfred said in October of 2021.

With WBD backing out of their RSNs, when combined with the Bally Sports networks, 17 of the league’s 30 clubs, or 2/3 of MLB’s total now are on the edge of financial collapse.

More than one discussion with MLB has said that they have been preparing for this to happen for some time as witnessed by their hiring of Billy Chambers to a newly created position of Executive Vice President, Local Media, and promoted Kenny Gersh to Executive Vice President, Media and Business Development. While that move was in January, the league saw Sinclair on the edge, especially after a $600 million cash infusion last year.

As I’ve reported more than once, the Bally Sports bankruptcy is merely the catalyst for the entire RSN model and rejiggering of not just MLB, but the NBA and NHL to recalculate their economic model. Major League Baseball, simply become the first that will see them toward more centralized revenues and a host of other moves. The announcement by Warner Bros. Discovery on Friday simply shows that Bally Sports is not just some isolated occurrence.

What is irrefutable is MLB is on the cusp to go direct-to-consumer and they undoubtedly have an exceptional amount of experience in streaming. They also seem prepared to produce games themselves through MLB Network for traditional television. How all this looks for consumers is the question no one can answer right now. We’ll all see soon enough.

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