DIRECTV Agrees to Deal with LA Lakers and Dodgers Sports Network; Will Not be Forced to Make Channels Mandatory
Regional sports network (RSN) providers have been anxious about their long-term prospects for some time. As cord-cutting accelerates, there are fewer users paying for cable and satellite subscriptions. This means RSNs get less from pay-TV providers and therefore must raise carriage fees to try to make up for the lost income. Cablers are then put in a bind, forced to choose between passing those costs onto consumers or simply cutting ties with the channels in question.
More and more pay-TV providers are getting ready for life without RSNs, it seems. For example, DIRECTV announced this week it has agreed to a new carriage deal with Spectrum for its Spectrum SportsNet and Spectrum Sportsnet LA channels, which carry Los Angeles Dodgers and Los Angeles Lakers games. Most importantly for customers, the agreement significantly lowers the penetration threshold for the networks, which means DIRECTV can start offering satellite, DIRECTV STREAM, and AT&T U-Verse plans without the channels if it wants to.
The company will almost certainly do that, as it gives it much more flexibility in the Los Angeles market. Offering cheaper plans that don’t force users to pay for sports channels they have no interest in watching will likely help to slow cord cutting, at least temporarily.
“While viewing habits continue to shift, it’s clear that regular season professional sports programming remains extremely popular with a core base of traditional cable, satellite and [streaming] customers,” Spectrum Networks SVP and GM Dan Finnerty said. “That said, given these customers represent a relatively small percentage of the overall video subscriber base, and recognizing the marked increase in direct-to-consumer choices, the model for RSNs needs to evolve to reflect the realities of the current marketplace. With this agreement, we are taking a step to shift the business model so that customers have more control.”
Spectrum, which owns the two RSNs is following a similar path to DIRECTV. Earlier this week, it was reported that Spectrum — the second-largest cable provider in the United States — would begin offering a plan with no RSNs in it at all. Sports channels can either accept the new way of doing business or be dropped by Spectrum altogether. If DIRECTV and Spectrum see even brief respites from cord-cutting thanks to the new plan, other providers may start to do likewise, if their carriage agreements with channel owners allow it.
“DIRECTV continues to believe in the power of local sports, while also recognizing the demands of the many homes we serve with other diverse programming interests,” DIRECTV’s chief content officer Rob Thun said. “This agreement with Spectrum Networks achieves three key objectives – putting consumers first, recognizing local value, and enabling both parties to extend their relationship with long-term, mutual benefits.”
For RSN owners, it’s hard to see this new trend as anything other than bad news. Companies like Diamond Sports Group — which owns 19 Bally Sports RSNs — get paid according to how many households their channels are shown in, not how many viewers are actually watching. That’s why carriage deals traditionally require providers to make RSNs available in their most popular or base plans; if providers are no longer compelled to do so, RSNs will run out of money before much longer. DSG is already in bankruptcy court, and is fighting tooth and nail to keep its head above water.
But cable providers can’t afford to keep worrying about RSN owners and their own bottom lines at the same time. One recent report indicated that streaming revenues are set to surpass pay-TV-generated income by 2027, and cablers have to do something to try to keep themselves going for as long as they can.
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