Warner Bros. Discovery (WBD) plans to exit the regional sports network business and has informed affected teams, as first reported by John Ourand of Sports Business Journal.
WBD operates three AT&T SportsNet-branded channels, including AT&T SportsNet Southwest in Houston, which broadcasts games of both the NBA’s Rockets and Major League Baseball’s Astros.
The AT&T channels — and their corresponding sports broadcast contracts —were initiated prior to AT&T’s 2018 merger with Time Warner. From there, those assets transitioned to ownership by WarnerMedia, which was followed by a merger with Discovery in 2021 to form a new entity with no AT&T ownership. The AT&T name stayed constant on the television channels for branding purposes, but in effect, ownership shifted to a separate entity.
Now, it appears that new entity has no interest in continuing with the regional sports network (RSN) business. Per SBJ:
The company has told teams that they have until March 31 to reach an agreement to take their rights back. If the RSNs can’t reach deals with the teams, the channels eventually plan to move forward with a Chapter 7 liquidation filing.
In a statement provided to SBJ, WBD said, “AT&T SportsNet is not immune to the well-known challenges that the entire RSN industry is facing. We will continue to engage in private conversations with our partners as we seek to identify reasonable and constructive solutions.”
The Wall Street Journal reports that in a letter sent to the teams, AT&T SportsNet president Patrick Crumb said that “the business will not have sufficient cash to pay the upcoming rights fees” and WBD “will not fund our shortfalls.”
According to SBJ, the letter proposes that AT&T SportsNet transfer ownership of the networks and programming rights to the teams for no purchase price consideration beyond a release by the teams of any future claims against the networks.
Assuming an agreement is reached, not much should change for local fans in the short-term. In effect, teams will inherit the existing regional carriage agreements that providers like AT&T SportsNet Southwest have with distributors like DirecTV and fuboTV.
Rather than having those distributors pay an RSN, and then an RSN pay the teams, those payments could go directly to the teams. It’s not yet clear if they would stick with the AT&T SportsNet branding or perhaps shift it to something reflecting local control. Existing broadcast teams and related infrastructure would remain.
Relative to prior projections, there could be something of a financial hit to the teams involved. The general decline in linear TV subscribers due to cord-cutting trends means that the overall volume of subscribers — in other words, revenue for the cable and streaming groups — is short of what it was a few years ago. That’s part of why companies like WBD are focusing their efforts elsewhere.
But that trend is industry wide, as evidenced by the potential Diamond Sports bankruptcy filing. That will affect numerous teams who have their rights with RSNs under the Bally Sports brand.
In the longer-term, once existing carriage agreements expire, the transition to local ownership might allow teams to explore direct-to-consumer (DTC) streaming options. But that’s likely a number of years away, and each sports league will have conversations with its teams regarding the best path forward. The vast majority of teams and their broadcast partners are experiencing similar challenges.
For now, in AT&T SportsNet markets, it should largely be the status quo for fans in terms of their ability to watch the games.
