- The Washington Times - Monday, March 27, 2023

The outfield will be pristine green, the hot dogs hot and the beer icy cold when the Washington Nationals take on the Atlanta Braves on opening day Thursday at Nationals Park. But while much remains familiar, there are big changes afoot as Major League Baseball kicks off a new season with all 30 teams playing on the same day for the first time since 1968.   

Both on and off the field, the game’s executives are scrambling to solve problems that threaten the sport’s bottom line — including a younger generation increasingly immune to the game’s charms. 

On the field, pitch clocks and other new rules are in place to try to speed up the action. Off the field, the league is dealing with the fallout from an unraveling of the regional television networks broadcasting a huge chunk of MLB games.

Diamond Sports Group, which owns 19 regional sports networks that carry games for 14 teams, declared Chapter 11 bankruptcy this month. With a massive $8.6 billion of debt sitting on Diamond’s books, the filing is creating significant headaches for the league and individual franchises. 

After all, local media rights account for 23% of team revenue, according to Sportico — MLB’s third-biggest revenue stream, behind only central revenue and tickets. 

And if Diamond’s bankruptcy causes it to continue to miss payments — the company defaulted on a $31 million fee owed to the Arizona Diamondbacks — not only would those 14 teams be out that revenue, but also Commissioner Rob Manfred has threatened that MLB would terminate those contracts and look to produce those clubs’ own local broadcasts (Diamond doesn’t handle the Nationals, but Washington is embroiled in its own longstanding, complicated revenue dispute with MASN, the regional network that does).    

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An MLB takeover of the process of broadcasting its own games inevitably would alter the way fans watch games — dramatically, in some cases.

Manfred has told reporters that the league could implement a short-term plan of streaming games of the affected teams online and look to partner with other cable channels if the contracts between Diamond and its teams are broken.

Baseball, the game that loathes change, is in uncharted water. 

“This is a crisis,” said sports media consultant Patrick Crakes, a former Fox Sports executive. “It’s an existential one. [The regional sports network industry] can still be profitable on that side, but it’s declining and it’s not going to get better. Meanwhile, the new side [of streaming] isn’t doing what everyone told us it was going to do. It’s losing money. 

“And the content costs are through the roof.”  

An outdated model

Even if Diamond Sports Group’s bankruptcy doesn’t immediately affect broadcasts, analysts say the company’s decision to file for Chapter 11 protection marks a reflection of how challenging the industry for regional sports networks has become. 

Lee Berke, a sports media consultant, said the cable-centric model that fueled regional sports networks has been hit hard as consumers ditch their bundles and opt for steaming services. Sinclair Broadcasting Group, the parent company of Diamond Sports Group, said in an earnings call last year that its linear TV subscribers were down 10% year over year. As a result, the company’s cash flow was half of what it was projected to be at the beginning of the year. 

Across the television landscape, 25 million have cut the cord since 2012 — and another 25 million are expected to ditch cable by 2025, according to Axios. 

“It’s a substantial burden when the paid TV universe is shrinking,” Berke said. “You’re losing audience. You’re losing revenue. You’re losing eyeballs. You’re losing your next generation of fans.” 

In addition to losing subscribers, Diamond Sports Group finds itself in this position after taking on roughly $8 billion in debt after buying 21 regional sports networks from Disney for $10.6 billion. In February, Diamond missed a $140 million debt payment — a sign that it was about to file for bankruptcy.  

Diamond’s ensuing filing affected 14 MLB teams: the Arizona Diamondbacks, Atlanta Braves, Cincinnati Reds, Cleveland Guardians, Detroit Tigers, Kansas City Royals, Los Angeles Angels, Miami Marlins, Milwaukee Brewers, Minnesota Twins, St. Louis Cardinals, San Diego Padres, Tampa Bay Rays and Texas Rangers.

The RSN model has increasingly frustrated sports executives. NBA Commissioner Adam Silver said on a Sports Business Journal panel that the model was “clearly broken.” Manfred told reporters in December that the model is “probably not sustainable over the long haul,” adding the league was interested in coming up with a new system that would be viable and reach a greater number of fans. 

This year, MLB has appeared to take steps to implement that model. The league hired a slew of former television executives to help “address the changing landscape of MLB game distribution,” the league’s chief revenue officer, Noah Garden, said in a statement. 

A changing landscape 

Despite the complications from Diamond’s bankruptcy, local television ratings for MLB have been strong over the past few years — even as viewers on the national scale have taken a hit.

According to Nielsen, 22 of the league’s 29 U.S.-based teams were the top-rated program in their respective markets during primetime regular-season games. When comparing those regional sports networks to all other broadcast networks — not just cable — 13 of the 29 beat all other prime-time programming. 

Teams on regional sports networks drew an average viewership of 96,000 viewers per game in 2022, according to MLB — though the league estimates that the “true” number is 50% higher than the calculated Nielsen numbers, which include only the “the core section of the market around the metro area.” The average viewership on baseball-related local telecasts beat out the NBA (58,000) and NHL (45,000), Nielsen said. 

Nationally, the numbers tell a different, more complicated story. The most recent World Series, between the Philadelphia Phillies and Houston Astros, for example, was the second-lowest rated Fall Classic on record as the event averaged fewer than 12 million viewers. 

Sports Media Watch reported, meanwhile, that ESPN and TBS had higher regular-season ratings than in 2021 — only for Fox, MLB’s most-watched television partner, to see a 12% decline.

The data likely explains why executives charged with overseeing the national pastime have tried to innovate the game with a series of rule tweaks aimed at speeding up contests, generating more offense and making the product more appealing.  

The most notable change this year is the introduction of a pitch clock — in which pitchers have only 15 seconds between pitches to throw with the bases empty and 20 seconds with runners on. There’s also an additional 30-second timer between batters, who have to be in the box and looking at the pitcher by the time the clock reaches eight to avoid an automatic strike. 

The implementation appears to be working as intended. Spring training games have been 25 minutes faster than a year ago. 

The average nine-inning, regular-season game last season, for context, ran three hours and five minutes. 

“I’m old enough to remember when games ran 2:20, 2:30,” said baseball historian John Thorn, who turns 76 next month. “The fact that games now frequently run to three-and-a-half hours has not obliterated my trace memory of the way baseball used to be. … Baseball is a sports entertainment, which means the rules can change in order to improve the fans’ appreciation of the contest.” 

Still, there are no guarantees that a faster game will lead to a bigger audience — especially if fans have trouble finding games. 

As MLB looks to evolve from relying primarily on regional sports networks, Berke suggested that an embrace of streaming could be a positive for the long haul given that the switch may help reach younger fans. A 2017 study from Sports Business Journal found that the average baseball fan is 57 years old — the oldest among the core four professional sports leagues.

But there are potential pitfalls with streaming. Streaming services such as HBO Max, Peacock and Disney+ have been hemorrhaging money — each reported losses of more than $2 billion in 2022 — to the point that television executives have been forced to alter their digital strategies. And for live sports, the economic viability of streaming has arguably yet to be truly tested.

“The streaming model has to make enough money to replace the current economics of the old system or else it doesn’t fix any problems,” Crakes said.

He noted that if the product is not in a television bundle, the result could be a lot more expensive for the average consumer. 

For example, NESN, a Boston-based regional sports network that is not part of Diamond Sports Group, launched a standalone streaming service for Red Sox and Bruins games — for a cost of $29.99 per month, or $329.99 per year. But NESN’s fee inside a cable bundle is $8 per month, Crakes said.

As for Diamond Sports Group, Manfred admitted to reporters last month that if the league takes over the local broadcasting rights for the 14 affected teams, MLB likely wouldn’t be able to recoup all of the revenue it would have earned under the original deal in the short term.

MLB was projected to earn $900 million in local TV rights in 2023 — but that was before Diamond’s bankruptcy.

“It means turmoil,” Berke said. “The timing — it’s kind of like musical chairs and the timing is hitting … at the very start of Major League Baseball’s season.”

• Matthew Paras can be reached at mparas@washingtontimes.com.

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