How the collapse of the region...

The sports broadcast model is mired in a protracted moment of flux. For baseball, the impact came for two teams already this past season. Nearly half the league could be affected as soon as next year, and for 11 of those teams, the uncertainty hangs over their offseason. Rather than resist this change, Major League Baseball is prepared to embrace what the league believes could be a brighter future, with the current changes paling in comparison to an overhaul of the sport’s economic structure.

The long-lucrative regional sports network is collapsing under the shift of television viewing away from mass cable packages, through which non-sports viewers subsidized some portion of the high cost of carrying live sports that teams charged distributors. Cord-cutting and more a la carte options have been looming issues for baseball teams for a while now, as teams benefited generously from the previous model. The exclusive rights to air local baseball games were such a priority for distributors that they were prepared to pay handsomely — with local media revenue accounting for an average of 23% of teams’ total revenue, by far the largest portion for any major sports league.

The bankruptcy declaration by Diamond Sports Group almost a year ago forced the issue to the forefront of the baseball world. DSG, a subsidiary of Sinclair that owns Bally Sports Network, was responsible for the broadcasts of 14 MLB teams. Last summer, they stopped paying the rights fees to two of them, the San Diego Padres and Arizona Diamondbacks, forcing MLB to step in and take over those broadcasts with almost no notice.

As part of that process, the league was able to make Padres’ and D-backs’ games available in market through MLB.tv. The league’s streaming subscriptions are a technological feat that have long irked fans because they're riddled with blackouts. Cord-cutters can watch any and every game — except those of their local team(s). The blackouts are the result of the exclusivity agreements RSNs secure in return for the sometimes billion-dollar rights fees. But with those deals broken, MLB was able to make the Padres’ and D-backs’ games available both on linear TV and streaming in market.

Although quite literally a stopgap step taken to ensure that San Diego and Arizona fans would not be left totally in the dark, that setup is what MLB would like to recreate across baseball. In the interim, that means MLB funneling local revenue to teams through their own distribution systems. But as part of the ultimate end goal, according to people with knowledge of the league’s thinking, all media revenue would be centralized and distributed more equally, leveling the payroll disparity that is believed to be a detriment to baseball reaching its full business potential.

MLB had seen the writing on the wall for years — dating back to when Sinclair purchased the slate of RSNs from Fox in 2019 — and had been preparing since late 2022 for the possibility that DSG would not be able to fulfill its contracts in 2023. That involved building out a local media department, which was pressed into action first in late May and then in mid-July to take over broadcasts for the Padres and Diamondbacks. For the remainder of the season, those teams’ games were available on linear cable television in their home markets as well as direct-to-consumer via MLB.tv in the same market at $19.99 per month or $74.99 for the remaining Padres games and $54.99 for the remaining D-backs games.

As part of the bankruptcy proceedings in court, commissioner Rob Manfred guaranteed that the league would cover 80% of the money those teams were due to receive from DSG. The revenue from both the linear distribution deals struck by MLB and the MLB.tv streaming subscriptions went to the league and was then part of the 80% subsidy delivered to the teams. According to someone with direct knowledge of the situation, the league took a small loss as part of fulfilling that guarantee.

When the season ended, the Minnesota Twins’ deal with DSG expired, putting them in the same boat as the Padres and Diamondbacks. That leaves 11 teams still in contract with DSG: the Atlanta Braves, Cincinnati Reds, Cleveland Guardians, Detroit Tigers, Kansas City Royals, Los Angeles Angels, Miami Marlins, Milwaukee Brewers, St. Louis Cardinals, Tampa Bay Rays and Texas Rangers. Reportedly, the Guardians and Rangers are most in danger of being dropped next. What happens with those broadcast deals will be decided in bankruptcy court. MLB is pushing for clarity as quickly as possible, while DSG has repeatedly requested an extension to deliver an answer. Recently, the league filed a motion requesting the court to force DSG to decide which contracts they’re going to continue to honor — at least through 2024, if not beyond — and which they will reject. That motion is scheduled to be heard Dec. 15.

During the World Series, Manfred said the league is prepared to handle up to 16 teams’ broadcasts in 2024. But he also specified that the league would not make a similar 80% guarantee going forward.

Instead, the economics will function as follows: Teams that do not have other RSN deals will be part of MLB Media. The league will broker a deal with local cable distributors, sell advertising against those games and give the advertising money back to the team. Those teams’ games will also be available direct-to-consumer through MLB.tv, as was the case for the Padres and D-backs last year. Revenue from out-of-market subscriptions will belong centrally to the league, as it always has, but in-market subscriptions and in-market advertising revenue will go to the local clubs.

At the World Series, Manfred said that the in-market subscriptions MLB sold last year — 18,000 in San Diego — are proof of an underserved segment of fans that constitutes an economic opportunity.

“So it’s an important part of our future,” he said at the time. “It doesn’t have today the same robust economics that the cable bundle provided as an exclusive source of distribution, but my own view of the world is we’re going to have — the distribution may be smaller going forward, and we’re going to put with it that digital option that gives people more flexibility, more reach and is better for fans overall.”

That system, by which MLB subsumes the cable and digital distribution of teams and redistributes the revenue locally, covers the uncertain interim as the entire sports world adjusts to the future of television viewing.

Eventually, MLB would like to have both national and local broadcast revenue run through the league’s media departments. That would be a significant change for a sport that has long been defined by the differing behavior of big markets and small markets and in which the value of the local broadcasts has been a major source of that disparity. Even as an aspiration, it bears paying attention to.

How the league navigates from now to that version of the future — and how it strategizes around the predictable resistance from big-market owners, who presumably won’t want to see the payroll playing field leveled — will dominate the business of baseball for years to come. Ultimately, MLB believes even the still-lucrative iterations of RSNs are a sinking ship, and teams will have to embrace the league’s plans for a digital-first future.