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YES Network–MSG Networks JV Suggests ‘Great Re-Bundling’ Underway

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YES Network–MSG Networks JV Suggests ‘Great Re-Bundling’ Underway

The YES Network and MSG Networks recently announced the formation of Gotham Advanced Media and Entertainment (GAME). The joint-venture will “capitalize on the regional sports networks’ respective streaming services’ technical and operational synergies.” GAME also plans to offer “turn-key digital content distribution services to third parties.”

The press release did not mention packaging/selling the OTT services together. But it’s hard to imagine the two companies coming together and making waves about back-office resources and the creation of a shared service provider. Industry observers expect the announcement of a New York sports bundle to be forthcoming.

“Everybody's beginning to realize that you've got to put more content together so that the consumer can go to one place, pay one [but expensive] price, and get enough value,” media consultant Patrick Crakes said.


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Cable subscribers used to get all their sports programming in one neat, affordable bundle. But as the price of the offering rose, many got frustrated with paying for content that they were not consuming. Tens of millions have cut the cord in recent years, and the pay TV universe continues to shrink quarter over quarter.  

Still needing internet service and wanting select television content, many of those individuals began constructing their own skinny bundles. However, the increasing fragmentation of sports rights has forced fans to subscribe to several services to watch all their favorite teams play. 

They now long for the days where everything was packaged together.

Regional sports networks were generally slow to embrace the shifting media landscape. The feeling was by offering a compelling direct-to-consumer solution they would be aiding in the decline of their linear cable network. 

But as the number of cable subscribers disconnecting from the bundle grew, affiliate fees and advertising rates began to decline. RSNs launched streaming services to recoup some of the lost revenues and to try and position themselves for an uncertain future. 

The problem is that digital subs are not a one-for-one trade. RSNs are trading dollars (cable subs) for dimes (digital subs).

The creation of a New York sports bundle is unlikely to change that dynamic. It is, however, a step that must be made.

“The thesis a half decade ago was that segmented content, the Yankees, would be fine by itself,” Crakes said. “Now, [with an abundance of streaming offerings], there is a realization that having more elite content matters.”

Most consumers are only going to pay directly for one or two costly standalone services. So, it makes sense for a regional sports network to be in as an attractive a bundle as possible.

The recent Disney-Charter negotiations were an indication the ‘great re-bundling’ is underway. The roll-out of a New York sports bundle would be further proof that the current streaming landscape is unsustainable from a costs, navigation, and scaling standpoint.

The Yankees “direct to consumer subscriber base is small because the existing offering is segmented,” Crakes said. “You need general market content to scale. The service is much closer to general market with every team in New York [outside of the Mets] in it.” 

MSG Networks carries Knicks and Rangers games alongside Islanders, New Jersey Devils, and Buffalo Sabres games. The YES Network has the broadcast rights to the Yankees, Brooklyn Nets and New York Liberty.

Bundling the RSNs together would give New York sports fans compelling content to watch across the entirety of the calendar year, and in theory, eliminate some churn. As it stands, MSG subscribers do not have live baseball programming in the summer months.

It’s not clear how much a New York sports bundle would cost. But expect the offering to be priced cooperatively with Pay TV distributors (think: $40/mo.)–at least at the outset.

It has to be. There’s no way a streaming service could replace the linear business’ economics, and regional sports networks are costly to operate and unable to withstand much disruption. 

While some fans might be willing to pay that amount, more would subscribe if the offering were cheaper.

“So, [MSG and YES will] have to talk distributors into letting them price it lower while not tiering the cable channel or reducing sub fees,” Crakes said. If unsuccessful, “the next step could be to offer the distributor a cut.” 

Regardless of price, a New York sports bundle will never have massive subscriber base. Sports sold on an ala carte rarely attract more than 10% of the marketplace. 

That is why it’s safe to assume the next-gen bundle, whatever it ends up looking like, will include more than just the two RSNs. Complimentary programming –or value– is going to be necessary for it to scale. 

Amazon owns a piece of the YES Network. It’s not difficult to envision Prime being a part of a re-imagined bundle in the tri-state area. The e-commerce giant is reportedly exploring a bail out of the Diamond Sports RSNs that would give it streaming rights to a large swath of clubs. 

“It still won’t scale like it did when everything was included in the pay TV bundle because the market is smaller, but a broader offering may get these DTC products to break-even,” Crakes said. “Then it’s a matter of operating to extract some profits out of these streaming business.” 

In other words, while not a replacement for the old system, re-bundling is likely a necessary and proper step in media’s evolution. 

“If you don’t get to that stage, you’re never going to find out if these businesses can really make money,” Crakes said.

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