The Cardinals are preparing to go into the broadcast business as the current model for televised games collapses around them and creates the opportunity for a paradigm shift that will mean a direct channel to fans and could create a more balanced market for broadcast revenues.
With its parent company in bankruptcy and looking to restructure or jettison other regional sports agreements, Bally Sports Midwest, the Cardinals’ broadcast partner, pledged to pay the entirety of the rights fees for 2024, the team said Monday. That buys the Cardinals a year to determine how they will get their games to fans when, as expected, their rights are returned at the end of this season and they become, essentially, a free agent looking for a new broadcast model.
Ownership called it the “eyeball problem.â€
The Cardinals want to reach more of them.
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“There are multiple scenarios out there that could be in play, and we need to be ready for all of them,†club president Bill DeWitt III said. “If we’re ready to do it ourselves, then we’re ready for anything. That’s sort of my philosophy.â€
The options Cardinals ownership outlined Monday included joining with the ºüÀêÊÓƵ Blues, who will definitely have their rights returned to them this summer by Bally Sports Midwest, to create a shared channel and seek out subscribers as a pair. The Cardinals could also elect to create their own channel, as the rival Cubs have done in Chicago and the New York Yankees did with the YES Network in New York. Or the Cardinals could explore joining a bundle of Major League Baseball teams set free from their Diamond Sports Group contracts and, as a collaborative, find a home and distributor for their games.
All of the possible outcomes described by DeWitt end with an in-market, direct-to-consumer option that should obliterate the current archaic blackouts.
As the bubble bursts on broadcast fees for some teams, pooling Major League clubs onto a streaming service or another outlet could also reduce the gap between broadcast revenues. Some broadcast riches are part of Major League Baseball’s revenue sharing, but large markets benefit from a large pool of subscribers, larger populations to reach and larger financial benefits as a result. A collaborative broadcast effort that includes all 30 clubs could shrink one of the widest revenue gaps in the game for smaller-market clubs.
“Is MLB’s goal to move toward a more level playing field through the media route? I would say yes, that is an industry goal,†DeWitt said. “Is it doable and practical? That remains to be seen. But I think the disruption gives the industry an opportunity to try and move in that direction. ... If you’re getting a little bit more (revenue sharing) over time, evening the playing field on media, that’s a positive thing. But strategically, how do you level the playing field a little more as a commissioner — which is a goal — certainly media is the first place to look. How you implement that is a multiple-scenario analysis in New York.
“This is happening everywhere, and we are an example,†DeWitt continued. “That’s why we have to fix the eyeball problem first, and then the economics will flesh out. But we’ve got to fix that problem where somebody wants access to our games and can’t get it.â€
Cardinals chairman Bill DeWitt Jr. added how, with some clubs, they “own their own networks now and they’re doing well. That may or may not change. I think just think there’s a lot of uncertainty. The big markets, in the end, will have an advantage because they have more subscribers, more eyeballs. But I think we’ve got a pretty darn good market ... because we’ve got a broad fan base.
“This is a big project for us.â€
Although the signal had been spotty for a few years, the yank that unplugged the current regional sports network setup came a year ago when, during spring training, Diamond Sports filed for bankruptcy. This past season, two teams, San Diego and Arizona, had their rights returned to them. Major League Baseball rushed in to help both teams continue broadcasting their games to fans. A bankruptcy hearing this past week set for a courtroom in Houston was postponed so Diamond Sports and several MLB clubs could reach an agreement on broadcasts for the 2024 season, and the expectation is for that agreement to spill over from the few teams involved to include other clubs, like the Cardinals, currently under the Diamond Sports umbrella.
As part of the bankruptcy restructuring, Diamond Sports and the NHL completed an agreement to complete the season with a reduced payment and then return the rights to the clubs. A similar structure has been discussed for the 11 MLB clubs still partnered with Diamond Sports, according to officials.
The Cardinals need to be ready if their rights are returned in October.
“What’s happened is that business model has cratered because of what we all know the trends being with cord-cutting and even fans who have kept their bundle in the TV situation at home (and) might have lost Cardinals baseball if, for example, their carrier drops (Bally Sports),†DeWitt III said. “So there are two ways in which people have run into issues getting Cardinals baseball. The model has gotten pressure on all fronts. Now, what will happen if we get through next season under the status quo and we’re still with the Blues and the other properties on (Bally Sports Midwest)? It’s likely that would be the end of the line there.
“In some respects, you’re kind of a free agent at that point,†DeWitt III continued. “You can partner with the Blues and do a channel. We could go it alone. As far as a more holistic MLB-only strategy — that would take care of a number of issues fans-related to access. ... To summarize on this issue, from a team standpoint and from an industry standpoint, it’s quite a scramble.â€
Major League Baseball recently rejected a bid from Amazon to purchase the streaming rights to 11 teams impacted by Diamond Sports bankruptcy. That included the Cardinals. The deal was unappealing to a few teams like the Cardinals because it would have meant forfeiting their streaming rights, which are not owned by Diamond Sports but rather maintained by the club.
When the Cardinals negotiated a $1.1 billion, 15-year rights deal with then-Fox Sports Midwest, it turned the faucet on a modern revenue stream. The Cardinals also gained part ownership of their broadcast partner. Live sports programming appeared to be Teflon, the threat of DVR and streaming slipped right off while subscribers who did not even watch sports paid a monthly fee to have the channel in their cable bundle. Cable subscriptions have plummeted in recent years. Cords have been slashed. And while teams like the Cardinals maintained their streaming rights they do not currently have a direct-to-consumer product.
While negotiating on their current rights deal, the Cardinals explored setting up their own channel and partnering with the Blues, but they opted to benefit from Fox Sports Midwest’s infrastructure and distribution network. The Dodgers and Cubs both launched their own networks only to encounter initial difficulties getting onto the cable provider’s menu for some customers.
Part of the preparation now is learning that landscape.
“If it’s in our lap, we better know our market,†DeWitt III said. “We better know who is out there. We better know what ratings have looked like in outer-market territories, inner-market territories. We better understand how our ticket sales and other things overlay with those numbers. And that’s something that could have ancillary benefits for us as we understand our market better. Maybe we package things related to TV access and ticket sales.
“The bottom line is we want to take this opportunity to deal with this disruption in a way that may benefit us beyond just handling our rights coming back to us.â€
As previously reported in the Post-Dispatch, the Cardinals did not approach this winter with any limits on their spending that was related to rights fees. Bill DeWitt Jr. affirmed that again Monday in a news conference on the team’s final day of the Winter Warm-up.
The club set its baseball operations budget for 2024 on the expectation of receiving at least 80% of fees owed by Diamond Sports and Bally Sports Midwest. The Cardinals are one of the company’s profitable RSNs, unlike the World Series champion Texas Rangers who, to date, have no guarantees on their broadcasts for 2024 and have been reportedly told they will not receive a $111 million fee for the season.
The Cardinals were informed recently they will receive the full payment for the season, which, according to Post-Dispatch research and reporting, is expected to be around $73 million or more, depending on adjustments for inflation.
It’s the “beyond†budgets that are uncertain due to the broadcast collapse.
DeWitt Jr. said the changes expected after 2024 will “impact our payroll.â€
“One of MLB’s goals is to make sure all fans can get all games that they want and not be cut out of certain games that aren’t available to them because of the current model,†DeWitt Jr. said.
That is the recurring read on the situation.
A revenue pinch now will force a radical adjustment to broadcast sports model, and it is likely to improve access for fans and ultimately pay off for clubs.
More eyeballs, more revenue.
“From a fan’s standpoint, it’s going to get better pretty soon,†DeWitt III said. “The two ways in which they’ve lost Cardinals games — those both go away if you have a direct-to-consumer product. I think this is very interesting from a team point of view, and it’s a lot of work for us to really understand our market better if we have to monetize our own rights. All of that has internal issues for us to deal with. From a fan’s standpoint, I think things actually get better because of this disruption.â€