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Penguins and NHL have to navigate the reality of Regional Sports Networks failing

The future is approaching, and it doesn’t include AT&T Sportsnet Pittsburgh. How will the NHL and Penguins respond?

NHL: Toronto Maple Leafs at Pittsburgh Penguins Charles LeClaire-USA TODAY Sports

It’s not breaking any news that the world of television and the way the general public is consuming entertainment is rapidly shifting. Linear, traditional platforms are slipping in their reach. Streaming and use of mobile devices is growing at a rapid pace with every passing day, week, month, you get the picture. You’re living through it right now.

As a result of the changes cable subscriptions are down, which means revenue for the companies that own TV is down. When the money changes, companies are forced to adjust, as almost anyone has noticed with the rise and emphasis of premium streaming services that have become unavoidable in this day and age (Netflix, Hulu, Disney+, ESPN+, Paramount+, Peacock, Max, etc).

The storm has been brewing for regional sports networks for years. Now in 2023 and already well past the point of no return, it is about to hit. In fact, it truly has already begun.

AT&T Sportsnet Pittsburgh, the channel that has the rights to broadcast all of the local Penguins and Pirates games, has its roots way way back to 1986 being first known as KBL. Its coverage as a regional cable station was carried by cable outlets in most of Pennsylvania, West Virginia and some of Eastern Ohio. Several sales and changes in corporate ownership of the channel have come along with rebrandings and name changes over the years. KBL became Prime Sports KBL then Fox Sports Pittsburgh then Root Sports Pittsburgh and then finally a switch to its current name of AT&T.

But AT&T Sportsnet Pittsburgh, as we know it, is on life support and has a known expiration date. Its parent company, Warner Brothers Discovery, announced back in February 2023 that they are leaving the RSN (regional sports network) business and intend to shutter the channel by the end of this calendar year. AT&T Sportsnet Pittsburgh still has broadcast the Penguins and Pirates to this point as they always have, but the parent company is in the process of exiting the scene totally.

WBD’s move is very much in-line with the rest of the RSN’s. They are failing and, if not going away, then at least undergoing a seismic change from their current forms and formats as we have known them over the last 30-35 years or so.

Bally Sports, who like WBD own a handful of regional stations across the country, has gone bankrupt and has defaulted on payments to pro sports teams whose rights they carry. Others like NBC Sports are selling off their RSN’s, including the Washington network going to the Wizards/Capitals ownership team to run on their own.

What will happen next for how we view the Penguins? The short answer is that no one truly knows at this point, though league commissioners have been moving to ensure that there will be access in local markets to see all the games in an uninterrupted fashion. For now, it will still include the traditional, linear television outlets, but just how that will be accomplished hasn’t been determined.

Here’s some thoughts from Rob Owen, the TV writer at the Tribune-Review last week:

What will become of the rights to Pirates and Penguins games has not yet been announced and probably not fully worked out. I’d say it’s too soon to say whether or not it makes sense to cut the cable cord.

Because Fenway Sports Group owns the Penguins and also owns a majority share of the New England Sports Network, one could imagine Penguins games moving to that channel, but then NESN would need to get cable/satellite carriage in Western Pa.

My understanding is the Penguins are better positioned to take a leadership stake, possibly even taking control of AT&T SportsNet Pittsburgh. Under that scenario the Pirates would be in a secondary position, which makes outcomes for where the Pirates may land murkier.

In this regard, the timing of a large conglomerate with a branch of media buying the Pens a few years ago is likely very fortuitous to the franchise as a whole. As mentioned above, FSG could angle to absorb the current AT&T Sports Pittsburgh channel if they want, or simply roll Pens coverage into the NESN network that they already have.

That still leaves more questions than answers at this point about how they want to handle broadcasts in the short-term, and just what the long-term strategy will be in order to distribute the product of the games themselves.

The other big component is the financial one for teams to pick up the pieces as the established conventional local TV rights money disappears. A 2013 report from Forbes indicated that the Penguins’ local TV contract (then with DirecTV, acquired subsequently by Warner) was worth $16 million to the team in that year. Warner is terminating the agreement and that revenue source for the team is drying up. That might not be a huge impact for a large ownership group like Fenway, but does present another problem in a macro view for the league when all their franchises are seeing the Warner’s and Bally’s and other RSN’s money evaporating.

The NHL is very much a gate driven revenue league, but local television rights payments make up a significant eight-figure per year chunk of money that teams have gotten used to. Unlike the NFL and NBA, hockey does not have the benefit to lean on incredible riches from a massive national TV partnership. To be fair, the NHL did well in their last American rights package with Disney (ESPN) and, ironically Warner (TNT) to increase revenue three-fold from the prior deal with NBC. But that $4.4 billion, seven-year contrct for hockey looks quaint compared to the $100+ BILLION total multi-year package that the NFL recently pulled in and the $75 BILLION that the NBA is chasing down.

The realities of those massive differences scales of economy aside on the national level, the RSN’s have been very important to hockey. They bring in money and give visibility to a team’s local market and most core fans. The emerging challenge for Gary Bettman and the NHL with their local components will be in how they pivot and modernize how they distribute and monetize their product. Fans have long been clamoring for more streaming options — including most notably the ability for in-market streaming options that go outside of the traditional cable/television options.

Fans can purchase coverage through ESPN+, who carries all of the locally televised games in a streaming form, but currently gives dreaded blackouts for teams located within the “local” areas for fans. With the impending extinction of traditional TV channels, can the NHL move to a more digital and free way, for their fans to access games regardless of geography? It would be make for a good start.

The failure in the whole industry of regional sports networks provides the opportunity for the NHL and teams to take those steps. It won’t come without complexities and questions about how to recoup the revenue that the RSN’s were formerly providing in the short-term, but is unavoidable at this point of technological changes and the shifting landscape of how people are consuming entertainment.

One way or another, the lights are turning off for the old way games were available to fans. While teams/leagues always have it in their best interests for a way to broadcast their games, soon enough they will need to come up with some answers on exactly how they plan to deliver it in an ever-changing media landscape