CNBC Sport: If the RSN model crumbles, the NBA will be fine — MLB may not

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Tomorrow, CNBC will release its NBA team valuations, leading into the league’s All-Star weekend. You’ll be able to find them at?cnbc.com/sport.?

NBA franchises typically take in somewhere between $300 million and $800 million in revenue each year, based on CNBC’s calculations.?

For a typical NBA team, about $30 million to $40 million million of that comes?from regional sports networks, according to people familiar with the matter. The Los Angeles Lakers bring in far more than anyone else, taking in an average of about $150 million per season purely in rights fees after signing a 20-year, $3 billion deal with Time Warner Cable?in 2011.?

That deal is still an outlier 14 years later.

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The bulk of the RSN revenue stems from the fees TV operators pay to carry the networks. Most of the rest comes from ad sales, which some teams control and others share with their regional sports network. Some teams also pay for the production of games, which can cost about $5 million to $10 million per season.

We’ve talked about the slow dissolution of the RSN model before?in this newsletter?– highlighted by the decision of some teams, including the Phoenix Suns and Utah Jazz, to abandon their cable RSNs for a combination of streaming and broadcast TV. Phoenix?inked a deal?with Gray Television in 2023 to broadcast games over the air. Utah?did the same?with Sinclair Broadcast Group that year. Both the?Suns?and the?Jazz?also offer subscription streaming products for regional fans.?

Both teams took a revenue hit shifting from their old RSN deals to their new streaming-broadcast combos, according to people familiar with the matter. All in, Phoenix took about a 25% revenue haircut, said the people. The Jazz’s annual loss was closer to 50% – a number Jazz owner?Ryan Smith?said was “directionally accurate” when I spoke to him this week.

So, does Smith have any regrets about the decision?

“You couldn’t pay me enough money to go back to the old model,” Smith said.?

Smith told me that in the old model, Jazz games reached about 760,000 individuals when they aired on the AT&T-owned Root Sports Utah. In the new world, Jazz games now reach about 6.3 million people on a number of different broadcast affiliates depending on the state, plus the Jazz’s paid streaming service.?

“You have to zoom out a little bit beyond just the RSN revenue stream,” Smith told me. “Our team has about seven different revenue streams, and the other six are enhanced by broader distribution of our games. The more people watch, the more people come to games, the more we sell in concessions, the more money we bring in with sponsorships.”

The Jazz have also sold about 31,000?Jazz+?streaming subscriptions this season for either daily, monthly or annual plans, according to a Jazz spokesperson. The Jazz are the only team in the league to offer single-game viewing, because the team produces its own games and controls its own bespoke streaming service. A single-game streaming pass is $5.?

“We weren’t providing the best experience,” Smith said. “There were carriage blackouts. You have to start with experience first, and with the streaming product, now we’re reaching younger audiences.”

The other buffer Smith (and every other NBA owner) has as a safety net is the?$77 billion?national TV rights deal that begins next season, nearly tripling the league’s previous annual fee. The NBA has a revenue sharing system that redistributes money from the highest-grossing teams to lowest. This helps offset the loss in RSN money for teams like the Jazz and the Suns.

Major League Baseball is a different story.

MLB is far more exposed to the potential crumbling of RSNs in two ways. First, it doesn’t have the same enormous national media rights deal that the NBA and NFL can brag about. Second, RSNs bring in a lot more revenue for MLB than the NBA or NHL.

That’s because there are many more MLB games in a season – 162 versus 82 for both the NBA and NHL.

In most regional markets, MLB teams have guaranteed RSN rights fees that are twice that of NBA teams due to the fact there are twice as many games in the packages, according to WME Sports co-head and Endeavor Executive Vice President?Karen Brodkin. If that revenue figure falls dramatically, MLB teams may feel a real squeeze – one that could easily affect the roster construction of teams down the road.

This is part of the reason why more and more owners and executives are starting to chirp about an MLB salary cap when the league’s collective bargaining agreement expires Dec. 1, 2026.?

“If the cliff you’re falling off of is $30 million per year, that’s one thing,” Brodkin said. “If you’re looking at a falloff of $100 million or more for baseball, that’s a much more dramatic issue.”?

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