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RSNs are still poised to grow, Fox Sports says

This has been a rough year for TV sports networks. TV channels are losing subscribers and viewers at alarming rates as pay-TV distributors embrace smaller, lower-cost channel lineups.

While most of the press’s ink has been spilled on national networks like ESPN, which has seen some of the steepest drops, regional sports networks face the same challenges. After all, RSNs carry some of the biggest price tags in the business for distributors, which would seem to run counter to the trend of lower-cost bundles.

But Fox Sports, which operates 22 RSNs across the country, says its business still is poised for growth — even if future growth will not be as wild as it was in past years. Fox executives are relying on the power of live local sports — which dominates prime-time ratings in most markets — and an embrace of new technology to keep its RSN business healthy amid a contracting industry.

“The erosion of the big bundle is certainly a trend,” said Jeff Krolik, president of Fox Sports Regional Networks. “The linear big bundle in cable has declined. That’s caused an adjustment. … The numbers are not as robust as they once were. It’s still a great business. Not the business that it was five years ago. …

“We think these are very good businesses that certainly have hit some headwinds that every cable programmer has, but also has some significant tailwinds.”

Sling TV CEO Roger Lynch at January’s Consumer Electronics Show. Sling TV is among the over-the-top services altering the marketplace.
Photo by: GETTY IMAGES
Fox Sports, which is celebrating the 20th anniversary of its regional sports network business this year, believes the market looks a lot like the cable industry of the mid-1990s when DirecTV launched as a competitor with a new and unique technology. For Fox Sports, that means it now will cut deals with “virtual MVPDs” such as Sling TV, Sony PlayStation Vue and Hulu Live (which has yet to launch), which should add subscribers, just as they negotiated deals with DirecTV when the satellite provider launched in the 1990s. MVPD is an industry acronym that stands for multichannel video programming distributor.

“The businesses we’re looking at are packaged bundled businesses, which is going to look and feel a lot more like cable TV than not,” Krolik said. “There’s going to be a package with DirecTV Now or Hulu Live that is going to look and smell a lot like a traditional cable package. It may not be 200 channels for $100. It may well be 100 channels for $40.”

Fox Sports executives also expect growth to come from streaming services through FoxSportsGo. Industry sources say that streamed sports add somewhere between 1 percent and 5 percent to overall viewership to games. Fox Sports would not comment on those statistics. “We’re getting some significant viewership,” Krolik said. “We’re even starting to monetize it. That’s a real business.”

Across the media business, executives preach patience. They say the declining cable subscriber numbers will reach a bottom eventually. Fox Sports’ Krolik is no exception.

“We believe there will be a leveling of the erosion of the cable big bundle because we’re introducing TV Everywhere,” Krolik said. “That makes it a much more attractive product. Now everything that’s available on your linear devices is going to be available on your digital device.”

Fox launched its RSN service in 1996, two years after Fox Sports launched on broadcast television. It launched seven local channels: Arizona, Midwest, Southwest, West, Rocky Mountain, Pittsburgh and Northwest. Krolik took over in 2006, and Fox has grown to become the country’s biggest RSN operator.

“There were no local branded sports networks at the time,” said Jeff Shell, now chairman of Universal Filmed Entertainment Group. The idea was Chase Carey’s, he said, and “I thought it was the greatest idea I’d ever heard.”

John Ourand can be reached at jourand@sportsbusinessjournal.com. Follow him on Twitter @Ourand_SBJ.

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