When the Chicago Cubs launched the Marquee Sports Network in February 2020, it was the fruits of a decade-long quest to create a devoted 24/7 cable TV platform for the crew, which was nonetheless hovering within the wake of its first World Series championship in additional than a century.
After three seasons of COVID-19, cord-cutting and declining scores, issues haven’t gone precisely as deliberate for the fledgling regional sports activities community.
Right off the bat, the inaugural opening day was postponed for 2 months after the pandemic hit. Marquee cobbled collectively a cable distribution community in time to hold the made-for-TV video games, the place cardboard followers and faux crowd noise supplied the backdrop for the shortened 2020 season.
Since then, the Cubs have been mired in back-to-back shedding seasons, viewership on Marquee has fallen by 56% and regional sports activities networks, lengthy the money cow of cable TV, are struggling as suppliers reduce on stay sports activities programming.
“We launched into a headwind,” stated Crane Kenney, president of enterprise operations for the Cubs. “We had a pandemic when we launched, but also cord-cutting had become a big obstacle.”
In 2019, the Cubs introduced the formation of Marquee, a three way partnership with Sinclair Broadcast Group, the Maryland-based TV station chain contemporary off its failed bid to purchase Tribune Media, the previous broadcast guardian of Tribune Publishing. That similar 12 months, Sinclair additionally purchased 21 Fox regional sports activities networks for almost $10 billion, rebranding the portfolio as Bally Sports.
Sinclair’s debt-laden Diamond Sports Group subsidiary has since been bleeding purple ink amid declining revenues for its Bally RSNs, and a few analysts imagine it could be on the verge of chapter. Kenney stated Marquee is an “independent network” that’s insulated from Diamond’s monetary woes.
A Sinclair spokeswoman didn’t reply to a request for remark.
Marquee turned the unique native TV house for the Cubs after the crew parted methods with NBC Sports Chicago, the regional sports activities community it shaped in 2004 with the Bulls, Blackhawks and White Sox. The Cubs additionally exited native over-the-air TV after 71 years, pulling the plug on WGN-Ch. 9 and WLS-Ch. 7.
National cable channel WGN America, now NewsNation, dropped native sports activities after the 2014 season, ending almost 4 many years of beaming Cubs baseball throughout the nation.
The Cubs are netting greater than $90 million in annual TV rights charges from Marquee, up from $60 million per 12 months the crew earned by way of NBC Sports Chicago and broadcast TV, based on sources aware of the deal.
Marquee is obtainable in about 3 million properties within the Chicago space. Cable suppliers embrace RCN Chicago (now Astound), AT&T and Comcast, which struck a “multiple year” carriage settlement with Marquee simply forward of the pandemic-delayed opening day in July 2020.
The nascent community debuted with a 3.57 ranking through the inaugural season, reaching about 116,000 households per sport, based on Nielsen knowledge provided by the Cubs. By comparability, the crew averaged a 4.5 ranking on NBC Sports Chicago throughout its championship season in 2016.
As followers returned to the ballparks in 2021, the Cubs on-field efficiency spiraled downward, with the crew buying and selling away the World Series core of Anthony Rizzo, Javy Baez and Kris Bryant, and stumbling to its first shedding season in seven years. Ratings for Marquee adopted go well with, with Cubs viewership dropping 41% to a 2.1 ranking within the Chicago market, based on Nielsen.
This 12 months, Cubs video games on Marquee fell one other 25% throughout a second consecutive shedding season, averaging a 1.57 ranking. The Cubs averaged a 1.5 ranking on NBC Sports Chicago, then often called Comcast SportsInternet, over the past pre-World Series shedding season in 2014.
“Our ratings have declined with the team’s performance,” Kenney stated. “We know that they’ll go back up when the team starts to compete a little more.”
Ratings typically translate into income, each within the carriage charges that networks can command from pay-TV suppliers and promoting charges charged to sponsors.
A report by S&P Global Intelligence pegs Marquee at $81 million in whole income in 2020, $169 million in 2021 and $161 million this 12 months. Meanwhile, the three-team NBC Sports Chicago generated $139 million in 2020, $189 million in 2021 and a projected $186 million this 12 months, based on S&P knowledge.
Marquee declined to reveal revenues, however stated promoting gross sales have elevated by a mean of three% per 12 months because the 2020 launch.
NBC Sports Chicago didn’t reply to a request for remark.
Carriage charges paid by Comcast and different pay-TV suppliers make up the majority of the income for Marquee and different regional sports activities networks. Most of that’s funded by cable subscribers — whether or not they watch regional sports activities networks or not.
Comcast is charging $17.30 per 30 days within the Chicago space for its regional sports activities community charge, which seems as a line merchandise on the invoice for the preferred cable subscription packages. The regional sports activities community charge contains Marquee, NBC Sports Chicago and the Big Ten Network.
In 2019, Chicago-area Comcast subscribers paid an $8.25 per 30 days regional sports activities charge, which means it has greater than doubled because the launch of Marquee.
S&P Global Market Intelligence places the present common subscriber charge at $7.50 per 30 days for NBC Sports Chicago and $6.39 per 30 days for Marquee throughout all pay-TV suppliers within the Chicago market.
The Cubs community is faring higher than many opponents as regional sports activities networks battle to navigate the altering pay-TV panorama, the place cord-cutting and streaming have eroded subscribers and squeezed the carriage charges suppliers are keen to pay for sports activities, lengthy the glue holding collectively the cable bundle.
More than 48 million households have deserted conventional cable or satellite tv for pc video service since 2010, with solely a 3rd of them offset by features at digital streaming suppliers equivalent to Hulu + Live, YouTube TV, SlingTV and DirecTV Stream, based on a September report from business analysts MoffettNathanson.
That leaves about 79 million linear pay-TV subscribers on the finish of the second quarter, or about 62% of U.S. households, the bottom penetration stage since 1993. The pay-TV business is “hurtling” to 50 to 60 million subscribers, with sports activities and information offering a flooring for the standard cable bundle, the report stated.
With client demand falling, pay-TV suppliers are chopping again on the distribution charges they’ll pay for regional sports activities networks, or dropping all of them collectively.
“Regional Sports Networks are unraveling,” MoffettNathanson stated in its report.
In 2019, Sinclair acquired 21 former Fox regional sports activities networks from Disney for $9.6 billion. Its Diamond Sports Group subsidiary, which owns the rebranded Bally Sports networks, is carrying about $8 billion in debt and has incurred working losses because the second quarter of 2020, based on Sinclair’s 2021 annual report, filed in June.
The Diamond subsidiary can be 50% proprietor of Marquee with the Cubs, and has a 20% stake within the Yankee Entertainment and Sports Network, often called the YES Network.
Sinclair is weighing the whole lot from promoting the Bally RSNs to submitting chapter for its Diamond Sports subsidiary, based on a report by the New York Post, citing sources near the scenario.
“The regional sports network business model shrunk a lot faster than people expected,” stated Marc Ganis, a Chicago-based sports activities advertising marketing consultant.
Rhode Island-based Bally’s, which filed an utility with the Illinois Gaming Board to construct a proposed $1.74 billion on line casino advanced on the positioning of the Freedom Center printing plant in Chicago’s River West neighborhood, has some pores and skin within the sport with Sinclair.
In November 2020, Bally’s struck a 10-year, $88 million branding cope with Sinclair to rename the previous Fox regional sports activities networks as Bally Sports. Sinclair additionally obtained fairness pursuits in Bally’s valued at $199 million, based on the broadcasting firm’s annual report.
Bally’s Chairman Soo Kim stated the on line casino firm is “watching the events unfold” on the struggling RSN group.
“Because it was acquired with a lot of debt, and because its performance is bad, it looks like it will have to go through a restructuring,” Kim stated Friday. “We don’t know exactly how that restructuring will play out as relates to our relationship with the company.”
Numerous conventional pay-TV suppliers have dropped RSNs utterly, together with Dish Network, whereas digital companies equivalent to Hulu + Live TV and YouTube TV service have additionally pared again their native sports activities choices. An inaugural Marquee companion, Hulu + Live TV shed the complete Sinclair RSN portfolio, together with the Cubs community, Bally Sports and YES, in October 2020.
Ganis stated the declining cable subscriber base and elevated strain to scale back affiliate charges has created a “very challenging” surroundings for regional sports activities networks.
“They’re going to be smaller businesses than they were,” Ganis stated.
One potential answer, nonetheless within the early innings, is to bypass cable and go direct-to-consumer with a streaming regional sports activities community.
In June, New England Sports Network launched the primary direct-to-consumer streaming subscription service, providing greater than 220 stay Boston Red Sox and Bruins video games for $30 per 30 days, or an annual $330 fee. NESN is owned by the Red Sox and Bruins.
Bally Sports rolled out a streaming service throughout all of its markets in September. For $20 per 30 days or an annual charge of $190, subscribers get native NBA and NHL video games, with baseball initially restricted to 5 markets — Detroit, Kansas City, Miami, Milwaukee and Tampa Bay — pending additional negotiation for streaming rights with Major League Baseball, based on a Bally Sports information launch.
This month, the Los Angeles Clippers launched ClipperVision, a regional subscription streaming service, providing the overwhelming majority of the NBA crew’s video games to Southern California viewers for $199 per season.
The Cubs plan to introduce their very own direct-to-consumer streaming service, maybe as early as subsequent season.
“That is certainly the goal,” stated Mike McCarthy, Marquee’s normal supervisor. “And we’re watching very closely what the others have done.”
McCarthy, 62, a soft-spoken veteran sports activities govt who beforehand headed MSG Network, was introduced in to launch and lead Marquee into the aggressive RSN ecosystem in 2019. Under his steering, Marquee has crammed the schedule past the 146 Cubs video games and 39 minor league video games it aired this 12 months with documentaries, studio reveals equivalent to “Cubs 360” and sufficient peripheral programming to sate even probably the most diehard Cubs followers.
Marquee earned three regional Emmys final 12 months, that are propped towards the wall at Kenney’s workplace adjoining to the extensively transformed Wrigley Field. The community is nominated for 12 regional Emmys this 12 months, with Kenney giving all of the credit score for Marquee’s essential success to McCarthy.
At his modest workplace contained in the Marquee studios, housed within the former Cubs administrative places of work throughout Waveland Avenue from Wrigley Field, McCarthy stated the system for achievement is straightforward.
“I look at it as a television network with a guaranteed hit show, which is the Cubs game,” McCarthy stated. “A lot of TV networks would be very envious of a starter kit like that.”
The Chicago tv market is outlined by Nielsen as 3.46 million properties from Lake County in Illinois to Indiana’s LaPorte County. Major League Baseball defines Chicago’s house broadcast territory as stretching throughout Iowa, Illinois, Indiana and components of southern Wisconsin.
Marquee is obtainable on greater than 50 cable suppliers, in addition to digital platforms DirecTV Stream and fuboTV, throughout the four-state MLB house market, however its attain is shrinking as extra subscribers lower the wire. McCarthy acknowledged that the RSN mannequin has modified, however sees alternative in a direct-to-consumer streaming future to recapture Cubs followers that aren’t cable subscribers.
“The traditional cable subscription, it looks a little different than it used to,” he stated. “There may be some shrinkage, but there’s also some upside and optimism when it comes to streaming and digital consumption of our content.”
MLB.TV, the direct-to-consumer streaming service supplied by Major League Baseball, permits followers to look at out-of-market video games, however blacks out groups inside their house market territory. The DTC service within the works for Marquee would enable the Cubs to stream inside their house territory — however not exterior it — as an extension of their native TV rights.
The Red Sox have already established that precedent with their new streaming service, Kenney stated.
“We have those rights,” Kenney stated. “If we wanted to launch a DTC product, and lift the exact version of Marquee that you get on cable and offer it to a home directly we could do that.”
Kenney stated stories of the cable bundle’s demise are exaggerated, and that conventional and streaming RSN platforms will “live side-by-side” for years.
At the identical time, he acknowledges that the crew was slightly late to the sport in launching its cable community.
“If we could do anything over, I wish I could have done it sooner,” Kenney stated.
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Source: www.bostonherald.com