Could HBSE Form The First Super Regional Sports Network?

JohnWallStreet

As first reported by Sportico’s Scott Soshnick (our EIC), Harris Blitzer Sports & Entertainment (HBSE) - the owner of the Philadelphia 76ers, the New Jersey Devils, Crystal Palace F.C. and the Prudential Center - is considering the possibility of adding a Major League Baseball team to its growing sports portfolio. The holding company owned by Josh Harris and David Blitzer is said to be 1 of 2 suitors actively pursuing the New York Mets. It’s unclear if SportsNet New York (SNY) would be included in the sale - Mets owners Fred & Jeff Wilpon were unwilling to part with the RSN throughout their negotiations with Steve Cohen, but the New York Post writes that the “Wilpons are finally willing to part with their television network” suggesting it's at least a possibility. Should HBSE be able to take down SNY in a deal for the NL club, the company would own 3 teams across two major metropolitan markets and have an opportunity to establish the first super regional sports network (SRSN).

Our Take: It must be noted that even if HBSE were to acquire the Mets and SNY, the formation of a SRSN is unlikely to happen anytime soon. That’s because the Sixers (who would be bringing much of the value to the network) are under a long-term contract with their current RSN partner. Dan Cohen (Octagon, SVP Global Media Rights Consulting) said that “Comcast has not intimated that they're looking to sell their RSNs and Philadelphia is the home of Comcast headquarters.” As long as those two things are true, “NBC Sports Philadelphia is not going to be willing to break their existing agreement [with the NBA franchise].”

Cobbling together the broadcast rights of teams in multiple markets is not a particularly novel concept (see: Fox Sports South, Fox Sports Southwest), but the prospect of a regional sports network owner controlling 3 teams across multiple top 5 U.S. T.V. markets is unlike anything we’ve seen before. While the pro sports organizations affiliated with the likes of Fox Sports South and Fox Sports Southwest may have stakes in their respective RSNs, "the two parties still operate as separate businesses with separate goals and KPIs in mind." Cohen said the SRSN idea is “an entirely new approach to the business - one that has many efficiencies (think: sharing of strategies/best practices/data/cross promotion/sponsors/advertisers/fan engagement) since the owner of the pipes would also own all of the content across a significant geography.”

Chris Bevilacqua (Co-Founder, Bevilacqua Helfant Ventures) believes that the industrial logic behind the formation of an SRSN is sound. The CSTV founder explained that “packaging teams across multiple markets [on a single programming channel] would give [the SRSN] leverage in carriage negotiations with distributors and result in a bigger ad sales market [for the channel]; especially if the teams were to be located in a couple of adjacent, densely populated, northeastern cities." 

The formation of a SRSN would also give the owner (in this case HBSE) pricing power with distributors. Cohen explained "like everything else in media, telco and broadband; [the cable television business] is about consolidation and scale. The more premium content that a network can offer up to an MSO or MVPD, the more they can charge in affiliate fees. It’s a flight to premium and COVID has only exacerbated [that trend].”

Comcast, Spectrum, AT&T/DirecTV and Verizon control much of the cable footprint within the New York City and Philadelphia metro markets. Both Bevilacqua and Cohen thought there was a high probability that a SRSN with the rights to the Mets and Sixers would manage to find carriage on all of them. Bevilacqua said it’s his belief “sports will remain a must carry in the cable bundle and that the bundle will re-bundle itself on the digital side.”

If cable networks end up offering a D2C solution outside of the digital bundle, having the broadcast rights to teams in multiple markets would seemingly be beneficial to a SRSN. The pool of prospective subscribers would be significantly larger than if the teams were based in the same market (as there's likely to be minimal overlap amongst the fan bases).

Cohen suggested it wasn’t beyond the realm of possibility to consider Harris and Blitzer could acquire SNY with the intention of flipping it to Comcast (which could then introduce its own SRSN with the Sixers, Flyers and Mets). “If Comcast doesn’t have an exit plan for their RSNs and decides to hold on to them, New York presents a tremendous growth opportunity. HBSE could potentially cover the cost of buying the Mets - and then some - by flipping SNY and access to the number 1 media market.”

To be clear, a HBSE-owned SRSN does not mean that Sixers games are going to be competing with Knicks and Nets games in New York City or that Mets games will be pulling viewers from Phillies broadcasts in Philadelphia. Territorial restrictions prevent teams from televising games outside of their defined local markets for that exact reason.

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