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Report: Fanatics could enter US regional sports network market

CEO Michael Rubin has held “several” meetings with key executives, reports SBJ.

12 October 2021 Steve McCaskill
Fanatics is reportedly investigating the possibility of entering the struggling regional sports network (RSN) business in the US.

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  • Discussions put on hold but could reportedly recommence in early 2022
  • Fanatics’ interest comes with RSN owners NBCUniversal, AT&T and Sinclair exploring sale options

Sports retailer Fanatics is reportedly investigating the possibility of entering the struggling regional sports network (RSN) business in the US.

Sports Business Journal reports that chief executive Michael Rubin has held “several” meetings with league, team, distribution and network executives in recent months, and although these discussions have been dormant for several weeks they could be picked up in the new year.

RSNs are an important revenue stream for many major league franchises but such broadcasters have struggled in recent times thanks to a vicious cycle of increased transmission fees and declining viewership.

Subscriber numbers have been impacted by ‘cord cutting’ and disagreements with distributors that have seen some RSNs taken off certain TV platforms. Reports that NBCUniversal and AT&T are seeking buyers for their RSNs have circulated for some time, while there is doubt about the future of Sinclair’s Diamond Sports Group.

The subsidiary, which operates the 21 Bally Sports RSNs, is said to be facing bankruptcy after struggling with the US$10 billion cost of acquiring the former Fox Sports-branded networks in 2019, compounded by distribution disputes and the impact of the pandemic.

However, this climate of uncertainty would help explain why sports teams and organisations would be at least interested in talking to an outsider like Fanatics. The retailer sells merchandise and trading cards under licence from several major leagues and has a market valuation of more than US$18 billion.

Crucially, the company also has a database of more than 80 million customers, complete with valuable insight into their purchasing habits. Fanatics might see local media rights as a vehicle to drive sales in its other businesses, making RSNs a more viable prospect than they are for traditional broadcasters.

The same logic has been employed by others to great effect. Telcos such as BT have invested in sports rights to safeguard and grow revenues in their core business areas, while Amazon has secured streaming rights that provide a boost to Prime subscriptions during key shopping periods.

Such a model would allow Fanatics to sustain short-term losses whilst ensuring sports teams receive the same amount in local broadcast revenue.

Going with a relative outsider would, however, carry greater risk than the traditional broadcast models that have been so lucrative in the past, and it is thought that other options are being considered by rights holders and RSNs.

Sinclair, for example, has touted a direct-to-consumer (DTC) streaming proposition as a solution to its ills, but this requires approval from other stakeholders. One of them is Major League Baseball (MLB), which could emerge as a potential investor in the proposed venture.

Such a development would help provide Sinclair with capital to get the project off the ground and eventually safeguard revenue for teams. If the business is successful, then MLB could eventually sell its stake to the benefit of its franchise owners.

Fanatics has been approached by SportsPro for comment.

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