Dolan, NBA’s Other Big Market Owners Upset Rights Deal Makes Life Tougher on RSNs

Dolan, NBA’s Other Big Market Owners Upset Rights Deal Makes Life Tougher on RSNs

The NBA recently announced a new 11-year rights deal with ESPN, NBCUniversal, and Amazon worth $74.6 billion. The agreements, which start in ’25-’26, are worth 2.6x more than the league’s expiring tie-ups on a per-year basis.

The large increase seemingly represents a successful round of negotiations, particularly when one accounts for the shrinking pay TV landscape.

“The auction that accidentally ended up happening [between WBD, NBCUniversal, and Amazon] benefited them. The NBA got about 30% more than [it] would have without it, and nobody planned on that,” media consultant Patrick Crakes said.

But not every stakeholder is pleased. New York Knicks owner James Dolan recently voiced his objections to the league’s new national television and streaming package in a letter to the NBA Board of Governors.

"The increased number of exclusive and non-exclusive games means that national partners would have the ability to air nearly half of the regular season and all postseason games. This reduction in available games for RSNs risks rendering the entire RSN model unviable,” Dolan wrote.

MSG Network’s executive chairman was also critical of the NBA’s revenue sharing policies and the percentage of the new rights deal that will be allocated to the league office.

While Dolan was the lone governor to vote ‘no’, he’s not the only one concerned about growing pressure on the RSN model and the declining number of exclusive games for the local cable networks to air. Clubs in several of the leagues’ marquee markets are said to share similar worries.

“There’s validity to the new deal making life tougher for the regionals,” one former prominent media executive said.

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At one time, regional sports networks carried the bulk of the local teams’ games –including much of the postseason– on an exclusive basis.

“What has happened though is as rights deals have gotten richer over time, the [NBA, NHL, and MLB] have increasingly stripped inventory from the local markets to give to national broadcasters,” the former media executive said. “Then they went and allowed some non-exclusive games to be shown side-by-side on local/regional and national.”

Now, fans have access to so many games via the national networks, including many of the most desirable ones (think: featuring high-profile players, postseason matchups), that at least some no longer feel the need to subscribe to their local regional sports channel–or even the cable bundle itself.

The national networks provide the three leagues with valuable reach. It’s necessary for fans across the country, including casuals in-market, to be able to see the leagues’ best players to grow the games.

“But how much is enough,” the former media executive asked. “Viacom started streaming so much of its product that it lost its [must-have] nature. It’s why the company has struggled in recent years relative to other programmers.”

The loss of game inventory, or at least its exclusivity, will put additional pressure on a system already under duress (think: growing rights fees, declining revenues/audience). It’s logical to wonder when the scale tips and the RSN model really isn’t viable any longer.

We’re not there yet. Diamond Sports Group’s troubles are largely debt driven.

But Dolan believes the NBA’s latest rights deal, which further de-emphasizes the local markets, has pushed it to the brink. 

"The NBA has made the move to an NFL model. Soon, your only revenue concern will be the sale of tickets and what color next year's jersey will be,” he wrote.

That may not sound like a bad thing. The NFL has rights deals in place worth $110 billion over the next 11 years (with a lot less inventory than the NBA), and the bulk of its games air on broadcast networks. By contrast, RSNs are widely expected to be financially pressed in many markets in the years ahead.

But big market clubs, like the Knicks, do not want a homogenized league.

Dolan “paid up to be able to generate revenues in the local market that should outperform those in other markets, and he’s upset because he feels like those [opportunities] are being taken away from him,” one high-ranking club executive explained. 

And there’s no guarantee that gross media revenues would be any higher if the teams’ local media rights were pooled together, anyway.

“You have to take real risk to find out. Colossal risk,” the high-ranking club executive said. “And it’s easier for the Memphis Grizzlies to take that risk than it is for the New York Knicks [simply] because the Grizzlies have a tremendous amount of upside when it comes to local rights and the Knicks have a tremendous amount of downside.”

There’s no reason to believe Dolan’s fears are going to become a reality at the completion of the next TV cycle. However, logic suggests the NBA and other leagues seeking to keep rights revenues climbing will have to allocate more games and/or more valuable rights to do so–and that inventory is going to come from the regional sports networks.

“Truth is the local games will be significantly under earning going forward versus national games,” Crakes said. “It only makes sense to elevate some of that underearning local inventory up to overearning national inventory.”

A reallocation of games is likely going to have a direct negative financial impact on local club revenues.

“All team rights deals basically say if a matchup becomes a non-exclusive game, it might get a 50 percent reduction [in fees], and for preempted games it gets a 100 percent reduction,” the former prominent media executive said.

“And at some point, if too much inventory gets taken away, the network has the right to terminate the deal,” he added.

That includes MSGN–even though the Dolans control both the network and the Knicks (and Rangers). Remember, the companies have different public shareholder bases.

An increasing number of games migrating to national networks could end up hurting the regional sports networks’ sponsorship business too. 

“If an advertiser can buy up the whole national package in the banking category, do they need local market deals or do they cut out MSG Network and just buy MSG arena inventory,” the former prominent media executive wondered.

It’s a fair question. And if the answer is no, how do the networks offset the lost revenue?

Big market RSNs, like MSGN, will have the most time to figure it out. But if Dolan is right, and the new deal further damages a broken model, it may be less time than most are anticipating.

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