Main Street Sports Group Worth Saving for Teams and Strategics

Big four clubs tied to FanDuel Sports Network, including the nine Major League Baseball teams that recently terminated contracts with Main Street Sports Group (MSSG), have reportedly given the RSN operator until the end of the month to find a guarantor for the revamped agreements it has proposed (they include reduced and/or referred rights fees, profit share minimums, and extensions). Those organizations have threatened to walk away from MSSG and pursue alternative distribution channels if their deadline is not met.

MSSG failed to make scheduled payments to NBA and NHL teams earlier this month.

The counterintuitive reality, however, is this: those franchises should be hoping that MSSG can find a strategic partner, still inside the pay TV bundle, who recognizes there is an opportunity to obtain a sizable local rights portfolio at an attractive valuation. It’s not easy to recreate affordable, one-stop access with optionality across multiple teams in local markets. 

If Main Street goes away, the scale and economics it provides are likely to disappear with it. Teams that have left the RSN ecosystem are, with just a single exception, generating less income from their rights (even compared to proposed reduced rates).

Logic suggests the right buyer could stabilize the collection of RSNs by capitalizing on multi-channel distribution (see: pay TV), while it continues to build out MSSG’s DTC channels and explores new monetization models, partnerships, and betting integrations.

“The biggest problems that MSSG’s DTC products currently have is lack of flexibility in setting important business terms with both distribution partners and customers, that includes packaging and pricing,” Patrick Crakes (principal, Crakes Media) said.

Just look at Disney and Spectrum/Charter Communications. Ad-supported versions of DIS+ are now available to all of the distributor’s basic pay TV and broadband subscribers for free.

Main Street Sports Group is among the most misunderstood properties in sports media. 

The current narrative around the company has led many observers to conclude regional sports networks are no longer viable (think: uncertainty over local rights contracts, speculation about potential buyers) and that the future belongs to broadcast stations, streamers, and/or league-controlled solutions.

The truth is that the value of, and audience for, live local sports remain robust, particularly in contrast to entertainment programming. There are more fans tuning in to root for their favorite teams nightly, not fewer (largely due to OOH measurement), and RSN game broadcasts continue to be amongst the highest-rated programs on linear television.

No other genre can deliver the combination of content frequency and real-time engagement as sports does across platforms.

“The demand for these RSNs is there and the revenues they generate remain important to the teams,” Patrick Crakes (principal, Crakes Media) said. “It’s just the market for them and dollars generated are smaller and more highly segmented than they used to be.”

That’s because many of the people who had been subsidizing local rights income, but were not watching games on them, have since opted out of the cable bundle.

MSSG’s current problem is that it “does not to have enough diverse media assets to lay directly alongside or tangentially in distribution conversations with pay TV distributors,” Crakes said. “You need strategics to make all this work and Main Street’s not a strategic media entity.”

However, a sale to the right buyer could alter its negotiating dynamics and solidify the RSN conglomerate. 

“DTC is a plus plus with pay TV distribution,” Crakes said. “Right now, MSSG’s pricing is high because it has been fully protecting pay TV distributors’ bundled pricing despite the tiering of RSNs. It must unlock that and experiment with pricing and new bundling to scale more.”

A sale to an entity with linear reach would be the best outcome for rights owners too.

“It's really simple,” Crakes said. “You’re either going to get a lower multiple of what you currently have coming in from MSSG or you're going to get next to zero if you go to broadcast stations or streaming only.”

Distributors have largely drawn a line in the sand in opposition of retransmission fees for subchannels and digital affiliate stations, and standalone DTC sports streaming services only attract the most fanatical of fans at current prices.

There is undoubtedly value to be extracted from Main Street’s expansive portfolio, now available at a significant discount compared to the peak of the pre-cord-cutting era, under the right ownership.

And as the industry realigns, there is an opportunity for a strategic to acquire these unique assets, integrate them across a broader media ecosystem, and reset how local broadcasts are delivered to fans and value is captured. Teams are keen to partner with a stable non-league solution.

Baseball teams are probably the least wary of its league’s solution. But remember, MLB remains anchored to pay TV and has told clubs it can go back to Main Street if more money is available.

By contrast, the NBA has spoken of creating a centralized digital clearinghouse for its clubs as a possible path forward.

Main Street’s volume (think: 3,000+ annual live events) and persistent audience presence (think: nightly viewership that is comparable to national networks, like ESPN and TNT) could make it an anchor, or complimentary service, for a content platform seeking to drive subscriptions and reduce churn. Its aggregation of MLB, NBA, and NHL teams in multiple markets provides sticky year-round programming that keeps subscriptions active longer.

The company also manages its product in-house, enabling it to maintain greater control over issues management, enhancements, and app stability, which should be attractive.

That means a buyer “can maintain a local approach to the game presentation within the team brand cost effectively,” Crakes said.

The logical question follow-up question is who makes sense as a potential acquirer? 

“It probably has to be a vertically integrated media company with a foot in the pay TV bundle; somebody who has sports pay TV channels that still that matter and can lever these RSNs together with them to monetize,” Crakes said.

Fubo fits that bill.

“It’s a channel provider so you can set the rate card with them, they have digital assets, and then these RSNs could all be rolled up, because Disney would own them, into the ESPN app more efficiently and they can be used in negotiations for the ESPN-Disney channels.”

Paramount would also work.     

“It's got to be somebody who's on offense,” Crakes.

Comcast could too. Though, it seemingly has some larger moves to make first.

A PE firm capable of getting MSSG to a place where a strategic will acquire it a few years down the road as consolidation picks also makes sense.

While sports media observers remain focused on the damage from the old model, opportunity remains in MSSG’s portfolio.

“Everybody needs to step back and take a look at these assets in the context of what they are and where local rights can go,” Crakes said. “RSNs remain necessary because the way you get actual economics from local sports rights is still from pay TV. An acquirer who stabilizes revenues could, at the very least, manage the business for cash and if it can bridge itself long enough, the business distribution system probably has growth to it.”

Editor Note: Patrick Crakes is a former Fox Sports SVP of programming, research & content strategy, the Principal of Crakes Media, and a JohnWallStreet Advisory consultant. Want to connect with Pat on media rights strategy, valuations and negotiations, capital allocation, distribution, acquisition, marketing, and/or programming strategy, reach out to Corey at [email protected] and he’ll make the connection.