FanDuel Bankruptcy: Why MLB Viewership & Ad Spend Are Rising

The recent bankruptcy of FanDuel Sports Networks has cast a shadow over the future of regional sports networks (RSNs) carrying Major League Baseball games. However, despite the uncertainty surrounding the distribution landscape, advertiser interest in MLB and subscriptions to MLB streaming services remain surprisingly robust, signaling a potential shift in how fans consume the sport. The situation highlights a complex interplay between traditional media, streaming platforms, and the evolving preferences of sports viewers.

The RSN Landscape in Flux

FanDuel, a name primarily associated with daily fantasy sports and online betting, made a relatively short-lived foray into direct ownership of RSNs. Their attempt to create a new model for regional sports broadcasting ultimately failed, leading to a bankruptcy filing that has left the future of several networks in question. This collapse underscores the challenges facing RSNs as cord-cutting continues to accelerate and the economics of linear television become increasingly strained. The core issue? Declining subscriber numbers for traditional cable and satellite TV, the primary source of revenue for these networks.

The fallout from the FanDuel situation isn’t isolated. Diamond Sports Group, which owns a significant portfolio of RSNs, also filed for bankruptcy in early 2023, further destabilizing the market. Crain’s Detroit Business reported that the Detroit Tigers’ new TV network was picked up by major cable providers just hours before the season began, a positive sign, but one that doesn’t necessarily reflect the broader industry trend.

Advertiser Confidence and Streaming Growth

Despite the turmoil in the RSN sector, MLB is experiencing strong advertiser interest and a growing subscriber base for its streaming services. Yahoo Sports Australia notes that this resilience suggests a disconnect between the challenges facing RSN distribution and the overall appeal of MLB as a property for advertisers and fans. This is likely due to several factors, including the league’s broad national appeal, the popularity of individual teams, and the increasing availability of MLB content through streaming platforms like MLB.TV.

The strength of advertiser interest is particularly noteworthy. Brands are willing to pay a premium to reach the engaged audience that MLB consistently delivers. This suggests that, even with potential disruptions in traditional TV viewership, the value of MLB’s media rights remains high. The league’s ability to attract and retain advertisers is a key indicator of its financial health and its ability to navigate the changing media landscape.

Impact on Stakeholders

The RSN churn has ripple effects across multiple stakeholder groups. Teams are facing uncertainty about their revenue streams, as local broadcast rights fees are a significant source of income. Fans are potentially facing limited access to games, particularly those who have not cut the cord and rely on traditional cable or satellite TV. Cable and satellite providers are grappling with the challenge of retaining subscribers in the face of rising programming costs and the availability of alternative viewing options. And local economies that benefit from the economic activity generated by MLB teams and their broadcasts could also be affected.

The situation is particularly acute for teams in smaller markets, where local television revenue is a more critical component of their overall financial picture. Larger market teams, with national appeal and more diversified revenue streams, are better positioned to weather the storm. However, even the most financially stable teams are likely to feel the impact of the RSN disruptions.

How the MLB Media Rights Landscape Works

MLB’s media rights are divided into national and local components. National rights, which include games broadcast on networks like ESPN, Fox, and TBS, are negotiated league-wide and generate significant revenue for all 30 teams. Local rights, which cover games broadcast on RSNs, are negotiated individually by each team. This is where the current challenges are most pronounced.

Historically, RSNs have paid substantial rights fees to teams in exchange for the exclusive right to broadcast their games in a specific geographic area. These fees have become a critical source of revenue for teams, helping to fund player salaries and other operating expenses. However, as cord-cutting has accelerated, RSNs have struggled to maintain their subscriber base and, their ability to pay these high rights fees. The bankruptcy of FanDuel Sports Networks and Diamond Sports Group are direct consequences of this trend.

The Rise of MLB Streaming and Direct-to-Consumer Options

MLB has been proactively investing in its own streaming services, MLB.TV and MLB Extra Innings, as a way to mitigate the risks associated with the declining RSN landscape. MLB.TV offers live streaming of out-of-market games, although MLB Extra Innings provides access to additional games and features. The league is also exploring other direct-to-consumer options, such as a potential league-wide streaming service that would offer access to all MLB games.

The success of these streaming services is crucial to MLB’s long-term financial health. By offering fans a convenient and affordable way to watch games, MLB can reduce its reliance on RSNs and capture a larger share of the revenue generated by its media rights. The league’s ability to attract and retain streaming subscribers will be a key determinant of its success in the evolving media landscape.

Risks and Trade-offs

While MLB’s strong advertiser interest and streaming growth are encouraging signs, several risks and trade-offs remain. The ongoing uncertainty surrounding the RSN landscape could continue to weigh on team revenues. The league’s efforts to develop its own streaming services could face competition from other streaming platforms. And the potential for disputes between MLB and its players’ union over revenue sharing could further complicate the situation. Bleed Cubbie Blue provides an update on the FanDuel Sports Networks mess, highlighting the ongoing complexities.

What’s Next

The future of MLB’s regional sports coverage remains uncertain. The league is likely to continue exploring alternative distribution models, including direct-to-consumer streaming and partnerships with other media companies. Teams will need to adapt to the changing landscape by diversifying their revenue streams and finding new ways to engage with fans. The resolution of the RSN situation will likely take several years, and the outcome will have a significant impact on the future of MLB and the broader sports industry. Expect continued negotiations between teams, RSNs, and streaming platforms as all parties seek to uncover a sustainable path forward. The league will also be closely monitoring the performance of its streaming services and making adjustments as needed to maximize subscriber growth and revenue.