A regional sports network group went bankrupt. MLB teams depend on those revenues. Here’s what’s at stake. - The Boston Globe (2024)

A January settlement is in sight, with Amazon a possible savior of DSG according to the Wall Street Journal, but uncertainty persists until a deal is struck.

This past season, MLB took over the broadcasting of two former DSG teams, the Diamondbacks and the Padres, at a 20 percent discount of what they usually received from their RSNs. If it has to, MLB is preparing to take over broadcasting and distribution duties of anywhere from 5-16 teams this coming season, according to a source familiar with the league’s thinking.

Thanks to their 80 percent stake in NESN, the RSN co-owned with the Bruins, the Red Sox will not be directly affected by the case. The importance of a stable, well-run RSN cannot be understated. Baseball’s RSNs paid more than $2.3 billion to teams in 2022, accounting for 22 percent of the sport’s $10-plus billion in revenues, according to Forbes.

Local media rights agreements are supposed to provide a lucrative and guaranteed annual revenue stream that teams count on to calculate payroll commitments, court free agents, and make trades. Without those guarantees, teams are in limbo.

Forecast: Limited visibility

The Minnesota Twins and Cleveland Guardians are two teams wondering where their next RSN paycheck is coming from — and how much it will be.

The Twins received $42 million in payments from Bally Sports North in 2022. With their deal with Diamond just expired, the Twins have no certainty on how much local TV revenue they will receive this coming season. It’s one reason why the team’s payroll, at a record $156 million last year, will drop.

“It creates a little bit of uncertainty around the revenue stream … that’s just really being direct about it,” said Twins president of baseball operations Derek Falvey. “It impacts your planning to some degree and how it impacts your overall budget, but that’s something we’re going to have to navigate through.”

The Guardians are unsure if Bally Sports Great Lakes will pay them the $55 million owed for 2024.

“One of the historic benefits of having cable deals in place is it’s a fixed and predictable form of revenue that we know and we can then plan around,” said Chris Antonetti, president of baseball operations for the Guardians. “Over the last couple of years, and now specifically, there’s uncertainty around what had been a relatively stable revenue source for us.”

There’s somewhat of a leap of faith involved as the Guardians plot their offseason team-building strategy and how they will afford it.

“We have to be thoughtful and think about what are the probabilities of different outcomes and what is the risk tolerance if things don’t go the way we expect and revenue ends up being a lot less,” said Antonetti.

Red Sox have an edge

The Red Sox do not have such worries. They will receive their customary share of revenues from NESN, which was estimated at $97 million in 2022 by Forbes.

“There’s not always a straight line between having an RSN and success,” said Red Sox chairman Tom Werner. “We’re very pleased with the way that [NESN president and CEO] Sean McGrail and his colleagues run their RSN.

“It’s called the ‘virtuous circle,’ right? The more money that NESN can make, the more money we can invest in the players and baseball personnel. But it’s very important for the ecosystem to survive.”

Last week, the Red Sox’ stake in the ecosystem actually grew. Back in November, the Pittsburgh Penguins — the NHL team owned by Fenway Sports Group, which also owns the Red Sox and NESN — became the owner of SportsNet Pittsburgh, the Pittsburgh RSN that had broadcast both Penguins and Pittsburgh Pirates games through last season.

After last month’s owners meetings in Texas, there was still uncertainty on whether MLB or SportsNet Pittsburgh would take over Pirates broadcasts in 2024. The answer came when the team announced they had entered into a joint ownership agreement — a 50-50 split, according to an industry source — of SportsNet Pittsburgh.

NESN, which began managing the production of Penguins games this season, will absorb Pirates production responsibilities. That means the Red Sox, via their Penguins-FSG connection, will benefit from another MLB team’s broadcasts. (What they do with that extra revenue is a topic, and story, for another day.)

What’s next, though, is that the 2024 season should mark the final round of the DSG-MLB brawl. From 2025 on, MLB is intent on reimagining the entire RSN model.

What does the future hold?

The number of cord-cutters is gradually growing, particularly among the attractive younger demographic, which is increasingly opting to stream the teams it follows rather than subscribe to a traditional and expensive cable bundle where sports is just one option.

“Everybody who’s unplugged that I’ve talked to is very, very excited about what’s going to happen and they think it’s far for the better,” said baseball agent Scott Boras. “I think the streaming part is a real positive for all markets. All the teams and clubs I’ve talked to that are unplugged, they’re very excited about the fact that they’ve gone from 1 million into 4 or 5 million opportunities to sell the rights.”

Some sort of hybrid broadcast solution could take shape, with some (but not necessarily all) local TV rights of the 30 teams consolidated into an MLB-run model. There also could be a solution where MLB joins other leagues in owning a multi-sport streaming platform where the leagues directly control distribution and broadcasting.

The appetite for sports in the entertainment industry is massive, and the more than 2,400 games in an MLB regular season elevates its role in delivering that content. Nielsen estimates the audience for MLB games in the 2023 season was 407 million people, more than twice the NBA (122 million) and NHL (77 million) combined.

There are other RSNs besides NESN that are working just fine, among them the Yankees’ YES Network. The Dodgers’ SportsNet LA setup, a 25-year, $8.35 billion deal that runs through 2039, which meant $136 million in revenues to the team in 2022. It’s in great shape: New sponsors and advertisers have yet to be locked up following the Ohtani deal, but the influx of expected new dollars played a significant role in the Dodgers going above and beyond with their commitment.

The MLB economic engine still produces substantial horsepower from its chief product, the players, and chief customers, the fans. Combining the two into seven months of programming that will fuel the sport’s growth is a task the league is trying hard to complete to everyone’s satisfaction.

“The end goal is to make it as fan friendly as possible, where it’s easy to find your game of choice and wherever you are in the world, you have access to it,” said Sam Kennedy, president and CEO of the Red Sox. “How you get there is going to take awhile. There has to be a lot of analyses, but those conversations are starting.”

Michael Silverman can be reached at michael.silverman@globe.com.