Discovery plans to have Warner Bros. leave the RSN business

Warner Bros. reported. Discovery, owner of AT&T SportsNet and minority shareholder of Root Sports, has announced that it will stop participating in the regional sports network business, according to reports from John Aurand of the Sports Business Journal And Joe Flint from The Wall Street Journal. WBD has local broadcast agreements with a few teams in the MLB, NBA, and NHL.

The affected MLB teams are the Rockies, Astros, and Pirates. The Mariners also have a relationship with Warner Bros. Pictures. discovery; Ourand writes that the Mariners own 60% of the Root Sports project in Seattle, with the remaining 40% owned by WBD. However, Flint reported that the Seattle Regional Sports Network is not part of WBD’s ongoing proceedings.

Ourand wrote that the channel had informed the teams that they would have until March 31 to reach an agreement to take back their broadcast rights from RSN; If no deal is agreed upon, the networks are expected to be liquidated via Chapter 7 bankruptcy. Flint quotes a WBD speech, which told the clubs “The company will not have enough cash to pay the upcoming rights feesHe suggested that the teams reclaim ownership of the broadcast rights without a purchase price beyond the waiver of civil claims against the networks.

Colorado, Houston and Pittsburgh join the list of nearly half of the teams facing some uncertainty over the potential bankruptcy of the Diamond Sports group that operates the Bally Networks. Diamond, who is in charge of broadcasting for 14 clubs, defaulted on interest payments to creditors last week and is assessing whether it will be able to stick to its broadcasting deals.

The difficulties facing both conglomerates come in response to declining cable ownership rates. Cord cutting has increased dramatically over the past few years and is expected to continue given the rise of streaming alternatives. Presented by Warner Bros. Discovery issued a public statement to Aurand noting the financial troubles: “AT&T SportsNet isn’t immune to the well-known challenges facing the entire RSN industry. We will continue to engage in private conversations with our partners as we seek to identify reasonable and constructive solutions.“

The next steps for franchises are not clear. Commissioner Rob Manfred told reporters last week that the league would be in a position to take over the market’s broadcasts, if necessary, from the networks managed by Diamond. Presumably this also applied to the three clubs affected by the WBD decision. There are no indications that fans in those markets should worry about the upcoming blackout due to the RSN meltdown. Ourand reports that WBD has notified the clubs that they will be allowed to use the same production team/equipment for the existing agreement if those teams agree to take back their broadcast rights.

However, the events of the past few weeks have highlighted questions about the long-term viability of setting up the Regional Sports Network. The WBD’s withdrawal from RSN affects only a tenth of MLB teams, but the ongoing Diamond uncertainty could put many in a tough spot over the coming weeks.