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May 11, 2023

Golden Knights Going 'Back to the Future' with OTA Broadcast Deal

The Vegas Golden Knights (VGK) are bucking the regional sports network model in favor of over-the-air broadcast distribution. The club recently announced it signed a five-year deal with Scripps Sports that will see all locally broadcast games delivered to residents of Nevada and the surrounding states within the club’s expanded distribution territory.

“It’s back to the future,” Bill Foley (owner, Vegas Golden Knights) said. “25 years ago, over-the-air broadcasting was dead and everything was going to cable [and satellite].”

Cable and satellite were in ~80% of homes in the late 90s. Now they reach less than half in some markets, while anyone with an antenna can get an over-the-air (OTA) broadcast station for free.

As a result, the trend looks to be headed in reverse. Vegas is the second professional sports team within the last two weeks to announce it is leaving the lucrative, but shrinking, pay-TV landscape for the promise of expanded reach of OTA.

And in the Golden Knights case, the team didn’t have to absorb much financial risk to chase those eyeballs.

“The [guaranteed] economics are roughly the equivalent of what we were getting [to start], and they go up [annually],” Foley said.

The circumstances surrounding the VGK’s exit from the RSN business are different from the ones

the Phoenix Suns faced

.

The team’s current local rights owner, AT&T SportsNet, is not embroiled in a bankruptcy proceeding and its deal with the RSN still had several years remaining on it.

However, WarnerMedia (AT&T SportsNet’s parent co.) came to the VGK in January and made it clear the company was planning to exit the local sports broadcasting business.

“We said you have three years [left] on your contract," Foley recalled. "And they said, [if we refused to let them break it, they were] just going to file bankruptcy. We didn’t really feel like we should call that bluff. They [already] owed us some money. They had been [holding back about 25% of our payments].”

So, the club negotiated a deal that would make it whole, and AT&T SportsNet agreed to carry VGK games through the first round of the playoffs (the league takes over all broadcasts beginning in the second round).

The team then got to work with Evolution Media partner Alan Gold on identifying a local broadcast solution for ’23-’24 and beyond.

“We actually considered buying some TV stations to control our own destiny in several markets,” Foley said. “We just don’t have the bandwidth. We don’t have the production capability [and] we don’t have the advertising capability to sell ads.”

Scripps does. The company will produce the VGK's local broadcasts and sell advertising and sponsorship integrations against them.

Presumably, the club could have found another RSN or DTC partner to handle production and ad sales, and either option may have come with a larger financial guarantee.  

It chose Scripps because the large station group has local affiliates capable of delivering games to fans in-market for free. The club understands it is hard to develop new fans, and spur loyalty amongst existing ones, if the target demo cannot see games.

“We want to be broadcasting locally,” Foley said. “Because AT&T SportsNet lost Dish, we were down to reaching about 35% of the Las Vegas and St. George markets; in Reno and Montana, about 10%.”

The Golden Knights will now be able to reach “100 percent of the households in [the] Las Vegas [market],” Brian Lawlor (president, Scripps Sports) said, and upwards of four million homes in total across the entire broadcast territory.

Scripps has two OTA stations in Las Vegas. It also owns and/or operates local affiliates in several of the Golden Knight’s secondary markets and plans to air games on those stations. That was appealing to a club with supporters across the broader region.

“We’re [popular] in the Rocky Mountains, Montana, Idaho, Wyoming and Utah. We have coverage in northern Arizona and eastern San Bernadino County and up into Fresno [California],” Foley said. “These are all markets that are primed for the Golden Knights [and reachable with Scripps].”

Montana is of particular importance to the VGK owner. He operates out of Deer Lodge in the summer.

Typically speaking, NHL clubs pay a nominal per household fee to the league to broadcast games outside of their home market. In this case, the league was supportive of the VGK’s effort to deliver games to more fans for free and kept the club’s out of market fees consistent.

There looks to be little downside in the deal for the VGK.

“Our penetration, on a fan level, is going to be so much greater now with all of these TV stations [carrying games] and the economics are roughly the equivalent of what we were getting,” Foley said.

In fact, the Golden Knights’ will have an opportunity to earn more than it took in from AT&T in ’22- ‘23 if viewership climbs as anticipated.

“Right now, our ratings are only 2.5, 2.7. But we’re only reaching 35% of the market,” Foley said. “If we reach 100% of the market we know our ratings are going to go up.”

And as TV ratings rise, so too should ad sales and sponsorship rates. The club will share in that upside.

The VGK also anticipate several new revenue streams emerging.

The club retained its streaming rights and will partner with Scripps on a new direct-to-consumer app.

The games “will still be free there,” Lawlor said. “But we’ll also create other content, have merchandising and ticketing opportunities, unique profiles, and maybe sports betting secondary streams. There are ways to make money in the DTC space [without putting the main feed behind a paywall].”

Scripps has free ad-supported streaming television (FAST) and virtual distribution rights too.

“Even though the situations how they got there are different, the distribution mix of both the Suns/Gray and VGN/Scripps deals will look very similar,” media rights consultant Yannick Ramcke said. “OTA, cable/satellite, OTT, with differences in the details” (think: Gray not broadcasting all matches OTA). 

Of course, that assumes the Suns/Gray deal ends up happening. On Wednesday, a U.S. bankruptcy judge blocked the tie-up.

Foley believes the value of the club’s media rights has the potential to climb “by at least two-thirds” with this new distribution approach.

“It’s [also] about owning the data and the complete fan engagement experience,” Lawlor reminded.

The team wants to be viewed as fan friendly and believes in making its product available, for free and on every platform, so that fans can engage with it as they wish.

The Golden Knight’s ability to tap into fans across several states is relatively unique. Because there is no NHL team in Utah, Wyoming or Montana, the club’s sphere of influence does not encroach on anyone else.

“Then when you keep pushing it out, the next surrounding states, there’s nobody else again,” Lawlor said.

But that shouldn’t prohibit other clubs –including those currently distributed by AT&T SportsNet (see: Utah Jazz, Colorado Rockies, Pittsburgh Pirates and Pittsburgh Penguins)– from pursuing an OTA strategy as their rights come up; particularly if they’re going to be guaranteed a meaningful portion of the revenues earned from their existing RSN partner.

Remember, population and station density is going to be greater in many markets.

Look for more teams to announce OTA broadcast deals in the weeks and months ahead.