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May 4, 2023

Suns Put Fans First, Announce Local Games to be Available OTA

The Phoenix Suns have announced plans to become the first big four franchise in modern media history to make 100% of non-national exclusive games available via over-the-air broadcast stations and in-market streaming beginning next season. Future Phoenix Mercury games will also be made available, for free, throughout the Valley.

The Suns recently inked a five-year rights deal with Gray Television, which owns three local broadcast affiliates across the Phoenix, Tucson and Yuma markets, and Kiswe, a streaming production company under the same umbrella. More than three times the number of homes in market will gain access to Suns and Mercury games on linear television under the terms of the new pact, and the teams expect to draw from an even broader audience by offering an untethered streaming option.

“The value of a franchise is based on its ability to generate new fans,” one long-time media consultant said. “The current RSN model is not working. It is essentially pay-TV centric, and the pay-TV audience is declining by 10-12% per year. There’s upside and growth in moving to a multiplatform model that reaches fans across all screens as the Suns and Mercury are doing.”

The regional sports network model worked exceedingly well for sports teams (and the RSNs) throughout the '90s, '00s and '10s as consumers increasingly migrated to cable, satellite and telco platforms.

But that trend peaked in the early ‘10s and as it turns out, the model stumbles when people move to other distribution mechanisms and to other screens.

Now teams are stuck in a death spiral. Fewer and fewer fans are seeing games, but the clubs do not want –and in some cases cannot afford– to walk away from the guaranteed rights fees. And nearly all still have years remaining on their existing broadcast deals.

The Suns and Mercury were exceptions. Their existing deals with Bally's have expired and new owner Mat Ishbia is prioritizing developing the local fan base and improving the fan experience over the teams’ short-term finances. He believes if the clubs do right by the fans, business success will follow.

The teams' new deals with Gray will increase the number of households across the Valley with access to games from 800,000 to 2.8 million.

The teams' pacts with Gray and Kiswe allow for distribution across technologies. While that is best for fans, it should also be valuable for the clubs to have that kind of flexibility in a rapidly evolving media landscape.

“You need to be able to offer up your content on the screens wherever your fans are watching the games,” the media consultant said. “Audience behavior has changed dramatically over the past 15 years, and this revamped approach to regional telecasts reflects those changes.”

While the teams' new streaming option provides hardcore fans with flexibility, it is also expected to expand the potential fan base.

“There’s a substantial percentage in every DMA these days that are broadband only homes–and they’re growing,” the media analyst said. Rights owners “need to be able to reach them [too].”

The Suns and Mercury will stream content live on the teams' respective websites.

The former has not yet priced its offering.

However, the subscription rates for regional sports streaming services are relatively low. Expect the Suns to learn from that and price accordingly.

Bally Sports+ costs $19.99/mo. or $189.99/annually.

Mercury games will be streamed for free (advertising-based video on demand).

The Suns will receive a broadcast rights fee from Gray and Kiswe, though it is believed to be meaningfully smaller than the one it has been drawing from Diamond. The expectation is the reach gained will open the door to new and/or additional revenue opportunities that more than offset the difference.

The media consultant said that having more than 3x the number of eyeballs on games will “not only enhance the value of their telecast and the value of advertising on their telecast, it [also] enhances things like courtside signage, promotions, entitlements and marketing opportunities.”

Ishbia is convinced widespread distribution will also lead to long-term franchise value appreciation. It’s not a coincidence that the NFL has become the country’s most popular sport. The bulk of league games are available over-the-air.

If the Suns are successful in replacing short-term revenues, more teams will follow suit and leave the exclusive pay-TV model as their existing rights agreements expire.

But one can assume that most will be hesitant to make a similar move until that becomes apparent. 

The fact that the Suns and Mercury already produce all their content in-house also made it easier for them to move distribution channels than it might be for other teams.

Patrick Crakes (principal, Crakes Media) has modeled the strategy out countless times and doubts the Suns will be able to net out a winner over the next few years.

“It’s challenging to see how over-the-air broadcast, which is pure advertising, and streaming [subscription sales], which won’t scale at an effective price, can help keep the economics derived from their current [RSN] rights fee intact let alone grow it to anywhere close to what they might have planned in any renewal with Bally's,” he said. Of course, that assumes Gray and Kiswe are paying relatively nominal fees.  

So, Crakes suspects there will be additional distribution platforms (think: a return to Pay TV distribution via a sports tier) and broadcast transmission standards added, including an ATSC 3.0 signal broadcast, to help the teams capture additional fans and revenue. He noted there are already several stations in the market transmitting the signal, including the Gray stations involved in the deal.

It is possible if the transmission format gains traction (most people don’t have an ATSC 3.0 compatible TV).

But the belief is between the range of stations in the marketplace that Gray can offer, and the skills Kiswe can offer up in streaming, plus the fact that these Gray stations will be picked up on pay-TV in the market, that the Suns will be reaching fans wherever they want to be.

For reference purposes, Gray is the second largest broadcaster in the country. It owns and/or operates 180 stations across 113 markets.

Unsurprisingly, news that fans in market will be able to see Kevin Durant, Devin Booker, Diana Taurasi and Brittney Griner play for free has been well received.

“That bodes well for the success of everybody involved,” the media consultant said.

On Wednesday, Diamond Sports Holdings filed suit against the Suns. The media conglomerate claims its right to first refusal has been violated. 

In response, Ishbia said in a statement, "Nobody is surprised by this lawsuit and it will not stop the Phoenix Suns and Mercury from making our games available to as many people as we possibly can. The fans, players, and everyone in our organization knows this is how all of us win together, on and off the court. I firmly believe the future success of the NBA and WNBA is about getting our product to everyone who wants it versus just the people who pay for it."

For informational purposes, Endeavor and WME Sports advised the Suns on the deal.