Scripps Sees Opportunity in 'Broken' RSN Business

Scripps Sports

With the regional sports network business model broken, the E.W. Scripps Co. sees an opportunity to step up and play hardball with the big boys.

Brian Lawlor, who was named president of the new Scripps Sports division, told Broadcasting+Cable that cord-cutting has become a "massive problem" for teams and leagues. That makes his company's broadcast stations and linear networks attractive to rights holders looking to reach a bigger share of fans and potential fans.

TV sports started on broadcast. Now, "what's old is new again," Lawlor said.

Brian Lawlor

Brian Lawlor (Image credit: E.W. Scripps)

Before launching its sports division, Scripps consolidated its news assets into a Scripps News unit, focusing its efforts on two key forms of content that still drive linear viewing.

"Probably 95% of all the revenue inside of our company is attached to linear," Lawlor said. "There are no better assets on linear television than sports. I believe we have an expertise in local and an expertise in sports. We’re bringing an acute focus to maybe our two most valuable areas."

Two-Pronged Strategy

Scripps has a two-pronged sports strategy as it takes its swings at the sports business. It will seek national deals with leagues to turn Ion network into a channel that looks like TNT, with a combination of entertainment and sports. Ion, though, will aim to showcase the leagues it does business with, rather than simply programming different sports on different nights, Lawlor said.

Scripps focused on sports after acquiring Ion Media for $2.65 million last year. "We own the fifth-largest broadcast network in America," he said. "The first four have a lot of sports rights. There are a lot of other sports rights out there. ABC, NBC, CBS and Fox can only absorb so much of it."

Scripps will also look to make local deals, particularly in markets where it has two stations, like Detroit, Phoenix and Denver.

Also: Fubo TV Deal with Altitude Sports Makes Denver One of the Nation's Most Interesting RSN Regions

"Big markets with big sports and RSNs with problems provide an opportunity for us," he said. "I think our portfolio is unique. I think our proposition is unique."

Costly Rights

Lawlor said Scripps would be "interested in looking at everything" when it comes to national and local sports rights, including the NBA, and that it has "been engaged in many conversations with leagues and teams over the past year."

Blitzing costly sports rights will put a scare into Wall Street — Scripps stock fell 8.1% to $13.50 on (a selloff day overall) Thursday — so the company "will be very selective and figure out where we can create the most value for a league and for ourselves," Lawlor said.

Lawlor said Scripps doesn’t have a specific budget for sports rights. "It will all be case-by-case and we will run models and develop P&Ls and ROIs and figure out what make sense and what doesn’t," he said. "And again, every deal isn’t going to be right for us."

The problems Sinclair Broadcast Group in particular has been having with its Bally Sports RSNs have been well-chronicled. It paid more than $9 billion to The Walt Disney Co. for what were then known as the Fox RSNs, and now is burdened with debt as sports rights costs rise and subscribers fall.

Rights for regional sports networks will be coming up for renewal and "I would certainly expect in the next couple of months that we’ll start chipping away at some deals," he said.

In the current environment, Scripps won’t be trying to pay more than the RSNs are currently paying.

"The RSNs aren’t going to pay what they used to pay," Lawlor said. "Their next deals are going to look completely different than the last ones. It’s more of a conversation about what is the value to their franchise and brand if they’re reaching 100% of the audience versus 40%."

The new strategy might put Scripps in competition with the networks its local stations are affiliated with — networks that Scripps pays "reverse compensation" fees that help the networks pay for sports rights. 

"We have great relationships with our networks and we’re very comfortable with what we pay," he said. "I think live sports is the primary foundational part of the network-affiliate model."

On the local level, having both live news and live sports would demonstrate that its stations are local community stations.

The shrinkage of RSN distribution means that "teams can’t even reach 50% of all the households in their home viewing market," Lawlor said. "That’s not a good business model if you can’t reach half of your potential customers" and that people who aren’t hard-core fans can’t stumble onto games, either by flipping through available channels or through search.

New Model

Lawlor said a new local sports business model might entail having a broadcaster work with a streamer, with a station’s broad reach helping to funnel direct-to-consumer opportunities. Deals with teams and leagues would take advantage of revenue streams from merchandise, ticket sales generated and sports betting, he added.

The company will be looking at deals that involve full seasons worth of games, partial seasons, or even a handful of games, as Nexstar Media Group did in Los Angeles with the Clippers.

Scripps already does some sports business. It has the right to the college Big Sky Conference. Some of its stations show NFL Monday Night Football or Thursday Night Football when a local team is involved. Scripps stations also have preseason partnerships with NFL teams and air coaches’ shows.

"Now there’s an opportunity to just go a little deeper with more elaborate rights," Lawlor said. "The RSNs are in trouble and I think linear television will be the savior and the solution for many teams and leagues." ■

Jon Lafayette

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.