Strike 2: Warner Bros Discovery Wants Out Of Regional Sports Business: Report

AT&T SportsNet Pittsburgh
Warner Bros. Discovery-owned RSNs include AT&T SportsNet Pittsburgh. (Image credit: Warner Bros. Discovery)

Warner Bros. Discovery, which operates three regional sports networks and has a stake in a fourth, has sent letters to teams and leagues saying it plans to get out of the troubled local sports business, according to a published report.

The alarm from Warner Bros. Discovery echoes the situation with the Bally Sports RSNs, whose owner recently missed an interest payment.

Sports Business Journal said WBD has told teams it wants to negotiate agreements for the teams to take back the rights to broadcast games. If a deal can't be reached, the RSNs would head toward a bankruptcy filing.

“AT&T SportsNet is not immune to the well-known challenges that the entire RSN industry is facing,” Warner Bros. Discovery said in a statement sent to SBJ. “We will continue to engage in private conversations with our partners as we seek to identify reasonable and constructive solutions.”

WBD operates AT&T SportsNet channels in Denver, Houston and Pittsburgh. It also has a minority stake in Root Sports in Seattle. The company acquired the RSN business when Discovery bought WarnerMedia from AT&T.

 According to The Wall Street Journal, AT&T SportsNet’s letter to the teams said that “the business will not have sufficient cash to pay the upcoming rights fees.” The teams were also told parent company Warner Bros. Discovery, which is cutting costs to cut debt, will not bail out its RSNs.

The letter states that “unless we can reach a deal to transfer ownership of the network . . . our only realistic option is to file for Chapter 7 liquidation,”

Also Read: Scripps Sports: Phones ‘Already Ringing’ as Regional Sports Nets Implode

A source familiar with the situation said Warner Bros. Discovery’s talks with the teams and the leagues have been productive at this point. The source also indicated that the AT&T SportsNet talks are not nearly as contentious as the discussions with Diamond Sports Group, which was turned into an independently operated subsidiary of Sinclair Broadcast Group, with its own executive team, in order to rebuild working relationships.

The RSN business, once a cash cow, has been squeezed lately as cord-cutting erodes pay TV subscribers and the cost of sports rights escalates.

Diamond Sports, which runs the 19 Bally Sports RSNs bought by Sinclair in 2019, earlier this month missed a payment on part of its $8 billion in debt resulting from the purchase. 

Major League Baseball and the National Basketball Association have been keeping an eye on the situation and have started to make plans to ensure that games are televised even if the RSN’s go bankrupt. 

With baseball’s spring training in full swing, the teams carried by the AT&T SportsNet RSNs are the Pittsburgh Pirates, the Houston Astros and the Colorado Rockies. The networks also carry NBA and NHL teams including the Houston Rockets, Utah Jazz and Pittsburgh Penguins. ■

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.