Warner Bros. Discovery Inc. is informing the professional-sports teams whose games are carried on three of its regional sports networks that it wishes to cease operating the channels and exit the business, according to The Wall Street Journal citing people familiar with the matter.
The three regional sports networks were inherited by Warner Bros. Discovery Inc. when it acquired control of the WarnerMedia assets from AT&T Inc. The channels—which are still branded as AT&T SportsNet—serve teams in Pittsburgh, Houston, Colorado and Utah—and carry baseball, basketball and hockey.
In a letter sent Friday from the unit’s president Patrick Crumb teams were warned that “the business will not have sufficient cash to pay the upcoming rights fees,” people familiar with the letter said. The teams were also told that Warner Bros. Discovery “will not fund our shortfalls,” they said.
The letter proposes that AT&T SportsNet transfer ownership of the networks and programming rights to the teams for no purchase price consideration beyond a release by the teams of any future claims against the networks.
The affected teams include the National Basketball Association’s Houston Rockets and Utah Jazz; Major League Baseball’s Pittsburgh Pirates, Houston Astros and Colorado Rockies; and the National Hockey League’s Pittsburgh Penguins, the people familiar with the matter said.
The NBA, MLB and NHL are also being informed by Warner Bros. Discovery of the situation, the people said.
AT&T Sports Networks also owns a minority stake in an additional regional sports network controlled by the Seattle Mariners, which isn’t part of this proceeding, they said.
Regional sports networks were once the envy of the media industry, due in part to the high distribution fees they command from cable and satellite operators. But the rapid acceleration of cord-cutting has hit sports channels particularly hard, and many are challenged to continue to pay the rights fees to teams in return for carrying their games.
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