Sports streaming is too expensive, and the streamers know it

It’s taken a couple years, but regional sports networks are starting to realize they charge too much to stream local games.

NESN 360, which offers live streams of the Boston Red Sox and Bruins, just dropped its annual price from $330 to $240, while also throwing in four Red Sox tickets. Main Street Sports Group, which operates regional FanDuel Sports Network channels, has hinted at lower prices as well, and in some markets, local games stream for free or are available over-the-air with an antenna.

What you’re witnessing are the first tweaks to a misguided sports streaming strategy, one that assumes high direct-to-consumer prices will discourage cord-cutting while offsetting the revenue losses linked to the decline of cable TV. That strategy hasn’t been working for regional sports networks, and it’s not going to work for the likes of ESPN and Fox, which plan to launch their own expensive streaming services later this year.

A broken model

The regional sports model—and live sports in general—used to be extremely lucrative. Sports networks earned per-subscriber fees from every cable customer, so they made money even from folks who never watched sports.

That model’s been unraveling as more folks cancel their cable and satellite subscriptions. Most live TV streaming services don’t offer regional sports networks because they don’t bring in enough viewers to justify the cost, and those that do—namely DirecTV Stream and Fubo—relegate regional sports to more expensive tiers. Even on the cable side, Comcast has stopped offering regional sports in its base packages to keep prices down. Meanwhile, a growing proportion of cord-cutters are realizing they don’t need pay TV bundles at all.

These trends have put regional sports networks in a bind. They don’t want to offer anything that would risk the easy money that still comes from cable, but they also can’t ignore their declining customer base and the growing proportion of viewers who’ve moved away from pay TV.

The failed solution

To address this dilemma, most regional sports networks have opted to charge excessive rates for standalone streaming.

FanDuel Sports Network, for instance, only costs between $3 to $8 per month as part of a cable bundle, yet it costs $20 per month on its own. NESN’s carriage fee was a little over $5 per month as of 2021, yet NESN 360 costs $30 per month. The thinking goes that if standalone streaming is expensive enough, it’ll reach a new generation of cable-free superfans without actively encouraging more cord-cutting.

Too bad the strategy isn’t working. When FanDuel Sports Network’s streaming service launched in 2022 (under the name Bally Sports+), its owners hoped it would eventually reach 4.4 million subscribers. The actual subscriber count today is only around a half-million, and now it projects to reach a less-ambitious 2.8 million subscribers by 2027. Meanwhile, the channel has lost 22 million pay TV subscribers over the past four years, and by 2027 its owners expect to lose 6 million more.

The truth is that there just aren’t aren’t enough people willing to pay $20 to $30 per month for regional sports, nor are there enough people willing to keep expensive pay TV packages just to watch those channels. Like a lot of streamers, the regional sports networks have underestimated peoples’ ability to tune out.

Lowering the paywall

All this brings us to the news that NESN 360 is cutting the price of annual plans, from $330 to $240. The service’s monthly plan still costs $30, but the annual option will make a lot more sense for year-round Boston sports fans, especially with Red Sox tickets thrown in.

Speaking to Mollie Cahillane at Sports Business Journal, NESN president David Wisnia acknowledged that it was asking too much.

“Inflation is high,” he said. “There’s a saturation limit in terms of DTC [direct-to-consumer] right now, and we wanted to get into people’s homes and make it as available as we can, while balancing the financials of it and making sure it still makes sense for us.”

NESN isn’t alone in changing its tune. Last month, Main Street Sports Group CEO David Preschlack told CNBC’s Alexander Sherman that the company is considering price cuts for FanDuel Sports Network as well.

“We have the ability to go lower, and we’re going to test different price points, absolutely,” he said.

Meanwhile, some teams are already embracing a philosophy of long-term reach over short-term subscription revenues. In Utah, a subscription to watch local Jazz games still costs $20 per month, but you can also watch for free with an antenna or your can stream individual games for $5 each. Jazz owner Ryan Smith told Sherman he’d never go back to the old model.

“The more people watch, the more people come to games, the more we sell in concessions, the more money we bring in with sponsorships,” Smith said.

Omens for ESPN and Fox

The strategy of charging high standalone rates for sports streaming isn’t just going to be troublesome for regional sports networks.

This year, both ESPN and Fox plan to launch their own standalone services. ESPN’s is rumored to cost between $25 and $30 per month, and Fox CEO Lachlan Murdoch has told investors that it will intentionally charge a high price, so as not to cannibalize its pay TV business.

“We don’t want, and we have no intention of, turning a traditional distribution customer into our direct-to-consumer customer,” Murdoch said. “So, our subscriber expectations will be modest, and we’re going to price the service accordingly.”

Good luck with that. If sports fans are balking at $30 per month to watch their favorite teams every day or two, why would casual sports fans pay similar prices for a smattering of nationally televised games they might not even care about? Moreover, what’s even the point of offering a service whose price is intentionally unappealing? Regional sports networks are already failing at the same strategy, and the national sports networks will be next.

What’s the solution?

Sports streamers still have to pay astronomical costs for live sports rights, and those costs aren’t coming down anytime soon. That means direct-to-consumer streaming probably won’t get much cheaper on its own.

What we’ll likely see instead is more attractive and flexible bundling. Disney and Max are already finding success bundling their non-sports streaming services together at a discount, and Disney could pursue something similar for ESPN with Fox’s streaming service. Perhaps they could also offer regional sports add-ons at lower-than-standalone rates. Instead of making everyone pay for sports, they can offer fairer pricing by putting lots of sports in one place.

Sports networks have spent far too long trying to prop up traditional TV packages with little to show for it. They’d be wise to start building something better to replace it.

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