Andy Larsen: The media landscape is changing around the Utah Jazz. Will that make it hard to find a winning TV deal?

The financial realities of sports broadcasting creates challenges for the team as they open negotiations with potential providers.

(Rick Egan | The Salt Lake Tribune) Utah Jazz owner Ryan Smith visits with reporters, during the Utah Jazz Media Day, on Monday, Sept. 26, 2022.

What would you do about the Utah Jazz’s TV situation if you were team owner Ryan Smith?

Right now, Jazz games are available on AT&T SportsNet Rocky Mountain, a network that has paid the Jazz about $25 million per season for their comprehensive broadcast rights in recent years.

But there are problems: First, AT&T SportsNet is only available on Comcast and DirecTV among major traditional TV options, and only on DirecTV Stream and FuboTV on online streaming platforms.

It’s not available to Dish subscribers, which represent between 9% and 15% of Utah’s TV market, depending on whose numbers you believe. It’s also not available on the biggest streaming platforms: YouTube TV, Hulu, Sling.

The upshot of this is that it costs at least $70 a month to get a service that shows Jazz games, pricing a lot of fans out.

Second, AT&T SportsNet isn’t a very good TV channel for the Jazz’s purposes. The Denver-based channel shows no other Jazz-related content beyond game coverage. There have been repeated picture and audio issues. Social media promotion is near nil.

No less a figure than Jazz CEO Danny Ainge is apparently unhappy with the setup. Smith told reporters in October that Ainge “reminds me of it every game, every road game, he’s like, ‘Let’s find a better experience there.’”

Many fans feel the same way, and the team has announced it is opening TV negotiations to all comers.

But here’s the rub: finding a better experience may well be impossible unless Smith just wants to suffer a significant loss in his team’s income.

Here are the options as I see them:

Find a new regional sports network?

If AT&T SportsNet isn’t meeting all needs, why not find another channel?

Essentially, because many of them look to be on the threshold of bankruptcy.

The largest player in the space is Diamond Sports, which owns the 19 Bally’s networks that broadcast 42 NBA, MLB, and NHL teams. They told investors in a quarterly earnings call that a key cash flow measure would come in at half the expected number at the start of the year. They also said subscriber numbers were down 10%, resulting in a loss of $1.2 billion in the third quarter of 2022. They told investors that they have enough money to go for at least 12 more months. Outside observers say that bankruptcy could be in the cards.

Diamond did extend their deals with two NBA teams earlier this year, but there’s been no word on how many millions those agreements sent to those teams.

Last year, the Wall Street Journal reported that NBC was exploring selling off its NBC Sports networks, they were able to dump NBC Sports Washington. AT&T explored selling theirs, then didn’t because bids were too low.

A traditional TV network company like KSL might be interested in purchasing Jazz TV rights — the two entities worked together on a deal for radio station 97.5/1280 The Zone — but it would have to come at a significant discount. KSL’s main channel likely wouldn’t be able to broadcast Jazz games over network programming, so games would probably have to be on a smaller substation, which might limit reach and viewership. Most importantly, it doesn’t seem KSL is eager to spend the money the Jazz would be looking for in order to buy those rights, at least not in totality.

There doesn’t seem to be another obvious TV entity that would pay eight figures for Jazz broadcast rights. AT&T SportsNet isn’t out of the picture of negotiations yet, partially for this reason.

Is streaming the answer?

NBA TV observers were so excited when former Microsoft CEO Steve Ballmer announced ClipperVision. The streaming service run by the Clippers broadcast six different feeds (standard, an analytical broadcast, a “Mascot Mode” broadcast, an alternate broadcast with former Clippers players, and Spanish and Korean language options) of each Clippers game to subscribers for $199 per year — with a $99 per year introductory sale. Fans who signed up also got a Clippers jacket.

It’s a next-generation product, the first streaming platform built by an NBA team.

And it’s received incredibly disappointing subscription numbers, according to sources. ClipperVision is generating under $1 million in revenue, even before the costs of creating and running the platform, the discount price, the cost of the jackets, and so on are added into the equation.

Other local sports streaming solutions aren’t releasing their subscriber numbers, which industry analysts say usually indicates a number that will disappoint investors. The most optimistic number I’ve seen came from Diamond Sports on their investor call this week — yes, the one they said they were losing $1.2 billion per quarter in — that streaming in their Bally Sports Plus app “routinely exceeds a 1.0 rating” in the Minneapolis market, which would indicate at least 17,000 streaming subscribers. That costs $20/month, meaning perhaps $5 million per year in income.

It seems potential consumers are balking at those price tags just to watch one channel. Tech-savvy consumers have just used illegal streaming sites and VPN software to get NBA games for cheap or, more likely, free. While the services’ $20 monthly charge means less than $2 per game, it also means that the cost to subscribe is higher than the cost to subscribe to familiar streaming services like Netflix, HBO, Disney+, Hulu, Peacock, and so on.

Those companies, by the way, have been reluctant to enter the local sports streaming game. That’s possibly because profitability has been hard to reach for new entrants: even the very popular Disney+ service lost $1.5 billion last quarter. Apple recently bought the local streaming rights for all MLS clubs, but seems uninterested in doing a deal with just one local sports team.

Idaho-based Evoca TV was kind of a hybrid between the two concepts, offering fans in other Western states their regional sports teams plus limited live TV for $30/month. They sent an email to subscribers on Wednesday that they would shut down soon without more funding.

Create a new broadcast station?

In the absence of partners willing to pay the Jazz, why not just have the Jazz create a media arm themselves? It’s an idea that’s been floated, and it has worked in larger cities: the Madison Square Garden Company owns both the New York Knicks and the MSG Network the team broadcasts its games on, for example.

It also worked for the Jazz for a long time when the Larry H. Miller family owned KJZZ-TV — until the expanding fees regional sports networks were willing to pay became too lucrative for the Jazz to pass up. In 2009, Jazz games left the channel for good when the team signed a 12-year deal with then-Fox Sports Net for $20 million per year — so we know KJZZ was making way less for the Jazz than that. (In 2016, the Miller family sold the station to Sinclair for $6.5 million.)

The economics are tough. Let’s just go through the back-of-the-envelope math: TV stations make their money from per-subscriber fees paid to them by TV distribution companies, plus the advertising they receive for commercials. In terms of per-subscriber fees, the Utah media market (comprised of 29 counties in Utah, four in Wyoming, three in Idaho, and two in Nevada) has about 916,000 TV households in 2022.

One strategy would be the RSNs current strategy: get the companies willing to charge a lot for their TV service to pay a higher price per month, something like $4 per subscriber per month — about in line with what regional sports networks with only one pro sports team charge.

For example, DirecTV had about 180,000 subscribers in Utah in 2019, and let’s say the industry’s shrinking reality will mean 150,000 in 2023. Charging them $4/mo would earn $7.2 million for the Jazz per year from that one service alone, add in Comcast’s “over 200,000″ subscribers, and you’ve maybe got something that approaches their current AT&T revenue. But such a strategy would do nothing to address fan concerns of not being able to see Jazz games without spending top dollar.

Another strategy would be to charge a very low per-subscriber fee in order to get all of the various companies who service those 916,000 households on board, something like $1/month. Then, the Jazz would make about $11 million per year, total.

Interest and exposure for the team would increase, but would probably not increase by enough to make up the gap between their current TV deal and their new one in the short term. The arena is already selling out, and merchandise proceeds might be in the low seven figures, not in the ballpark of TV revenues — even if the Jazz’s jerseys are selling like hotcakes.

How much would a proposed Jazz TV station make in advertising revenue? Diamond Sports’ filings give us a guide: they make about $1 in commercial revenue for every $6-7 they make in per-subscriber fees. Add a few million on to the income for the commercials aired, but not more.

Of course, in this world, the Jazz could run their own streaming service, too. Add in a few million there, too, if you’re optimistic.

Also in this world, the Jazz have to hire a ton of people to get all of the above done. While they currently produce their own broadcasts, they would need to hire people to negotiate with the TV companies, salespeople to sell commercials, the technology to send games to fans via streaming, and so on.

It would be a huge undertaking. Remember: the regional sports networks that exist now aren’t really wanted by their owners! The Jazz creating a new one would be an interesting business decision, to say the least.

What’s next?

In sum, I don’t envy Jazz management here. Frankly, I don’t see a clear option that preserves their money while making every fan happy, at least not in this media environment. The options that do make their fans happier mean they could lose millions, maybe tens of millions, in revenue.

Personally, I’d prefer the latter, but billionaires do not become billionaires by making decisions that lose them lots of money.

The Jazz do still have months to negotiate a solution, and they also have the support of many other sports teams nationwide in the same boat. The NBA, MLB, and NHL are starting to murmur about potentially a group sale of broadcast rights, similar to what the MLS did with Apple.

But for now, the situation does not have a great, obvious win in sight.