Inside sports business
One of many key issues facing would-be NHL owners here is maximizing the value of their television rights.
Given what an arena costs, plus a rumored $500 million NHL expansion team price, it’s critical they reap as much TV money as possible. And forget about any Seattle hockey team starting its own regional sports network (RSN) like the Mariners with ROOT Sports.
There aren’t enough hockey games in a season to carry a network like baseball’s 162 dates per year. Also, hockey just isn’t as big a viewer draw.
Even adding an NBA team later would still leave a gaping summer programming hole. Throw in the combined $1 billion cost of an arena and team, forming their own RSN is too risky for Sodo District arena builder Chris Hansen or Tukwila counterpart Ray Bartoszek.
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In fact, sports and television industry sources suggest neither will go that route. Instead, they’ll try to sell broadcast rights to either ROOT Sports or a competing network, with talks currently under way to determine what those would be worth.
Hansen and Bartoszek both made minor arena progress last week.
The Seattle Design Commission unanimously approved the first, shoo-in phase of a much-longer process for Hansen to get a street removed for his project. And Bartoszek filed a notice of application for his Tukwila arena, launching a public comment submission phase that began last Friday and runs through June 12.
But overcoming bureaucratic hurdles won’t matter unless both find the missing pieces of a financial puzzle that bringing an NHL team here ahead of the NBA entails. And figuring out their local TV cash flow is key to that hockey foray “penciling out.’’
Don’t assume the networks will simply shovel cash their way.
Industry sources say ROOT Sports may already be close to maxing out on what it can get away with charging viewers monthly for its current programming. Adding NHL would require hiking monthly subscriber fees to recoup any costs paid for hockey rights.
Networks do confidential surveys on this all the time. If they know customers won’t tolerate $3.50 per month and they’re already charging $3, adding another $1 to their bills for NHL games makes little sense.
In those cases, the RSN risks losing more viewers fed up with high prices than it would gain by adding NHL subscribers. So, if the RSN has to keep viewer costs contained, that means offering less for broadcast rights.
The same dynamic applies when it comes to RSN convincing rival cable and satellite providers to carry its programming. Those providers have to offload the cost of that programming on their own customers, so if it’s too high they won’t pay.
That isn’t good, because, in the RSN game, it’s all about getting seen by as many viewers as possible — yours and your competitors’. A team-owned RSN in Houston just went bankrupt because it wanted too much from rival providers to carry Astros games and none paid.
The same thing is happening in Los Angeles, with rival providers balking at the asking price for Dodgers games broadcast by the team’s RSN. As a result, barely anybody in Los Angeles can watch the Dodgers.
So, you’d better believe ROOT Sports won’t risk harming its distribution network by overpaying for NHL rights in Seattle. Not when recouping those costs means passing them on to their viewers and those of competitors.
Now, if Hansen — and especially, his NHL partner, Victor Coleman — and Bartoszek don’t like what ROOT Sports offers, they can always try the region’s other major RSN: Comcast SportsNet (CSN) Northwest, which is already struggling to sell Portland Trail Blazers games beyond their home city.
CSN Northwest could probably use Seattle NHL team programming to better its chances of rival providers wanting to carry the RSN, especially here in Washington.
Cable and satellite providers in Washington who don’t care about a Portland NBA team might nevertheless pay for a Comcast package that includes a Seattle NHL squad.
But take note: that’s a broad, longer-term strategy with no real guarantees of instant rewards for the network. Sure, it’s an option for Hansen and Bartoszek and there would be some money to be made.
But we likely aren’t talking about the vast amounts you see teams paid elsewhere, in other sports, for local TV rights.
Figuring all this out is why coming up with a “hockey first” proposal for Seattle takes time.
If the TV rights money isn’t high enough, paying a $500 million franchise fee might not work. It might also mean haggling with the NHL to lower its franchise fee, because we know public funding is expected to be minimal.
Or, the owners simply might have to eat the difference.
Those are some of the calculations, I’m told, being made right now behind the scenes.
Somebody has to figure out who’s going to pay for all this before any arena decision. One thing we can be sure of: making “NHL first” work is going to take big money.
And we’re about to find out which future owner, if any, has enough of that to pull this off.