28 April 2023

Have the Phoenix Suns Created a New Model for Regional Sports Networks?

The first new model deal to replace an RSN appeared in Arizona on April 28. The NBA Phoenix Suns, along with the WNBA Phoenix Mercury, agreed with a local broadcaster (Gray Television) to move all of their games to free-to-air television, along with a separate direct-to-consumer offering. This deal, with respect to the Suns, would begin this fall, as the rest of the Suns' games this year are post-season games that will be carried by national services like ESPN, TNT, and ABC. The first regular season game for the Mercury that will be part of this deal is set for May 25.

There are a few wrinkles here worth noting. 

First is that in-bankruptcy Diamond Sports Group, which carried the Suns' games this season on its Bally Sports Arizona RSN, is threatening to sue the teams for breaching their contract which they claim provides the RSN to match any new offer the team might receive. Additionally, if the Suns are relying upon the right to terminate the contract because Diamond declared bankruptcy, while it may be a surprise to non-lawyers, those provisions are usually unenforceable. Companies in bankruptcy, in some respects, have a more favorable position than those that are not. For example, Diamond's failure to make a rights fee payment might give the Suns a basis for termination. Once Diamond has the protection of bankruptcy, the court typically wouldn't allow them to do so, as it would look at the Suns' rights agreement as a crucial asset of the business that might be needed to help pay off Diamond's creditors.

Update: On May 10, 2023, the US bankruptcy court blocked the Suns move to enter into this new agreement, saying that it violated Diamond's contractual rights, notably its right to match any deal for the Suns renewal. Recall the Diamond-Suns deal only ran through the 2022-2023 regular season. As the Mercury were not carried on Bally Sports Arizona, their portion of the Gray deal was unaffected.

Second is that of the 70 regular season games in the typical RSN season, 40 or so are planned for Gray's full power TV station, independent KTVK, channel 3, and the rest will be on a co-owned low-power TV station KPHE-LD, channel 44. The distinction between full power and low power stations is important for two reasons. For those receiving the station via an antenna, low power stations, as their name would suggest, do not cover as large an area as a full power TV station does. 

For those receiving a station via a cable, DBS or similar distributor, low power stations are not always carried by those distributors, full power stations almost always are. KPHE does not appear to be carried by either Dish Network or DirecTV, at least not yet. Gray may need to negotiate a new deal to get KPHE carried on the systems of  many, possibly all, distributors. 

Considering KPHE as a broadcast station may be technically true. However, if most of that station's value is in the Suns programming, it is, from the perspective of a distributor, effectively an RSN -- a channel that needs cable carriage to reach customers save for those in its over-the-air footprint (note the linked map doesn't show any area where the station can be received with an indoor antenna). Depending on the retransmission consent fee that Gray/KPHE might request, that might be a tough sell to Dish which has dropped the RSNs in every market. KPHE is also branded like a cable channel, using the slogan Arizona's Family Sports and Entertainment Network; big TV stations typically include their channel number as part of their branding (as KTVK 3 and KPHO 5 do). Note also that none of the games are scheduled to be carried on Gray's most viewed Arizona TV station, CBS affiliate KPHO, channel 5.

Third is that the television deal is non-exclusive, unlike most RSN TV rights deals. The Suns also entered into an agreement with Kiswe, a streaming video technology company. It looks like the streaming concept is that the Suns (and Mercury) would be the face of the streaming service containing the programming. Kiswe would be the technical backend to that streaming service, not the name visible to consumers. Having a different media rights holders is not unusual in that teams typically have a television deal with one company and a radio deal with another. KMVP-FM is the radio rights holder for the Phoenix Suns; it is owned by the radio giant Audacy. However, for streaming vs. traditional TV, this may be a new precedent.

Updated: 5/11/23 to add bankruptcy court ruling and streaming plan
Updated: 5/12/23 to add KPHE signal map, branding information