With cord-cutting and the decline of the pay TV industry already wreaking havoc on regional sports networks, analysts at Lightshed Partners say the blackout of MSG Networks on Altice USA’s Optimium systems could push MSG Networks into bankruptcy, making it the latest casualty of declining RSN ecosystem.
“We do not expect a resolution anytime soon, if at all,” of the MSGN blackout that began on Jan. 1, analysts Brandon Ross, Richard Greenfield and Mark Kelley wrote in a note to investors. “This could set off a bankruptcy for MSG Networks, which would have an impact on SPHR [Spere Entertainment, the parent company of MSGN], MSG Sports and the wider sports media ecosystem.”
Altice’s decision to drop the MSG and MSG Sportsnet channels is part of a wider trend across pay TV, “as RSN pricing became strongly divorced from viewership and MVPDs have become focused on video’s standalone profitability,” the analysts argued. “MSG Networks, at a cost of $10-plus per subscriber, has been one of the largest overearners. With alternatives such as Gotham Sports App (MSG+), there is little reason for distributors to lose money. Indeed, if you follow the QR code on MSG Networks Optimum feed, they suggest the Gotham app or Fubo (with a discount).”
The MSG and MSG Sportsnet networks carry games involving the NBA’s New York Knicks and the NHL’s New York Rangers, New York Islanders and New Jersey Devils to Optimum subscribers in the New York City market.
Altice has also been putting together new packages of content, pushing RSNs out of the bundle.
This puts MSGN in a difficult position, given that “MSGN has already been in workout with lenders on its debt, which was already due and MSGN cannot repay,“ the Lightshed analysts said. “Lenders are now facing a two-front war with Altice and Sphere (MSGN’s parent). Without Altice carrying MSGN, we estimate that segment becomes EBITDA breakeven leaving nothing for interest payments. Plus, we believe there is a renewal with Charter coming at the end of 2025. The result seems to be heading toward Chapter 11, even as Dolan has likely tried to avoid that scenario, hoping to work something out with his relationship banks.”
Bankruptcy would improve Sphere Entertainment’s balance sheet but would hurt MSG Sports in the near term, the analysts said.
The analysts also argue this will have a larger impact on the NBA, which has been looking to centralize local OTT rights. “The biggest impediment to that is the deals from some large-market teams, especially the Knicks and [Los Angeles] Lakers,” the analysts wrote. “Perhaps a MSGN bankruptcy could catalyze those ambitions.”
