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Good Thursday Morning. Here’s the rundown of this week’s Sports Business Playbook:

• 📰This Week’s Topic: The Dallas Stars are the latest club leaving its regional sports network, opting for a new spin on the free viewership model that other teams have started to adopt. The difference: the streaming method and the partner.

• 🍸️ Impress Your Friends at Cocktail Party: Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? Hit the “Impress Your Friends at Cocktail Party” section at the bottom for a CliffsNotes of this week’s topic

• 🤯“Whoa of the Week”: The WNBA’s strong start to the season with a strong boost from #22, as told in ad revenue

• 💪Weekly Reminders that Sports are Awesome: Feel good story from the MLB All-Star Game, the Savannah Bananas continue to be an amazing story, and young phenom makes history in the MLS

Hey team,

The Dallas Stars are the latest team to break the mold and leave the traditional regional sports network apparatus, announcing this week they are terminating their agreement with Diamond Sports Group-owned Bally Sports Southwest before it ends next year.

In its place, the Stars are partnering with media company A Parent Media Company (APMC) on a seven-year deal to offer its games for free to local fans in Texas, Louisiana, Arkansas and Oklahoma via a FAST (free ad-supported television) channel called VICTORY+.

While four other NHL clubs and a few NBA teams have moved to a free model with local broadcast channels (think bunny ears on your TV), the Stars are the first major sports franchise in the U.S. to do so via streaming only.

The move is yet another sign of a team attempting something new (by drawing from the past) in the void left by the fracturing regional sports network model that has been a revenue cornerstone for most professional teams for decades.

In this week’s SBP, we’re talking telly. You’ll learn:

• What is a FAST channel, and why are they appealing

• The Stars’ logic behind the move

• The potential impact on the broader regional sports landscape

What’s a FAST

Unlike a number of the complex acronyms in the streaming/media space, a FAST (free, ad supported television) channel is quite straight forward: viewers can watch content on virtually any device — i.e., TV, tablet, phone, computer — at no cost, with the only tradeoff being that the viewer most times does not control the content and has to watch commercials.

Some of the most popular platforms offering FAST channels are owned by major media players — Tubi (owned by Fox), Freevee (owned by Amazon), and Roku Channel — and they’re seeing success with viewership.

Per Nielsen, FAST channels combine for 4.1% of the entire TV viewership market — more than both Hulu and Amazon Prime Video — and Goldman Sachs estimates the FAST market value to grow by 15% each year until 2027.

The value proposition tradeoff between consumer and company is simple.

• Consumer: We are all inundated with streaming services that cost an increasing amount of money, and it’s reaching a tipping point for a segment of viewers. In this FAST model, the viewer can passively enjoy the content without paying a monthly subscription fee or cable bill. Because the FAST content is free, viewers are more willing to sit through ads and not have as much optionality to save money.

• Media Company: FAST channels have comparatively low costs to streaming on both the customer acquisition and content costs (most FAST channels have old movies, TV shows, and local news). While the media company cannot charge the same monthly premium as a streaming service, it can attempt (to clear, the success rates on this model vary) to cover its costs and turn a profit via the advertising revenue.

If this sounds like a putting a streaming spin on the earliest days of television that may be attracting older demographics, you’d be right. As Russ Compton, a media analyst at Macquarie U.S. Equity Research, told NBC News:

The new added benefit, though?

Analysts believe that FAST channels also appeal to Gen-Z and millennials who are “cord nevers,” or viewers who never signed up for cable in the first place.

The Stars’ Logic

As we have discussed before, the regional sports network system is in a perilous position.

The major market clubs with strong followings have gone vertical and own/operate their own regional networks to show their games. For most, though, they’re beholden to a third party.

The biggest third party player is Sinclair-owned Diamond Sports Group, which owns nearly 20 regional sports networks around the country covering over 40 teams across the MLB, NBA, and NHL.

But this diamond is certainly not flawless.

DSG is in the throes of developing a plan to emerge from bankruptcy, and it would appear that a pillar of its strategy is to terminate contracts or significantly reduce payments to many of the clubs that it used to work with in the traditional model.

Which brings us to the Stars.

DSG’s contract with the Stars ran through next season, but the Stars determined that it should end it early in order to pursue other avenues because it was likely going to not end well.

While it is not a unique position to be in, what you do about it remains a challenge.

To elaborate, most of the clubs gave up reach for revenue in the traditional RSN model. While RSNs historically reached a smaller segment of the clubs’ DMA (for example, the Stars estimated that 60% of the local Dallas-Fort Worth market (~1.9 million of the 3.1 million television households) was unable to watch its RSN, the clubs were rewarded with eight-to-nine-figure annual payouts from the RSNs that amounted to anywhere between 12-23% of overall revenue.

If the contract with DSG is being terminated/renewed at a lower rate and there is not an obvious alternative on the traditional RSN front, replacing that revenue is going to be hard.

So, some clubs, including the Stars, are returning to the “reach over revenue” strategy from the olden days.

They will sacrifice upfront money by going with a free channel but hope to make some of it back in advertising dollars and ancillary revenue streams (i.e., merchandise, sponsorships) that come with attracting more fans and earning goodwill. Plus, the Stars reportedly received a minimum guarantee from APMC that serves to de-risk the deal somewhat.

The unique wrinkles in the Stars deal are the 1) streaming only medium, and 2) the partner — APMC — chosen.

Streaming Only

Unlike other clubs that are using over-the-air broadcast channels and then supplementing with a paid streaming option, Dallas is going all streaming and all free.

Fans in the Stars’ DMA will only have to sign up for VICTORY+ with either an email address or via their Google or Facebook account — an incredibly low barrier to entry for a team looking to grow its footprint of a historically northern sport in the heart of football country.

Plus, the Stars are likely looking to attract a younger, more tech savvy fans to the offering. A streaming channel that can be accessed across multiple mediums is incredibly appealing to this more transient, multi-screen focused generation instead of requiring people to use an antenna and TV.

The Partner — APMC

A Parent Media Co. would not be the obvious choice to partner on a sports streaming platform.

But, the company cut its teeth in streaming-based FAST channels, including its flagship product Kidoodle.TV, a direct-to-consumer, family-focused streaming service for kids to watch their content in a safe environment.

From there, the group stepped into sports and entertainment, setting up the streaming service for Dude Perfect, the Frisco, Texas-based trick shot content creators who have over 100 million followers across social media.

The expectation is that APMC can handle the technical elements needed to run a streaming-based live sports production while also bringing a fresh set of eyes to an old model.

Could Other Clubs Follow Suit

This partnership feels like the next evolution in the move away from RSNs, and I would expect other clubs to look hard at this option.

The concept of going free and also providing a digital native medium that appeals to younger audiences is quite compelling.

APMC has reportedly received interest from other clubs, but the major interest will likely coalesce once there is a good working product out in the market that is driving positive results.

Should it work, the most obvious candidates to jump onboard next are in the same city, as the Texas Rangers and Dallas Mavericks are both currently on the same RSN the Stars just left.

This model would create more complexity with cost and revenue sharing, but it could also lead to a positive re-shaping of the RSN model. The notion of having a singular, free app for fans to watch all of their local teams would be an oasis in a vast, fragmented streaming expanse.

Here’s hoping the Stars set the shining example in this next iteration of RSNs.

******

Lastly, if you didn’t think I was going to end an article about something called VICTORY+ without an Entourage callback, you are sorely mistaken, friends.

🍸️ Impress Your Friends at a Cocktail Party

Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive?This section is the CliffsNotes of this week’s topic

• Opener: The Dallas Stars are the latest team to break the mold and leave the traditional regional sports network apparatus, announcing this week they are terminating their agreement with Diamond Sports Group-owned Bally Sports Southwest before it ends next year. In its place, the Stars are partnering with media company A Parent Media Company (APMC) on a seven-year deal to offer its games for free to local fans in Texas, Louisiana, Arkansas and Oklahoma via a FAST (free ad-supported television) channel called VICTORY+

• Shot: Unlike a number of the complex acronyms in the streaming/media space, a FAST (free, ad supported television) channel is quite straight forward: viewers can watch content on virtually any device — i.e., TV, tablet, phone, computer — at no cost, with the only tradeoff being that the viewer most times does not control the content and has to watch commercials. It’s a page out of the original television model, but with updated technology.

• Shot: The Stars, like many other clubs in the NHL, NBA, and MLB, are faced with a challenging decision when what to do about their local TV rights. The current RSN model is quickly shifting, and there is not an obvious replacement. This presents a question of opting for reach or revenue. Most of the clubs gave up reach for revenue in the traditional RSN model. While RSNs historically reached a smaller segment of the clubs’ DMA (for example, the Stars estimated that 60% of the local Dallas-Fort Worth market (~1.9 million of the 3.1 million television households) was unable to watch its RSN, the clubs were rewarded with eight-to-nine-figure annual payouts from the RSNs that amounted to anywhere between 12-23% of overall revenue. In this free streaming model, they will sacrifice upfront money by going with a free channel but hope to make some of it back in advertising dollars and ancillary revenue streams (i.e., merchandise, sponsorships) that come with attracting more fans and earning goodwill. Plus, the Stars reportedly received a minimum guarantee from APMC that serves to de-risk the deal somewhat.

• Shot: Other clubs have tried this free channel idea, but the Stars’ setup is unique in that it is streaming only and with a partner that has experience in FAST channels and digital content (APMC runs Dude Perfect’s streaming service). These two elements are likely to help attract a younger, more digital savvy fanbase as the Stars seek to grow the fanbase.

• Chaser: This partnership feels like the next evolution in the move away from RSNs, and I would expect other clubs to look hard at this option. The concept of going free and also providing a digital native medium that appeals to younger audiences is quite compelling. Should it work, the most obvious candidates to jump onboard next are in the same city, as the Texas Rangers and Dallas Mavericks are both currently on the same RSN the Stars just left. This model would create more complexity with cost and revenue sharing, but it could also lead to a positive re-shaping of the RSN model. The notion of having a singular, free app for fans to watch all of their local teams would be an oasis in a vast, fragmented streaming expanse.

🤯 “Whoa” of the Week

Insane, mind-blowing things constantly happen in the sports business world. Here was my favorite of the past week.

1. Positive trends for the WNBA’s viewership and ad revenue, led by Caitlin Clark. There were also reports today of their new media deal taking shape — more to come on that 👀

💪 Weekly Reminder that Sports are Awesome

This newsletter is, of course, mostly centered on the business side of sports and the things that happen off the field. That being said, it’s important to remember why we fell in love with sports in the first place, though.

This section is meant to highlight the amazing things that happened in sports this week that serve as that reminder.

1. This is an incredibly cool story from the MLB All-Star Game

2. The Savannah Bananas are the Harlem Globetrotters of baseball, and they’re on fire

3. Cavan Sullivan is officially the youngest player to ever play in a North American major league game

Thanks for reading! Let me know what feedback you have.

Also, if you enjoyed this breakdown, please consider sharing it with your friends and network by clicking the social media icons at the top of the newsletter.

Until next time, sports fans!

-Alex