Jim Crane should come full circle on RSN ownership

Jan 30, 2020; Houston, Texas, USA; Houston Astros owner Jim Crane smiles during a press conference to announce Dusty Baker (not pictured) as the Houston Astros manager at Minute Maid Park. Mandatory Credit: Troy Taormina-USA TODAY Sports

Jim Crane should come full circle on RSN ownership

Once upon a time, Jim Crane purchased the Houston Astros and the doomed regional sports network the team partially owned. Could he soon own his own network?

It’s almost like karma has come full circle for the Houston Astros and Jim Crane, bringing incredible opportunity with it.

Back in 2014, with the team struggling through another 100+ loss season, the Astros partially-owned regional sports channel CSN Houston was in bankruptcy. CSN Houston was an award-winning channel, winning five regional Emmy awards in 2013 and was nominated for 16 more in 2014. Content wasn’t necessarily the problem, but the bottom line was.

CSN Houston, a joint venture between the Astros, the Houston Rockets, and NBC Comcast, failed to secure carriage agreements with any carriers. Only Comcast customers could watch Astros and Rockets games in the city. DirecTV, AT&T U-Verse, Dish Network, and every other carrier either refused to carry the team or only wanted the channel with a major lowball deal.

The Astros were losing tens of millions of dollars in rights fees because they couldn’t get carriage deals, and the value of the network was plummeting. Once valued at $700 million, it was valued at only $22 million in the bankruptcy proceedings. The Astros owned nearly 42% of the network.

In that bankruptcy proceeding, AT&T and DirecTV acquired CSN Houston for a mere $5000. You read that right—FIVE GRAND!

The two companies agreed to carry the newly branded Root Sports Houston on their systems (AT&T would purchase DirecTV in July 2015) and agreed to pay the same rights fees to the Astros as those that were stipulated under the original CSN Houston agreement. Under Root Sports Houston, the channel would only carry games and game day programming, and all other programming was cancelled. 96 of the 141 employees of CSN Houston were laid off.

It was, at the time, the biggest disaster in RSN history. RSNs were considered a license to print money. No RSN channel had ever fallen down like CSN Houston.

Fast forward to today when the same channel, now known as AT&T SportsNet Houston, finds itself in financial crisis. There are three AT&T SportsNet channels, Houston, Pittsburgh, and Rocky Mountain. As corporate mergers and acquisitions continue, the stations are now owned by Warner Bros. Discovery after WarnerMedia (formerly owned by AT&T) was sold to Discovery Communications. Warner Bros. Discovery now wants out of the game.

Last week, it was reported that Warner Bros. Discovery had told the teams they hold rights fees for that they cannot honor their agreements. WBD did make a rights fee payment on the due date, but the payments weren’t for the full amount. WBD has told the teams they have until March 31, 2023, to reach an agreement to take their rights back, or the networks will be forced into Chapter 7 bankruptcy. The network is willing to return the rights for no consideration (no buyout/fee to take them back).

Here is where things get interesting because no one knows how this process works better than Jim Crane and the Houston Astros.

Forcing the network into Chapter 7 as a creditor could work to Crane’s advantage. Where the network he once owned was sold for less than pennies on the dollar through bankruptcy, Crane could find himself in the position of power today. Crane could be the vulture buying AT&T SportsNet Houston for pennies on the dollar, coming full circle from CSN Houston.

With the infrastructure, carriage agreements, trained employees, and staff already in place taking over the network should be pretty seamless. The big difference, of course, is that they don’t have to worry about the profitability of a third party. The Astros can keep all the profits for themselves and not share them with a third-party network. That scenario could be a tremendous cash cow for the team, especially since they are one of the hottest properties in MLB right now as the reigning World Champions who have been to six straight ALCS and four of the last six World Series.

The network can operate as an arm of the team; it covers its expenses, and all the profits go to Crane and the team. It is essentially a wholly owned subsidiary of the team. The Astros, like all MLB teams, control their own rights. Therefore they can assign their rights to their channel, pay themselves, sell their own advertising, and reap all the benefits and rewards.

They can also do what AT&T SportsNet refused to do: create a stand-alone subscription app for people to watch games if they are cord-cutters. Personally, I would gladly pay $20 per month to subscribe to the app rather than pay $70+ per month for Fubo to stream the channel. It would certainly generate far more money for the channel in that scenario.

An Astros-owned RSN bought on the super cheap and no longer needing to share revenues with a third party like Warner Bros. Discovery has the potential to get the Astros on par with the Yankees and Dodgers in terms of revenues generated via media. It also creates a completely new opportunity.

Next season, the greatest free agent prize in baseball history will hit the market in Shohei Ohtani. Ohtani is not only the best player in the game but also an international powerhouse brand. Ohtani isn’t just a generational talent; he is the first player in 100 years to be a top pitcher and hitter. He is truly the modern-day Babe Ruth, and his value is beyond incredible.

Ohtani is also a hero to baseball fans in Japan. Those fans watch Ohtani’s games, and there is significant interest in him in his home country. Imagine what that interest would be if Ohtani was no longer trapped in the baseball purgatory known as the Los Angeles Angels, but was now on the perennial powerhouse Houston Astros? Imagine Ohtani on a team where his season didn’t effectively end in June, but playing for a chance to win a World Championship every year?

The Astros, as owners of their own rights and own channel, can reach an agreement for their channel to be carried in Japan, or have a rights agreement for a Japanese language broadcast to air every game in Ohtani’s native country. It’s a second windfall. Another country paying rights or fees, plus the fact there would be such a demand for Ohtani Astros jerseys that there may be a 4-6 month backlog on fulfilling the requests, and that’s just in Japan.

It doesn’t matter if the Astros paid Ohtani $50 million a year because he would actually generate more than that for the team. Not to mention, it would make the Astros a legacy team in Japan, similar to how the Rockets are still an incredibly popular team in China due to Yao Ming being a big part of their team for years.

Put it into this context, the Yankees with Hideki Matsui had Japanese media follow them every game. They became a huge team in Japan during his time there. The Mariners did the same with Ichiro Suzuki. Both of those players were great players, Matsui as a two-time All-Star and World Series MVP, Ichiro a Hall of Famer with over 3000 hits. Neither player is as big a star as Ohtani, not even close.

Having their own network, controlling their own rights, their own ad sales, a stand-alone app, international rights, or broadcasts would be a next-level game changer for the Astros in a manner that baseball has yet to explore.

No team has pushed the innovation angle harder than Houston has, be it on the field, in the front office, in analytics, everywhere. It is only logical the Astros could be the team to push innovation with their own channel, it’s distribution, and revenue generation.

The opportunity for the Astros to become a true media revenue powerhouse is all right there for the taking; it’s almost begging Jim Crane to grab it.

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1 Comment

  • Please do the Deal and carry the Astros and Rockets on Tv please no Streaming. I agree the opportunity for the Astros is huge benefit to the team and the Fans.

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