Talking TV and the Las Vegas Hockey Territory

By the time next September rolls around, there will be a television station that will carry games for Las Vegas’ first professional sports team. As pre-season games kick off, there will a local avenue for fans to watch outside of T-Mobile Arena. It is not yet known exactly how it will be rolled out, nor does anyone know if there will be any partnerships with current professional or collegiate teams on a regional sports network (RSN), but there have been some interesting articles published at Awful Announcing recently that are points of interest for Las Vegas residents as the team eyes a network partner.

The first article makes mention that the Las Vegas franchise could partner with one of the four Major League Baseball teams that can claim Las Vegas as part of their viewership area. The reason Vegas is so important to those four teams (the Dodgers, Angels, Padres, and Diamondbacks) is the same reason that Vegas was such a strong candidate for expansion, there is a market of more than 2 million people. Whether those fans watch or not, their local television carriers pay for the games on their networks and those costs are passed on to subscribers.

The article has a key flaw, however, in that for any one of those four teams to overtake Las Vegas as a sole provider of baseball (remember that MLB is a federally sponsored monopoly, and that providing baseball is a service in the same vein as electricity or telecommunications), they would have to pay for the right to own the market. The Padres for instance, if they wanted to own the Las Vegas metropolitan area (and make no mistake, it’s about the market as a whole, not just Las Vegas proper), they would need to make restitution payments to the other three clubs, if such a deal was approved by the other league’s owners. The Oakland A’s tried to do something similar with possibly moving to San Jose, which was in the territory of the San Francisco Giants, however that deal was squashed by Commissioner Selig quickly. So in short, that avenue won’t happen. Las Vegas will continue to be serviced by multiple MLB teams.

Another article published Monday explains of dire times coming for RSNs. The subject is nothing new, and the topic recently gained steam shortly after the SEC and ESPN agreed on their most recent rights deal, in which ESPN paid an estimated $2 BILLION over 15 years to basically become the Nationwide Leader of SEC Football (including the SEC Network). At the time, it was viewed as ESPN maintaining it’s perch as the leader in sports programming. Since then however as more and more cable subscribers have left traditional cable/satellite providers in “cutting the cord”, which has significantly impacted not only ESPN but their parent company Disney as well. Since 2013 it has been estimated that ESPN has lost 10 million subscribers.

Based on these numbers over the past four months ESPN lost an average of 10,400 subscribers a day.  – Neilsen data May 2016

ESPN and Disney have a multi-national profit infrastructure in place that allows them some coverage on these losses, however the trend is in motion that traditional television is in a regressive pattern thanks to internet-based avenues to watch events and programs. With all of this in mind, at this writing, it has just been announced that ESPN and the ACC have just penned a 20-year agreement.

To what do these have to do with Las Vegas hockey? How will the new team be able to keep its head above water, given the recent market shifts?

Part of a RSN for Las Vegas will need to borrow live events from another entity. UNLV, Minor Legaue Baseball, and maybe the Mountain West Conference seem to be the only opportunities. It could be also that a Sin City sports network would be able to partner with Major League Baseball in a way that it would allow for the channel to schedule all of the teams that claim Las Vegas (though highly unlikely). The partnerships involved in the network would would allow a better revenue stream for Bill Foley as he could own the channel outright in the same manner than in Chicago with their RSN, Comcast, is owned by the Blackhawks, Bulls, White Sox, and Bears. It is what the NHL did to assist the expansion team though that in my mind shows just how dedicated the league is to Las Vegas’ success.

Like other sports, the NHL has its own map of what teams claim as their home-team territories, and at the GMGM press conference last week, Bill Foley gave information about what the Las Vegas territory would look like. Areas of eastern California (and the LV metro area) will be given to the new team via the Kings and Ducks, northwest Arizona will be obtained via the Coyotes, and the Avalanche will lose areas in Idaho, Montana, and Utah (according to a quick peek at estimated census data, this area includes about  7+ million people).

To monetized this market, let’s assume that the Las Vegas RSN would command a reasonable $.40 per subscriber, and that would net about $2.8 million PER MONTH. That hypothetical total would not include the fees paid for the teams to broadcast (which is the part would go towards Vegas’ addition to hockey related revenue). Could such a network, even in Moody’s bearish forecast be a business move Foley would undertake on his own? Most likely he could, if for no other reason that it would provide control over content, and the costs could be off-set by the manner in which his team would charge his network via book-keeping slight-of-hand. In any case, the network would be able to provide a profitable enterprise and a key impact to the community in growing the sport.