Executives at Warner Bros Discovery (WBD) have affirmed plans to wind down their regional sports television business by the end of the calendar year.
The plan was confirmed during a conference call with investors on Thursday, and comes about four months after the Sports Business Journal first reported WBD was looking at various options to sell off or close the regional sports channels it acquired from AT&T last year.
WBD offers the channels under the AT&T SportsNet brand, with broadcast operations in Denver, Houston and Pittsburgh. It also owns a 40 percent stake in the Root Sports network that is available on cable and DirecTV in Seattle.
On Thursday, WBD Chief Financial Officer Gunnar Wiedenfels said the company was “working diligently” with various sports stakeholders on the plan, which includes outreach to the professional sports teams and leagues whose games are broadcast on the three AT&T SportsNet and one Root Sports channels.
Wiedenfels said various options are being carefully weighed “in a manner that minimizes the disruption to teams and their fans.”
“We expect each of the networks will be sold or operation seized by the end of the year,” Wiedenfels said. “While we’ve positioned these to operate at adjusted [earnings before interest, tax, depreciation and amortization, or EBITDA] breakeven, this business generated nearly $400 million of revenues in 2022 and skewed heavily towards distribution revenues.”
Wiedenfels said the winding down of its regional sports business could have a “modest impact” on distribution and advertising revenue headed into the third quarter, and a “more meaningful impact” from the end of the year through the start of 2024, though he did not elaborate.
WBD is not exiting the sports business entirely: It continues to focus on clinching live sports rights for its pan-European network Eurosport and sports channels in Latin America, both of which are generating healthy returns for the company. Some sports rights are being shared with localized versions of the streaming service Discovery Plus in those regions; last month, WBD executives affirmed its recent Tour de France telecasts resulted in a 36 percent increase in viewership on Discovery Plus in 10 key markets, The Desk Europe reported.
Likewise, WBD has started offering some live sports programming through its HBO Max (now called Max) streaming service in the United States, including a match with the U.S. Women’s National Soccer Team. Games from the National Hockey League are also expected to start streaming on Max.
“We believe there’s significant opportunity in the streaming space for sports, and we look forward to leaning into this incremental growth avenue,” Wiedenfels said
WBD CEO David Zaslav said the company had incorporated digital distribution rights into its various sports agreements, which allows it to build on its sports streaming initiatives in the United States without having to spend more.
“We still have a lot of work to do, we’re early on,” Zaslav said, without offering any additional insight.
Regional sports deals are a different story, and as cable and satellite customers drop those services for cheaper streaming options, being in the business of offering regional-televised sports has become less of an asset over time.
Other companies, including Sinclair Broadcast Group, have faced struggles in getting distribution of their sports channels on new streaming platforms, choosing instead to launch their own streaming products, with varied results. (In March, Sinclair’s regional sports subsidiary, Diamond Sports, filed for bankruptcy.)