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BY JONATHAN BLUM, KAGAN
MSOs and team owners are smart to look at the regional sports business. We estimated total RSN revenue hit $1.8 billion for 2002, up by about 11% from the previous year. But a look at the operational economics shows the business is not trivial to enter. RSNs are dominated by one player: News Corp. Blurry carriage and affiliate deals hide exact relationships, but of the 80 men's professional sports teams in the U.S., 50 have exclusive carriage deals with Fox. The limited carriage picture is further tightened by the subscriber dependency and the high costs of the RSN. We modeled the expenses and revenues of a vertically integrated RSN with stakes in sports teams and cable distribution with 1.6 million subs and showed that operating margins in the 50% range are possible. Drop that subscriber number down and take away the scales of cross-ownership and the stubborn costs of professional rights, remote production fees and ad sales quickly eat up available profits.
RSN REVENUE AND EXPENSE MODEL
| Subscribers |
1.6 mil. |
|
| Affiliate Fees/Sub/Month |
$1.70 |
|
| Affiliate Revenue |
$33.6 mil. |
65% |
|
| Advertising Revenue |
$16.3 mil. |
31% |
| Other Revenue |
$2.1 mil. |
4% |
|
| Total Revenue |
$52 mil. |
100% |
| Expenses |
|
|
| Professional Rights |
$10.3 mil. |
43% |
| Collegiate Rights |
$1.5 mil. |
6% |
| General & Administrative |
$1.6 mil. |
7% |
| Programming |
$300,000 |
1% |
| Remote Production |
$6.8 mil. |
28% |
| Ad Sales |
$2.9 mil. |
12% |
| Marketing |
$600,000 |
3% |
|
| Total Expenses |
$23.9 mil. |
100% |
| Operating Profit |
$28.1 mil. |
54% |
| SOURCE: KAGAN WORLD MEDIA ESTIMATES |
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