What do we make of the Stars new TV plan?

Trying to get a handle on how the Stars might be blazing a trail that others soon follow.

Photo by Glenn Carstens-Peters on Unsplash

Let’s answer an email from a subscriber today….

“Hey Bob,

Welcome back from vacation. I was wondering if you could address the news for me on what to think about the Stars announcement that they are moving their entire broadcast operation to a free streaming platform and what it all means for us out here in TV land.

Thanks! Dave.”

For sure!

So, we heard in the spring that the Stars were leaning in this direction, but I didn’t know if they were actually going through with it. But, clearly, they are.

Here is the release:

FRISCO, Texas -- The Dallas Stars announced today they have entered into a seven-year agreement with A Parent Media Co. Inc. (APMC) to stream all regional Dallas Stars games free of charge beginning with the 2024-25 season. The games will be broadcast on newly formed VICTORY+, a free direct to consumer streaming service created for fans by APMC with the Dallas Stars.

"After years of researching the right solution and careful planning with our partners at APMC, we’re proud to announce this pioneering streaming platform that will literally change the game for sports distribution on VICTORY+," said Dallas Stars President and CEO Brad Alberts. "Our first priority has always been our fan base, and on VICTORY+ fans will be able to stream 100 percent of Stars content for free through this innovative and unique streaming platform for sports programming. Despite the mutual agreement between the Dallas Stars and Diamond Sports Group to end our current relationship pending court approval, we would like to acknowledge that we wouldn’t be here today without the partnership and commitment of Bally Sports and their staff over the past 25 years and thank them for their partnership."

VICTORY+ will be available for download on smart TVs, tablets and smart phones in September 2024 ensuring fans within the Dallas Stars regional territory (Texas, Oklahoma, Louisiana, Arkansas) can enjoy content wherever they are on their preferred device. Fans outside the Stars regional territory will still be able to enjoy VICTORY+ to watch a robust menu of ancillary content provided by the team.

In a revolutionary step for sports fan engagement, the service will be offered as a free ad-supported streaming service, making it accessible without barriers and enhancing the fan experience with a low-latency feed and high ad-fill rate for a superior viewing experience. Utilizing APMC’s ad-tech solution Safe Exchange™ will allow both direct and programmatic ads on the service ensuring advertisers can have full access to the engaged audience base.

Basically, what we are looking at here is that the cable TV and satellite models are broken and absolutely unable to be fixed. If you thought Blockbuster Video vanished in a hurry, I hope you don’t have your retirement accounts linked to the long-term sustainability of our cable companies.

I cannot vouch for this following passage being the gospel, but if it is even close, this is staggering:

Cord-cutting households outnumbered pay TV households for the first time in 2023. By 2026, there will be 80.7 million cord-cutting households in the US compared to just 54.3 million pay-TV households.

But, wait, there is more:

• There will be 80 million cord-cutting US households by 2026.

• Cable and satellite TV providers have lost over 20 million US subscribers since 2014.

• Adults ages 18 to 29 are the most prolific cord-cutters.

• 30% of Americans who currently have cable TV subscriptions say they are likely to cancel.

• 52% of cord-cutters say they don’t miss anything about cable TV.

Again, this is a lot of information, but what it means to our sports teams is massive. They are businesses and have bills to pay, just like the rest of us. The cable companies and the sports channels have been involved in massive disagreements forever, and now it is coming home to roost.

Without explaining the entire industry in a long passage, here is the shortest version: When you pay your satellite/cable bill, you are paying a big number which is actually a series of smaller numbers added up, with each one representing a different network you have available. ESPN, for instance, charges the most:

With an average estimated carriage fee of $9.42 per sub per month, ESPN this year is on track to generate $8.1 billion in affiliate revenue.

So, nearly $10 every month goes to ESPN from every subscriber, even those who hate sports. Every month! There has never been an opt-in or opt-out version because it is always on the base tier, so every American who wanted TV was paying ESPN about $113 a year. Your regional sports cable company—Fox Sports Southwest, now Bally’s—was somewhere in the $6 range (reportedly), so your grandma, who never watches a game, was paying $72 a year for that.

We figured that at some point, this might be rejected by the American public, and here we are. People can now cut the cord, use Wi-Fi to get Netflix, Hulu, or Amazon Prime, and watch only what they want and cancel at any time. People normalized a satellite bill of $200 a month, but the next generation decided they are not interested in any of that and can get by for a fraction and tell the bundle to go fly a kite.

The sports channels had already agreed to 10 or 20-year deals with the local sports teams for their rights and now had their revenues chopped substantially, so they basically quickly go bankrupt when they can’t pay the bills. They had guaranteed their expenses but not their revenues, which I am told is poor business savvy, but essentially, the sports bubble burst and as we might expect it would when the public rejects it, and the leagues themselves were largely safe from the damage. The regional sports networks would be the first to die. And the teams would skate away.

Sort of.

That is a fair amount of expository text, but I feel like we had to set it up a bit.

The Dallas Stars were stuck on Fox Sports Southwest/Bally’s because they signed a long-term commitment at the same time that cable companies were rejecting the carrier fees. This caused a fractured relationship, ultimately resulting in people being unable to see the games because they were using a provider that would not offer the channel at all. The Stars were still getting their money (mostly), but the audience suffered. More than anything, though, they saw the future coming at them fast.

Now, I write about the Stars today, but this is also a big story for the Mavericks and Rangers. All three are in a somewhat similar spot, with some important differences:

• Stars were getting around $30 million a season, we believe and have a league cap around $88 million a year and Forbes projected the Stars revenues at about $210m when last they checked in. There is some national TV money in hockey, but it is a drop in the ocean relative to their friends in the NFL or even the NBA.

• The Mavericks were about twice that $50 to $60 million and are bolstered with massive national television money that is over 40% of their revenues which two seasons ago were listed at about $430 million per season. This, of course, is what has led to star players getting over $60 million per season each and now we hear the new TV deals will even triple that. Yes, $100 million-per-year basketball players are coming very soon.

• The Rangers local TV money from cable is even double that. $110 million per season or so and they are/were locked in for another decade. Forbes listed their revenues also at about $425m last season, but the distinguishing difference is that the Mavericks have most from a national TV deal and the Rangers and MLB teams get most of their TV money from local deals. Huge difference, especially if the local sports channels are dead. This, my friends, is why Rangers ownership is puckering at the thoughts of the future finances of the baseball model.

So, back to the Stars—the money is smaller, the bills are smaller, and while the league is growing revenues at a healthy rate, the local hockey team is trying to figure out its new normal and how to remain viable moving forward as a team that wants to not only exist but compete for championships. They know that hockey can be successful in DFW, provided they are trying to win. In Canada, you can put bad hockey on the ice and still have a huge audience, but Dallas has never proven to be that in love with a sport that is certainly not native to these parts.

Now, yes, the Stars generate income from sources other than TV. They are filling their arena well and have a very robust fanbase. The $210 million revenue figure does not seem to be overly leveraged in this TV bubble, but still, if it is $30 or $40 million, they don’t want that to disappear. More importantly, they don’t want their fanbase to be unable to watch their games because we have learned that people figure out other things to do with their lives. If you take the product away, people switch hobbies and exist just fine.

ENTER VICTORY+

The Stars are doing something unprecedented in our big four sports. They are leaving TV altogether and taking their product in-house. Now, that part has been done before. But the unique part is they are offering it to their fans for free, with no subscription whatsoever.

Free, and the commitment with the platform is seven years.

It will be fully streaming, and as someone who has been streaming sports for years, I find the experience to be easy and painless. There are a few things I don’t love, such as flipping back and forth being a bit more painstaking, but overall, there is nothing to it. The quality is high, and the general experience is simple. You download an app in a few seconds, and you are good to go. Oh, and it is free.

If they had charged a fee, we would have concerns. People are getting subscription fatigue, and any cost might trigger a negative response (thank you for not getting fatigued with me). But completely free? All you need is the internet, and you can watch every Stars regular season game for free.

Free is good. The quality will be excellent, we are assured, and the potential opportunities for alternate feeds, broadcasts of preseason, practices, or anything else abound. Can they carry Texas Stars games on off nights? No idea. But I am interested in their plans. If you are in those four states, you need to invest zero dollars to follow the entire season.

Yes, you can still get it when traveling out of those states.

Yes, you can join the game in progress and start at the beginning or in real time.

Yes, you can see archived games for probably 48 hours.

Yes, your local bars and restaurants can all do the same thing for the same price (although they will have to opt over to the app, which might be an extra annoying step for some).

Now, what is the risk for the hockey club?

Well, they believe they can generate eyeballs and convert them to ad dollars to underwrite the entire operation. Can they? If they can, they will be joined by more hockey teams and potentially more sports teams. If they are wrong, expect them to pivot to a new plan quickly because this is a reasonably sized risk. They could have built a partnership with a local TV station to try to share the risk, but they are betting on themselves and the future of how people—especially young people—will watch things moving forward.

I don’t know what is reasonable for ad revenue projections. I suppose if we see the same sponsor 16 times a game, we will know it is not going great. But, I have no idea at all how hard it is to find $30 to $40 million at this scale. The Rangers have to be thinking that they would need to make it hit $150 million for them and I am guessing that is even more of a long-shot. This is why the Stars have a better chance. They have top players making $9 million a year and not $40 million or $69 million a season, so they have smaller problems.

But, I do know a few things concern me and probably them:

• Very little promotional support will exist. If a tree falls in the forest, does anyone know about it? This is the big one. The local teams thrive on the anticipation of their next games. How does that happen? Promotion. Often, when you are watching TV, you will see something that reminds you the Blues are in town tonight. Does that completely disappear if you are not inside the echo chamber already? How will you casually find out about the game? Hardcore fans will be checking themselves, but what about the casual fans? Will they feel compelled to find the game on their own? Also, the other three teams can expect sports talk and sports print to offer the free promotion of conversations and content. Can the Stars? How do you make sure the city still cares? This is an issue they will need to tackle, and it has to mostly be from outside their own website, social media, etc. They already own that part of the audience.

• There will be zero “accidental viewers” left in the mix. Let’s face it—this model is great if you are a hockey fan. But the idea that you will stumble upon a Stars game by chance when you are flipping through the channels or guide will completely vanish. I know channel surfing is not really much of a thing anymore, but that part of the audience that wants to find a game to watch or bet on will not be around anymore, I’d imagine. The chance viewers are gone, and while everyone will have access, will it actually convert new fans? In other words, do we know that free content is all that prevents people from watching hockey in Dallas?

These two elements tell me the Stars have some work to do. They need to figure out how to remain relevant and grow without any help from a Stars promo during a Rangers or Mavericks game. That stuff does help. There are a few hockey enthusiasts in the media who will help because of their authentic passion for the sport and franchise, but are there enough?

Is this the beginning of something big that will be traced back to the Dallas Stars when the entire sports world follows them, or is this the start of the demise of their relevance?

As our friend Deion Sanders often tells us, “If it don’t make dollars, it don’t make sense,” and I believe that applies here. It is free to us, but the Stars need it to deliver on their hopes. Adapt or die is front and center on this one. The regional sports channels have died, and now the local teams have to adapt.

The Stars are taking the first step, and I promise the Rangers and Mavericks are watching to see how it goes. And so are we. This might be the new normal, with everyone hoping the hockey team can figure it out.

For more on this, check out Sean Shapiro’s piece at Shap Shots:

The Dallas Stars have left TV and are going all-in on free in-market streaming