- The broadcast deal between MSG Networks and Comcast expired on Sept. 30.
- That means customers in New Jersey and Connecticut lost access to upcoming Rangers and Knicks games.
- Comcast said MSG viewership was extremely low and that MSG is asking for too much money to carry the channel.
- MSG said it wants a deal with Comcast that's consistent with the deals it has with other carriers.
Madison Square Garden Network traded barbs with Comcast on Friday as the two media companies dispute over rights fees that halted pro sports content on the service.
The broadcast deal between MSG Networks and Comcast expired on Sept. 30, leaving sports viewers in the New Jersey and Connecticut areas without content featuring the New York Knicks and the National Hockey League's Rangers. Both are controlled by MSG. The network also airs Devils, Islanders and Major League Soccer games. The NBA season starts on Oct. 19, while the NHL season starts on Oct. 12.
MSG called the failed negotiations "disappointing," claiming Comcast attempted to "force us to accept terms they'd never agree to for their own regional sports networks, including SNY in New York," a MSG statement to CNBC said. SNY is another regional sports network that airs Mets MLB games.
MSG's statement also said Comcast rejected proposals similar to deals MSG has with other carriers.
MSG Networks also planted a banner across its website alerting consumers of the dispute. The network is owned by Madison Square Garden Entertainment Corp., which trades on the New York Stock Exchange and has a $2.4 billion market cap.
It's not clear how much Comcast pays MSG to distribute its channels. The network generated total revenues of $166.1 million, according to its fourth-quarter earnings report last August. But the report added its "affiliation fee revenue decreased $9.7 million, primarily due to the impact of a decrease in subscribers of approximately 7%."
Comcast, the parent company of CNBC, defended its decision to drop MSG. In a statement, it wrote its internal data shows "95% of all customers who received MSG over the past year did not watch more than 10 of the approximately 240 games it broadcast." Comcast doesn't serve residents of New York City, who instead get cable from companies including Charter, Altice USA and Verizon.
Said Comcast: "We don't believe that our customers should have to pay the millions of dollars in fees that MSG is demanding for some of the most expensive sports content in the country with extremely low viewership in our markets."
On Xfinity's website, the company wrote it would lower its regional sports network (RSN) fees to customers in "applicable areas" impacted by the decision to drop MSG Networks.
In media circles, this dispute could be a sign RSNs and that could impact local pro team revenues.
A new reality for RSNs?
The loss of Comcast viewers for MSG Networks comes at a critical time for its Knicks franchise. The team made the NBA playoffs last season for the first time since 2013 and energized its fan base. But Comcast is no stranger when it comes to turmoil regarding RSNs that feature New York City teams.
In 2015 it dropped YES Network, co-owned by the Yankees. The channel eventually returned to Comcast in 2017. That dispute needed to resolve because the Yankees are a premium sports brand outside of New York. And Major League Baseball games are the main blood vessel for RSNs.
NBC operates its RSN in New York with SNY and has properties in regions that include Philadelphia, Boston, Chicago and San Francisco. And Comcast temporarily renewed its deal with Google-owned YouTube to allow the service to continue streaming its NBCUniversal content.
When discussing the Comcast, MSG dispute, longtime sports media rights advisor Lee Berke called the move a "risk" as there could be pushback from customers. But he also cautioned RSNs are in danger if they don't improve their strategy.
"The Comcast MSG situation is more than a temporary situation," Berke said. "It's a symptom of an ongoing, substantial problem for RSNs to continue to gain distribution from pay-TV services as the pay-TV universe continues to shrink."
"The (cable providers) feeling is, 'How many subscribers are we going to lose versus that improved margin we have by not carrying these expensive RSNs," Berke added. "If the savings surpass the loss in subscribers, then they'll keep it up."
MSG Networks doesn't carry MLB games, so it can't leverage that asset to sports marketers. And distribution took another hit with losing Comcast. In 2010, MSG didn't agree to terms with Dish Network, resulting in it being dropped from the satellite service. The network still isn't available on the service.
Dish slashed RSN offerings overall over the years. For now, it stopped carrying AT&T-owned SportsNet and Root Sports, which just picked up the Portland Trail Blazers rights. And it removed NBC Sports properties last April.
"The current RSN model is fundamentally broken," said Dish president Brian Neylon in a statement last April. "This model requires nearly all customers to pay for RSNs when only a small percentage of customers actually watch them. As the cost of these channels continues to escalate, we no longer think it makes sense to include them in our TV lineup."
Berke said RSN offerings would further decline in the coming years.
"When your pay-TV universe has shrunk to 100 million subscribers at peak, down to approximately 70 million or less – shrinking to about 8% a year – it becomes more and more difficult to maintain the same stable of channels you've had in the past," Berke said. "The RSNs are increasingly feeling the heat and the brunt of these changes."
Most of MSG's subscribers are in the New York area, but losing Comcast viewers in surrounding regions impacts affiliate revenue and impressions – that could hurt advertising sales. And Berke factored in more ways to watch hockey content.
"If you really want hockey, you have new packages with ESPN and TNT," he said. "And 75 additional NHL games will be shown on ESPN+ and Hulu."
--CNBC's Alex Sherman contributed to this report.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.