Welcome back to The Varsity, my exclusive private email on everything that happens off the field in sports business. I’m John Ourand.

🚨🚨 Reminder: Time is running out on the trial period for this email. All of this content is heading behind a paywall starting next Monday. You know your bosses will still be reading this. You should, too. Sign up here to make sure you stay informed. You can afford it—but you can’t afford to miss out!

Before we begin, I want to point you toward a couple of appearances I made last week on two of my favorite podcasts. To start, I made my debut on The Tony Kornheiser Show to discuss naming rights and R.S.N.s. I won’t describe myself as a “Loyal Little,” but for a kid who grew up reading Tony in The Washington Post, it was a thrill. Then Peter Hamby had me on Puck’s excellent The Powers That Be podcast (click here to subscribe) to talk about two issues near and dear to my heart: the MLB Pantsgate debacle and, of course, more R.S.N. troubles (the saga that never ends, as you well know…).

Over the past few months, I’ve been bombarded with questions about why exactly Amazon opted to offer Diamond Sports a form of rescue financing as it emerges from bankruptcy. Wouldn’t it be wiser to simply wait for the company to go under, and then collect the rights, presumably on the cheap? That’s the focus of today’s private email.

But first…

Okay, let’s get started…

1. Caitlinmania: The final TV numbers aren’t coming out until tomorrow, but I’ve seen some early results suggesting that Fox will eclipse 2.5 million viewers for Caitlin Clark’s final regular season game, on Sunday, in an Iowa uniform. Amazingly, Clark has starred in the most watched women’s basketball games of all time on six different platforms and networks: ABC, Fox, NBC, Big Ten Network, FS1, and Peacock. This morning, I was chatting with a top executive as we tried to recall the last athlete to have this sort of impact on their entire sport. The best we could come up with was… Tiger Woods.

   Clark is such ratings gold, in fact, that Fox executives contemplated reaching out to other networks to see if they could come up with an enticing N.I.L. offer that would convince her to stay in the college ranks for one more season. Alas, talks never materialized (nobody ever approached Clark), and ended before they could get going last week, when the superstar formally announced that she was headed to the WNBA next season. She is the overwhelming favorite to be the top overall pick.

2. NBA’s foreign capital: Last week, a source close to the NBA media rights talks called me to say that media reports were discounting the importance of the league’s international prospects. After all, the NBA’s international deals all expire after the 2024-25 season, just like the league’s domestic deals with Disney and Warner Bros. Discovery. And, this person noted, those global rights could be particularly compelling for the deep-pocketed platforms, including some who might lose out domestically this cycle. They might even use international NBA rights as a test-and-learn opportunity for the next go-round.

   Nevertheless, I’m hearing that Apple executives are still not interested in the NBA, believing that the league is too fragmented in its current economic and distribution environment. It’s too soon to count anyone out entirely, sure, but Apple’s MLS deal and Pac-12 bid demonstrate that it wants to own all of the rights to a league, not just one of three or four packages. Nevertheless, international NBA rights will get others to bite: Games can be viewed in 214 countries and territories, and one-quarter of NBA players come from outside the U.S.

   The NBA can’t talk dollar figures with any of these companies until its exclusive negotiating window with Disney and WBD expires next month. But league executives have remained insistent over the past several months that they expect bids from the top streamers, including Apple.

3. A Netflix live sports milestone: Perhaps my biggest takeaway from yesterday’s Netflix Slam tennis exhibition between Rafael Nadal and Carlos Alcaraz was that it did not dominate my social feeds. Ironically, that’s perhaps a relief for the streamer’s executives, given that the Netflix Cup golf exhibition and the Love Is Blind live finale only surfaced in my feeds when viewers were highlighting major production glitches. Instead, this no-drama production reflected Netflix’s strength in creating and delivering live events. That should calm some nerves as Netflix prepares to roll out WWE Raw in January.
4. More on my adventures on Capitol Hill…: My January appearance before the House Energy and Commerce Subcommittee on Communications and Technology is the gift that keeps on giving. (Don’t worry, dear readers, I will mention my tango with Capitol Hill until it becomes a drinking game…) Recently, I was asked to respond to a note from Rep. Russ Fulcher, a Republican from Idaho. But I will offer my answers here, first.

   Rep. Fulcher asked if the increasingly competitive bidding for sports rights by streamers could lead to more affordable prices for consumers. “Am I thinking in the right direction?” he asked. My response: Consumers can expect prices to rise as media companies and streamers continue to compete for sports rights. We already saw this happen first-hand, two years ago, when Amazon cited its NFL deal as one reason why it increased Prime’s monthly fee from $12.99 to $14.99, and annual fee from $119 to $139.

   One of the reasons why NBC paid $110 million to put an NFL playoff game on Peacock—and why Amazon will pay $150 million for the rights to stream its own playoff game on Prime—is exclusivity. Neither Amazon nor Peacock would pay nearly as much if they didn’t have exclusive access to the games. All the leagues need to balance making sure their games are available to the most people while selling exclusive access to streaming companies. Right now, the money is so good in streaming that leagues will likely try to find more games or packages to sell to streaming companies.

5. R.I.P. Mort: I was struck not only by the sheer amount of heartfelt notes and remembrances following the passing of Chris Mortensen, the ESPN reporter and all-around mensch who died Sunday morning at the age of 72, but also by the fact that virtually every single tribute focused on his decency and professionalism. If you only spend time on one piece, make sure it’s this one from Mortensen’s friend Adam Schefter. “He was the reporter who could get to the bottom of the most difficult stories, yet still be the biggest prankster at the network, capable of making any and everyone laugh.”

Ironically, it’s that old-school, legacy R.S.N. business—or, more specifically, the way that it’s structured—that most interested Amazon. Local sports rights are still valuable, even as the R.S.N. business model remains in crisis. And while there’s not a lot of money in local sports streaming right now, Amazon has long been a believer. The company owns 15 percent of YES Network and carries a package of Yankee games locally. This rescue financing represents an escalation of the thesis.

The easiest way for Amazon to realize that streaming future without hemorrhaging money is to keep R.S.N.s as viable as they can be for as long as they can. Even after Diamond is restructured, the business is slightly cash flow positive to break-even; the revenue that the linear channels make from distribution and ad sales could fund the cost of the streaming rights that it will put on Prime. In other words, think of the legacy channels as a basement apartment that Amazon rents out to fund its mortgage.

If Diamond dissolved, however, all those contracts would be up for grabs. Insidiously—and brilliantly, actually—if Amazon’s investment can keep Diamond running, those contracts would remain the same. Amazon is clearly betting that as they start putting more local rights on Prime, other teams will fall in line, one by one.

While companies like Disney, Fanatics, and others contemplated becoming more involved in local streaming, Amazon gained a first-mover advantage. It will have a local streaming system in place as some of these team deals expire, which will put it in a better position to negotiate, and build its business on top of its investment, all while looking like a saint that rescued Diamond from near death. Indeed, Jassy does not do dumb deals.

“I wondered how long it would take you to use the word defenestrated. It’s a favorite Puck word! I’d have bet the under and lost. It took you a while!” —A former network executive

“You know you are reading a Puck newsletter when you see the word defenestrate.” —A Puck subscriber

See you Thursday,
John