There are so many dramas playing out in the TV/video business these days it’s hard to keep up. Cord-cutting, M&A, reorganizations, high-profile executive departures, product launches, discounted pricing, eye-popping A-lister salaries….the list goes on and on.

But one particularly intriguing drama that’s been catching my eye lately revolves around YouTube TV and the YES Network. As with everything in the TV/video business, the background is complicated, so here’s the high level cheat sheet:

YES is the Yankees Entertainment and Sports Network. It is a regional sports network (RSN) that has the rights to broadcast Yankees and Brooklyn Nets games plus other content.

Last year, following the Disney-Fox M&A drama, YES was acquired for $3.5 billion by the Yankees (26%), Sinclair Broadcasting (20%), Amazon (15%) and a bunch of investment firms. Separately, Sinclair acquired 21 of Disney’s RSNs, in partnership with entrepreneur Byron Allen for nearly $10 billion.

Like all RSNs, YES primarily generates revenue from the monthly carriage fees that pay-TV operators pay to include YES in their channel lineups, and from advertising sold during the broadcasts. YES is one of, if not the most, expensive RSNs in the country. Estimates vary, but it likely charges operators at least $6 per month per subscriber. 

Last week there were initial reports that YouTube TV, a virtual pay-TV operator owned by Google that now has around 2 million subscribers, was planning to drop Sinclair’s RSNs and YES from its lineup on Feb. 28th but subsequently agreed to an extension. Today there are reports that Sinclair has reached a deal with YouTube for 19 of its 21 RSNs, but a YES-YouTube TV deal remains elusive. YES released a statement denouncing YouTube TV as being unwilling to “pay the market rate and accept market terms and conditions that other YES distributors have agreed to.”

By YouTube TV taking a tough line with YES, has Google has potentially positioned itself to take the lead on tackling the RSN and sports networks bubble? As VideoNuze readers know, I have been writing for years about the obscene economic unfairness of RSNs and national sports networks that has created a .01% bubble that is unlike anything else in our society.

The key to understanding this bubble is that the carriage fees RSNs charge operators flow through to the monthly bills of virtually all subscribers - whether or not they ever watch a single inning of a single game. All of those billions of dollars of unwarranted charges - along with the high prices of tickets and concessions - then flow back to fund lavish player salaries, franchise values, etc.

Up here in Boston, we recently got a first-row view of this bubble. Without getting into too much of the details, with a year left on his current $27 million per year contract, our superstar right fielder Mookie Betts reportedly wanted a 12-year $420 million contract, and the Red Sox reportedly offered a 10-year, $300 million deal. So a difference of $5 million per year, plus the extra 2 years, which would be worth around $70 million. The Red Sox ultimately traded Mookie to the LA Dodgers, to the dismay of Red Sox fans.

The Mookie drama played out on local sports radio to the point of being insufferable. One time I tuned in and an unnamed analyst proclaimed that the Red Sox offering Mookie “anything less than $32 (as in million) per year was a “total insult.” I found myself wondering - would this analyst summon even 10% of his Mookie outrage about topics like climate change, poverty, health care, etc?

The answer is surely no. And this is what the bubble has created - a massively distorted view of what a very thin layer of athletes is worth paying. Mookie is just one example of what life is like at the tippy-top, but even well far down the line, life doesn’t suck once you’ve made it to the ranks of professional athletes. In short, the sports bubble is completely disconnected to the real world.

Google is in a tricky place here and admittedly it's a little rich to have Google, which exists in its own bubble of de-facto search monopoly, take on another bubble. Other operators - especially Dish - have taken hard lines on RSNs as well. For now, YouTube TV seems to be just focusing on YES (though that line could disappear before Opening Day, as it has so often has in these types of past disputes).

The larger issue at play here is how sustainable the sports bubble is in a world of plentiful free and subscription entertainment choices and accelerating cord-cutting? Pay-TV operators’ video margins are already razor thin; most of them now look at video as a cash cow, best case. 5 million American homes likely abandoned pay-TV in 2019 yet sports and news are consistently cited as the main reasons subscribers retain their service.

It’s quite a drama.