Welcome to an exciting Leap Day edition of The Varsity, my new private email about the money and power behind your favorite (and despised) sports leagues, teams, and mediacos. I’m John Ourand, writing to you from Washington, D.C., home of the NBA team with the worst record in the league—yes, somehow worse than a Pistons team that lost 28 straight games this season…

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It’s been another busy week in sports media. Let’s get right to it.

McAfee was at it again this week, belittling the ESPN executive editor during an episode of Stephen Jackson and Matt Barnes’ All the Smoke podcast—an excellent show in which the hosts and former NBAers conduct often revelatory interviews with players and executives while interspersing commentary about their love of marijuana. (The title, of course, is a double entendre.) McAfee, for his part, may have been high on his own supply, offering comments that suggested he wields the real power in Bristol. “I thought that was a warning shot to that guy,” McAfee said, not referring to Williamson by name. “I guess a lot of people have a lot of fear of him. I did not.”

I’m not expecting a response from ESPN, especially since the network has already indicated that it would handle all of this stuff internally. But it’s hard to imagine another on-air personality who would be given such a wide berth. If even Mike Wilbon or Scott Van Pelt had ventured into these waters—and they never would have, of course—they would have suspended immediately and put in their place. Bill Simmons, after all, was suspended and eventually defenestrated for simply criticizing the commissioner of a league partner. McAfee also name-checked Bob Iger and Jimmy Pitaro as his real bosses, which suggests that Aaron Rodgers may not just be his buddy and occasional guest, but his public relations model, too.

1. Cable wars: Comcast’s deal to carry the regional Mid-Atlantic Sports Network, home to the Orioles and Nationals, was supposed to end at midnight tonight, but the two sides worked out a short-term extension that will keep the R.S.N. on Xfinity for at least one more week. Negotiations are ongoing, which is a good sign. But I’m told that both sides remain far apart, and it seems increasingly possible that the opening day telecasts for the O’s and Nats will not be carried by the dominant cable provider in the Baltimore-Washington corridor.

   The dispute, of course, comes down to what every dispute comes down to: money. Comcast wants to put MASN on a less popular digital tier that would cut the R.S.N.’s distribution and revenues significantly. MASN wants to stay on its current, more popular and lucrative tier. Don’t dismiss this as a local issue germane to the D.M.V.: Comcast has used this blueprint for independent R.S.N.s in other markets, like Pittsburgh and Seattle. The question is what will happen when the cable operators’ contracts with the Comcast-owned, NBC Sports-branded R.S.N.s, and the Bally Sports R.S.N.s, finally expire. I can’t imagine a scenario where Comcast pushes smaller independent R.S.N.s to a digital tier but keeps its NBC Sports-branded ones on the more populated tiers. The internal negotiations around that will be as fierce as any cable carriage dispute, and I expect that Brian Roberts will have to step in and adjudicate it.

2. The Zoom of Doom: I’m hearing that Warner Bros. Discovery cut as many as 150 jobs this week at MotorTrend, the racing channel, with layoffs across production, programming, marketing, and accounting on both coasts. Budgets in many departments were slashed, too. Cutbacks also hit MotorTrend+, the network’s streamer, which recently folded into Max. Meanwhile, the hard-copy magazines—MotorTrend and Hot Rod—will move from a monthly to a quarterly publishing schedule. An unknown number of affected employees will transition to jobs at the parent company.

   Insiders say they learned of the coming cuts during a Zoom meeting on Monday, run by president of global streaming and games JB Perrette and MotorTrend Group president and general manager Alex Wellen. The mass layoff event is now being referred to as the “Zoom of Doom.”

3. The sports force multiplier: One of the reasons that Peacock paid $110 million for the exclusive rights to a single NFL wild card playoff game was elucidated in, ironically, a competitor’s earnings call yesterday. Paramount C.E.O. Bob Bakish said that people who subscribe to Par+ for live sports will spend 90 percent of their viewing hours on non-sports content. “Think about that as a nine-times sports multiplier,” Bakish said on his company’s Q4 call. “That’s the power of an integrated sports and entertainment strategy.”

   That number is telling and suggests why streaming companies are becoming even more aggressive in securing sports rights. The key metric in streaming, especially ad-supported streaming, is the lifetime value of a customer. Peacock is happy to spend $110 million in customer-acquisition costs, in the form of a playoff game, if its data scientists are confident that those customers can be retained via other programming, like Saturday Night Live or The Office repeats.

   That said, sampling can be selective. It will be interesting if, in a year, NBCU releases the percentage of people who signed up for Peacock to watch the wild card game and remained subscribed. Similarly, it will be interesting if Par+’s numbers remain that high in a year—if it even exists, of course.

4. Iger’s Charter rope-a-dope: The most interesting question I was asked at the J.P. Morgan conference earlier this week dealt with the Charter-Disney deal that was signed last fall. Early consensus was that the deal was a big win for Charter, as it was able to drop eight little-watched channels, like Disney Junior, Freeform, and NatGeo Wild. This was seen as a big step by Charter to create skinnier bundles and seemingly set a precedent for other distributors like DirecTV when they renegotiate with programmers. Plus, Charter won the right to make Disney+ available to expanded basic subscribers at no extra cost—a big deal for distributors who have long complained about all the content leaking outside of the bundle and onto streaming services.

   With the benefit of hindsight, however, my view has changed. Disney got around a 10 percent rate increase at a time when any increase is worth celebrating. And ESPN gained enough flexibility to launch Spulu with Fox Sports and Warner Bros. Discovery—not to mention the ESPN flagship D.T.C. service. Meanwhile, Charter still cannot launch the types of skinny bundles that make up Spulu. Its contracts won’t let them. Charter may have kicked Nat Geo Wild and Disney Junior to the curb, but it still has to carry Nat Geo and Disney Channel.

5. ESPN Minus: Make sure you read Julia Alexander’s excellent piece this week about how Spulu will impact the existing sports streaming services. I was most interested in her analysis of ESPN+, which tracks completely with what I’ve been hearing. “ESPN+ wouldn’t necessarily be made obsolete by the Spulu bundle, which will presumably be four or five times more expensive,” she writes. “But the current version of ESPN+ will likely become a lower tier of the new ESPN stand-alone streaming app that Disney C.E.O. Bob Iger has announced for 2025. … Consolidation is coming.” Indeed.

Or does one fast-forward to Diamond’s failure to make a $140 million interest payment last year, which plunged the company into bankruptcy? Or Amazon’s $115 million investment, contingent upon a restructuring, to be Diamond’s exclusive streaming partner? Look, I’ll save everyone the unmitigated hell and begin by telling you the good news, which you likely already know: Diamond’s recently structured $450 million debtor-in-possession financing plan, including the Amazon rescue investment, was formally approved by the bankruptcy judge this week. The company will use the cash to pay down its debts and begin operationalizing. Hooray…?

There’s a whole lot of work to do over the next few months as Diamond looks to restructure its economic relationships with the leagues and secure long-term affiliate deals with the country’s biggest distributors, such as Comcast, DirecTV, and Charter. Diamond operates 18 regional sports networks televising 11 MLB teams, 11 NHL teams, and 15 NBA teams, and the company needs to convince the leagues that they should reduce their rights fees by around 15-18 percent per team. And the company, saddled with its DIP restructuring, is hardly in a position to play hardball.

Furthermore, the Amazon dimension adds an interesting wrinkle here. Yes, $115 million (plus potentially another $50 million) is a lot of money, but it represents laundry coins for Amazon. Manfred likely sees a larger opportunity to partner with the world’s fifth-largest company and presumably doesn’t need the interstitial layer of Diamond to pull it off.

In the meantime, as the Major League Baseball negotiations remain stalemated just a month before the season commences, Diamond C.E.O. David Preschlack doesn’t have time to screw around—he needs to make deals to bring in revenue to service the debt, and stat. And that means he’s got to restructure his company’s deals with the NBA and NHL, too.

According to my reporting, however, NBA commissioner Adam Silver is more inclined to take a haircut on teams’ rights fee payouts, largely to prevent local media revenue from falling through the floor. His larger priority, as I’ve previously noted in this space, is negotiating the national deals—contemplating three partners versus four, and maybe some wrinkle with a playoff round—and figuring out whether they might include digital local rights. (Ironically, of course, Amazon is considered a frontrunner for one of the NBA’s national rights packages.)

Indeed, the NBA is engaged in talks, but various league sources warn that it will take a while for those talks to wrap up. As for the NHL, Gary Bettman’s teams take in a smaller amount of local media rights fees than MLB and the NBA. The NHL is talking with Diamond. And while the two aren’t necessarily close to a deal, it doesn’t appear that the talks are headed sideways.

On the other hand, look at how Comcast is treating MASN. Diamond can’t afford to have Comcast put the Bally Sports R.S.N.s on a less popular digital tier, potentially cutting its revenue by as much as one-third. But Comcast appears to be unmovable on this deal point. Preschlack cut his teeth in ESPN’s affiliate sales department many years ago, and he’ll need to draw on his experience and his relationships in this negotiation. Charter, which put its own Los Angeles R.S.N.s on a less popular digital tier, is in the same boat.

Diamond extended its deal with Charter by a couple of months—“They kicked the can down the road,” as one insider described it. Its deal with Comcast runs into the spring, and DirecTV is up in late summer. In the end, Diamond’s survival will come down to what kind of deals Preschlack can cut.

“You made a brilliant point about Peter King and his newsletter. When I was at Sports Illustrated, nobody really knew what to make of his columns, but it drove incredible traffic to the website. People said that we were giving away the brand’s best asset—MMQB—for free. They were right.” —A former S.I. staffer

“I am obsessed with Pantsgate. It’s hilarious that it’s the biggest story in baseball as MLB begins spring training.”—A network executive

See you Monday,
John