Welcome to the inaugural edition of The Varsity, my twice-weekly private email on the inner workings of the business of sports. I’m John Ourand.

Today, I’m coming to you from the spiritual heartland of Las Vegas, where I am currently performing all of our industry’s pre-Super Bowl rituals. I’ve spent the week shuttling back and forth from the media inner sanctum, the Luxor Hotel (gussied up this week to look like a giant nacho cheese Dorito), all the way to the other end of the Strip, where so many of you are staying. If you’re around and you want to get together before the game, just respond to this email. It goes right to my inbox.

🚨🚨 I’ll be hitting the Endeavor/TKO Lounge on Saturday afternoon to see my new Puck partner Matt Belloni host a live episode of his excellent podcast The Town with Bloomberg’s Lucas Shaw. I was excited to make my own debut on The Town as an official Puck employee yesterday, when Matt and I spoke about the new all-in-one-ish super sports streaming app, which I’m writing about in fulsome detail below. I also talked about the consortium on another Puck podcast, The Powers That Be. Subscribe to both here and here.

A quick programming note: For the next month or so, this newsletter will be free. After that, you’ll need to subscribe to Puck in order to read my work. In fact, you can subscribe here to make life easier for yourself. As you likely already know, a subscription also provides access to the reportage of my excellent partners, including Matt, Dylan Byers, Lauren Sherman, and Julia Alexander, among others.

Mentioned in this issue: Roger Goodell, Taylor Swift, Adam Silver, more Orioles drama, Chris Winfrey, the Jaguars, Peter King, David Rubenstein, Mike Bloomberg, Barry Levinson, Phil Hochberg, Pam Shriver, the Tom Clancy estate, Joe Ravitch, Lachlan Murdoch, Ted Leonsis, and more…

Okay, let’s get started…

Viewership for the NFC and AFC Championship games were up 11 percent this year. I don’t expect that the Super Bowl will see that big of a jump. But I think it will eclipse 120 million viewers for the first time. Anyway, I’m going with 120.2 million viewers.

The irony, of course, is that Goodell is in his strongest position in more than a decade, which is why he secured this honor. Most NFL narratives precipitating this week are relentlessly positive, at least from a business perspective. In the first year of its new TV deal with Amazon, CBS, ESPN, Fox, and NBC, viewership is through the roof—the league posted its best TV numbers in nearly a decade. Playoff ratings are the highest we’ve seen in four decades. League sponsorships—like Pepsi and Anheuser-Busch—are solidified for the foreseeable future. And the NFL is expected to bring in more revenue from this year’s Super Bowl even though Allegiant Stadium is one of the smallest stadiums to host the big game. Congrats, Roger.

I’ll get to ESPN/Fox/WBD’s sports streaming plans down below. But the challenges around pay TV are escalating—and fast. Live events have long been the Scotch tape holding the pay TV business together: news, live shows and, of course, sports. This streaming deal will make top sports—the NFL, NBA, and MLB, among many other leagues—available outside the bundle. It’s Defcon 1 time for distributors, like Charter.

Okay, now on to my biggest observations about our industry this week…

1. The Announcement: I’ve been in Vegas for a couple days and just about every conversation has focused on the ESPN/Fox/WBD announcement—not just the deal, but also the way it was communicated. It’s clear that the Tuesday evening, post-market-hours news was timed to hit before the Disney and News Corp. earnings calls on Wednesday. But the announcement also came right in the middle of CBS’s media day, when the Super Bowl broadcaster rolls all its on-air talent and top executives into a big ballroom and lets the assembled media ask whatever questions they want. It was the best light-touch executive shade-throwing that I’ve seen in some time.

   Given how effective the NFL has been in keeping Super Bowl week stories focused on the league and its teams, most of my sources were surprised that two of the league’s media partners would make such a big announcement this week. It doesn’t help matters that the league had no idea this deal was coming. The NFL has earned a reputation for being punitive when its TV partners do something it doesn’t like. Once upon a time, back when ESPN was in the doghouse for not showing the NFL enough love, the network was saddled with multiple Jaguars games on Monday Night Football before ultimately repairing its relationship with the league. So my sources will certainly be studying next season’s schedules when they are released in the spring to see if this move affects Fox or ESPN in that area.

2. More on Baltimore: MLB wants to fast track its approval of the Orioles’ sale to a group led by private equity O.G. and Baltimore native David Rubenstein. This process should take weeks, not months, as owners are eager to see new leadership in Baltimore. Peter Angelos has been incapacitated by an illness for the past several years, and his son, John, has antagonized the league office and fellow owners over the years on various topics. Rubenstein, a true visionary of the P.E. business, is the sort of civic-minded billionaire with friends all over the place. It’s hardly a surprise that the league wants to bring him into their ranks quickly and painlessly.

   Since I broke news of the sale last week, I’ve learned a few more details about the sale process. Rubinstein’s group, which includes fellow billionaires Mike Arougheti and Johns Hopkins alum Michael Bloomberg, will initially acquire 38 percent of the team as part of a deal that values the Orioles at $1.725 billion. As soon as that first part of the deal closes, Rubenstein will become the team’s “control person.” The Angelos family will sell their remaining stake in the team to the Rubenstein group following Peter’s death.

   Another interesting wrinkle: The Angelos family will allow minority owners, who I’m told own 28 percent of the club altogether, to roll over their investments and be allowed to participate in the sales process. Some of those owners include local heroes like Barry Levinson, Pam Shriver, and the estate of Tom Clancy.

3. Even more on Baltimore!: The biggest question mark to come out of the Orioles sale is: What happens with MASN, the regional sports network majority owned and controlled by the O’s? All has been quiet on that front since news of the deal broke, but the MASN saga to this point has been so messy and litigious because the Orioles, through MASN, essentially control the media rights to their closest rival, the Nationals. In the past several weeks, the network hired consultants to come up with a new rights fee for the Nats for the next three-year period. (Given cord-cutting and the state of sports media these days, I’m told that the fee is likely to remain flat at best.)

   The Nats, of course, are also for sale—though everyone expects the top bidder will be billionaire former AOL executive Ted Leonsis, who is looking for summer programming to round out his Monumental Sports Network lineup. But news out of those shops has been sparse over the past few weeks as well.

4. Broadcast growing pains, then and now edition…: Last week, I appeared before a House Energy and Commerce subcommittee hearing on Capitol Hill to provide expert testimony on streaming and sports rights—a very cool moment that I will dine out on for some time, thank you very much. At some point during the hearing, however, I stopped counting the number of times I was asked about Peacock’s exclusive NFL wild card playoff game. Committee members were mad at NBC for putting not just any old playoff game, but one involving Taylor Swift’s favorite team, behind a paywall. One representative remarked that his office was inundated with complaints from his constituents.

   In my responses, I reminded lawmakers that the game was available on over-the-air stations in Kansas City and Miami. And I pointed out that anyone with a pay TV subscription already was paying to watch NFL games. My friend Phil Hochberg, a media lawyer, emailed me after the hearing to say that he had a sense of déjà vu. “I can’t help but remember from some 50 years ago—the early 1970s—the same type of arguments being made by the over-the-air networks (notably ABC) about the horrible things that would come from the God-awful migration of sports to cable.”

5. Give a listen…: Right before I started at Puck, Matt Belloni had Raine founding partner Joe Ravitch on The Town for a conversation that weighed in on the future of sports media. I wanted to resurface some gems here. Download the episode if you haven’t yet had a chance to listen.
   • Sports rights fees will continue to increase, Ravitch said, because teams and leagues are developing so many new ways to make money on the content, from betting to data to NFTs. “You’re going to see increasing forms of monetization, increasing global audiences.”
   • Unsurprisingly, there will be winners and many losers. “The rights fees for sports are going to become too expensive for the broadcasters.”
   • And a silver lining: “The market is bullish on consolidation. The market is nervous about streaming. I think if somebody said, ‘We’re going to buy Paramount and get rid of Paramount+ and become an arms dealer like Sony,’ I think stock prices would be rewarded. … As the streaming landscape settles out, consolidation amongst the studios makes a lot of sense.”

Of course, nobody involved with the Disney-Fox-WBD deal is describing it as a cable killer. During News Corp.’s earnings call, Lachlan Murdoch stressed that Fox remains committed to the pay TV bundle, a declining but still massively profitable enterprise that generates enormous cash flows for all three companies. Indeed, as I discussed with Matt Belloni on The Town, the expected price point for the new all-in-one sports offering—likely in the range of $35-$45 per month—seems perfectly calibrated to target the sort of people who don’t already subscribe to a pay TV service. But distribution executives feel understandably threatened and unanimously predicted a tough renewal cycle when affiliate deals with these networks expire.

These executives are upset, in part, because Disney, Fox, and WBD would never allow distributors to sell their channels this way—sports networks have spent the last quarter-century fighting to stay off of sports-only tiers. In fact, I know that distribution executives have complained for years that network groups do not allow them this kind of flexibility in how they sell these channels. (I know because they complain to me.) Think low-cost skinny bundles with fewer channels organized around programming genres. The second distribution executive pondered hypothetically about what would happen if he dropped the networks involved in the sports streaming service from his cable platform and instead gave his customers a rebate to buy the service.

He was venting, of course, because we all know that networks still have most of the leverage, even in the throes of late-stage cable. If a Comcast or a Charter dropped Fox and FS1, they would also have to drop Fox News, etcetera, and that’s not happening. Sports league executives, for their part, are not as pessimistic about the proposed plan; many that I’ve spoken with are preaching a wait-and-see attitude. But that’s also a posture that befits their ascendant position in this turbulent ecosystem. After all, cable distributors are operating through the latest phase in an existential crisis. The leagues, though, are still reaping profits via renewed rights deals—especially with Amazon and Apple bidding up prices—and one of their main considerations pertains to timing the transition: i.e., being prepared when their audiences truly make the jump from linear to streaming. On some level, this troika deal will offer them some helpful data points.

That said, in this chummy world, they didn’t like how it all went down. Executives with two top leagues were dismayed about being kept in the dark about the deal and only learning the news a few hours before it went public. Beyond that, their thoughts were largely consumed by various operational questions surrounding structure and implementation. In some ways, they view the service as simply a virtual MVPD, akin to YouTube TV or DirecTV Stream. In other ways, though, they were concerned that three blood rivals joining forces could hurt the media rights business even further. The NBA, for example, is negotiating new deals with ESPN and Turner. Will this new partnership make them less aggressive in the rights space? (Antitrust regulators might want a word…)

Network executives reject this hypothesis, of course. But the only thing everyone currently agrees on is the fact that there are more questions than answers at this point, many of which were enumerated by my Puck partner Julia Alexander: Who is paying, who is in charge, and (critically) who controls the tech? And you can be sure that these topics are being debated—and pontificated about—up and down the Strip all this week.

According to my top media sources, it’s an obvious acknowledgement that the business dynamics are changing rapidly, and media deals (even amorphously announced and structured ones) need to catch up. The advantage of traditional media has always been its reach—even though streaming is the present and future, more people still watch games and events on traditional linear television. And yet, that reach is melting away as people cut the cord. Even NBA commissioner Adam Silver has said that the definition of “reach” is changing.

Disney, Fox, and WBD are making a big bet to see if Silver is right.