Phoenix Suns and Mercury to move games from cable to local network and streaming

Arizona's professional men's and women's basketball teams are bouncing out of the regional sports network arena.

The NBA's Phoenix Suns and the WNBA's Phoenix Mercury reached a deal with broadcast station owner Gray Television to air the entirety of their regular seasons on local broadcast networks available throughout Arizona.

The local networks are available for pay-TV subscribers as well as for those who opt to watch for free by using an antenna. The teams also signed a deal with Kiswe, a privately held video technology company, to start their own direct-to-consumer streaming service.

The deal marks a pivotal moment that will see a professional sports team exit the regional sports business and bring regular season games back to fans through their local TV stations.

"I am incredibly excited to let you know that we have finalized and signed a deal that is an absolute game changer for our organization, our fans and the future of how we grow the game," Suns and Mercury owner Mat Ishbia said in an email to executives, viewed by CNBC. "In addition to being the first modern deal to go to exclusively over the air statewide, we are also building our own DTC product in partnership with Kiswe." 

Part of what made this deal possible is that the Suns and Mercury have their own in-house production, as well as a commercial sales group, which will help simplify the transition from its RSN.

Regular season games for the Suns were previously available on Diamond Sports' Bally Sports Arizona channel. Diamond filed for bankruptcy protection in March.

Beginning next season, the Suns will no longer be on the network. The Suns, who have advanced into the second round of this year's NBA playoffs, are considered contenders to win what would be their first league championship.

Bally Sports Arizona also airs the NHL's Arizona Coyotes and MLB's Arizona Diamondbacks regular season games. Diamond Sports skipped a rights payment to the Diamondbacks, in a push to gain its streaming rights, prior to filing for bankruptcy. Diamondbacks games are still airing on the network while the battle plays out in court.

On Friday, Diamond Sports said the Suns' deal with Gray and Kiswe was a breach of contract and they would work to stop it.

"The Phoenix Suns breached our contract and violated bankruptcy law, and Diamond Sports Group will pursue all remedies against any parties that attempt to exercise control over our property interests while we reorganize. This is an improper effort by the Suns to change their broadcasting partner without permitting Diamond to exercise our contractual rights," a Diamond Sports spokesperson said in a statement Friday.

The Suns responded that they were in the clear to do the deal. "Diamond's position is totally inaccurate.  We are moving forward with this deal and could not be more excited about what it means for our fans and our future," Suns and Mercury CEO Josh Bartlestein said in a statement Friday.

The RSN business model has long been lucrative for the leagues and teams, as networks pay big fees for the rights to games that aren't nationally aired.

Financial terms of the Suns and Mercury's deal with Gray and Kiswe weren't disclosed. Overall, Gray and Kiswe will carry the Suns games for five years, while the deal with three-time WNBA champion Mercury runs for two years. Endeavor and WME Sports advised the Suns on the deal.

Regional sports networks in general have been under pressure as customers cut their pay-TV subscriptions and opt for streaming. The networks, including Bally Sports, have been launching streaming options at price points that many consumers balk at, but are not likely to upend the longstanding RSN business model.

With this new deal, Suns and Mercury games will be available to nearly 2.8 million households in Arizona, which the teams say triples the current number of homes they now reach. The teams will be able to reach every home in Arizona once Gray launches in Yuma this summer.

"If you go back to the 1980s and 1990s there weren't RSNs. These pro games were on local TV," said Pat LaPlatney, Gray Television's co-CEO. "This gives the Suns and the Mercury a really broad distribution platform. It will make TV advertising and promotion of the games significantly more valuable as the games will be reaching tons more people."

With the WNBA season starting in a few weeks, Mercury games will already be available over the local networks and Kiswe's streaming service. Mercury games will be available for free through the streaming option, in a push to broaden the team's fan base.

The first two Mercury games will be nationally aired on ESPN, as it marks the return of WNBA star Brittney Griner, who was jailed on drug charges in Russia last year. She was released in December.

Mercury games will be available on local TV stations in Phoenix and Tucson, which covers more than 95% of the state's TV households, and will be added to Yuma over the summer.

The Suns games, however, won't be free on the streaming service next season, but will be more affordable than the pricing for other RSN streaming services, the executives said. This year, MSG Networks, which airs New York Knicks' games as well as games featuring the NHL's New York Rangers, Buffalo Sabres and New Jersey Devils, said it would launch MSG+ for $29.99 a month. The New York Yankees' YES Network charges $24.99 a month for its new streaming service.

"The absolute intent is to change it up compared to what's been out in the industry today from a price point perspective," said Mike Schabel, Kiswe's chief strategy officer. "I'd like for it to be soda money, not gas money, type valuation. We're thinking about the audience and who we'd like to reach."

Pricing for the Suns' streaming option is still being finalized.