The plan was halted over concerns that it would conflict with the broader streaming strategy of NBCUniversal, a unit of

Comcast Corp.

CMCSA 1.98%

, the people said.

NBCUniversal is still considering options for streaming its sports channels on Peacock, the people familiar with the situation said. The company also is exploring whether to sell off the networks and sees the teams associated with them as potential buyers, some of the people said. Teams often hold an equity stake in the networks that air their games.

Regional sports channels were once an engine of growth and profit for media companies, because of the high fees owners were able to charge cable and satellite TV providers to distribute them. Now, the business is eroding as consumers cancel pay-TV subscriptions or switch to traditional or online packages that don’t include the sports networks.

In 2020, regional sports networks collectively had 145.8 million subscribers, down 23% from 190.2 million in 2014, according to S&P Global Market Intelligence. The pandemic pummeled the industry. More than $1 billion in rebates were given to pay-TV subscribers when leagues paused their seasons, according to S&P.

Meanwhile, some channels are on the hook to pay billions of dollars of media-rights fees annually, meaning they will face a financial squeeze in coming years.

Building streaming businesses has become a popular option for traditional TV networks.

Sinclair Broadcast Group Inc.

SBGI 1.55%

, owner of the Fox Sports family of regional sports channels—rebranded as Bally Sports in a licensing deal with casino operator

Bally’s Corp.

—plans to sell streaming subscriptions for 19 of its networks, with an aim to launch in 2022.

One major challenge for the networks is to build an audience for their streaming apps without jeopardizing their traditional TV business. “In the short term, does this cannibalize some of these other cable-TV subscriptions, which are very profitable?” said Rose Oberman, an analyst at S&P Global Ratings.

The economics of streaming will be tough. In traditional cable-TV, households pay for many channels in their bundle that they don’t watch. In direct-to-consumer streaming, only the people who want to watch sign up and pay, so networks will likely need to set a much higher price in order to collect the same revenue as they do on cable.

The sports world is moving toward streaming, gradually but inexorably.

Amazon.com Inc.

AMZN -0.45%

will stream a package of National Football League games exclusively starting in the 2022-2023 season, under a deal reached with the league.

Walt Disney Co.’s

DIS 1.68%

ESPN has been investing in its ESPN+ service, which also will add a few NFL games and stream some National Hockey League games.

Regional sports channels are under more pressure to adapt, because they have been hit harder by cord-cutting than bigger cable channels and face high costs. Collectively, regional sports channels spend more than $4 billion yearly on sports rights fees, according to consulting firm Octagon Sports and Entertainment Network.

Under the plan NBCUniversal was developing for its local sports channels, in addition to having them available on pay-TV providers in a given region, the channels would be added to Peacock, a streaming service that carries an array of the company’s TV shows and movies.

Philadelphia was a natural choice for the test market because Comcast is based there. NBC Sports Philadelphia is profitable, but it may not be as early as next year and has long-term media-rights deals that will require it to pay billions of dollars in the coming years, a person familiar with its finances said.

NBCUniversal, which operates seven regional sports networks, doesn’t break out financial results for them.

If the plan had moved forward, fans in the Philadelphia market would be able to stream the local teams’ games. To offer the games to fans outside Philadelphia, NBCUniversal would need permission from leagues, which have their own apps offering such “out of market” viewing.

One issue for executives at the company was pricing, people familiar with the situation said. Peacock subscribers in Philadelphia would have to pay more for the service than Peacock subscribers in markets without a regional sports network, a situation the executives feared would confuse the service’s marketing, the people said.

For NBCUniversal, selling the networks to teams has proven challenging because teams haven’t emerged as serious bidders in recent auctions of sports networks.

Sinclair, the largest owner of regional sports networks in the U.S., is working on offering two streaming tiers, one without games but with content associated with the teams and another at a higher price that would show live games, Chief Executive

Chris Ripley

said in an interview.

“Look at how much fandom is outside of the pay-TV bundle—it’s quite significant and it’s been growing faster over the last couple of years,” Mr. Ripley said. “We think there’s millions and millions of subscribers just for our service alone.” Sinclair’s sports networks had 52 million subscribers in late 2020.

Pricing has yet to be decided for Sinclair’s regional sports networks, but analysts and industry experts estimate an individual channel with live games could cost $30 or more a month.

Sinclair placed a big bet on regional sports channels in 2019 when it acquired a group of Fox-branded networks from Walt Disney. in a deal valued at $10.6 billion including roughly $8 billion in debt.

At the time of the acquisition, Sinclair didn’t signal plans to get into streaming, instead focusing on the potential of the traditional TV business. But Covid-19 accelerated the deterioration of the networks. The company’s debtholders began to consider a restructuring of its hefty debt load, given the mounting pressure, The Wall Street Journal previously reported.

The Sinclair channels remain profitable, but analysts say it is only a matter of time before they start losing money. The company last year wrote down $4.2 billion on the sports networks.

Sinclair’s goal is to make regional channels’ existing Bally Sports streaming apps—which can be accessed by people with a pay-TV subscription—available to cord-cutters, Mr. Ripley said.

Sinclair’s Mr. Ripley said the goal isn’t to upend the pay-TV model, but complement it and reach cord-cutters.

“I don’t see this system with the pay-TV distributors collapsing, I see it evolving and the structure changing,” said Patrick Crakes, a sports media consultant.

Write to Lillian Rizzo at Lillian.Rizzo@wsj.com