Sinclair Bets Big On Live Sports Rights To Help Business Model
Sinclair Broadcasting Group has "made a big bet on the future of live sports to pair with its new offerings" in buying the 21 Disney RSNs for a reported $10.6B, according to Ben Strauss of the WASHINGTON POST. Sinclair President & CEO Chris Ripley said, "We will become the preeminent local news and sports provider in the country. And those two genres, in terms of live viewership, are head and shoulders above any other genre." Ripley said that he expects to "package the RSNs and broadcast channels to cable distributors, which pay fees to broadcast stations even though they are available over the air free." Ripley suggested that there would be "some business operations streamlining involved in sales and back-end management as well." Ripley added that Sinclair also "sees opportunity in legalized sports betting and building out content for the RSNs." Strauss notes when the RSNs were owned by Fox before the Disney acquisition, "most of the channels offered little beyond live games and pre-and-postgame coverage" (WASHINGTON POST, 5/7). In Atlanta, Tim Tucker noted Ripley "expressed confidence in the sustainable value of sports broadcast rights despite increased resistance from some cable subscribers to paying high fees for sports networks." He said, "We asked ourselves sort of a simple question: Ten years from now, would the local MLB, NBA and NHL teams' rights be important to people? And the answer to that was pretty easy -- they will be" (AJC.com, 5/6).
ADDED LEVERAGE: Sinclair's purchase of the Fox-branded RSNs is the worst possible outcome for distributors. That was the consensus from many media execs contacted since the deal was announced last week. There is a reason Sinclair's share price rose 35% yesterday in an overall down market. As the country's biggest owner of local broadcast stations, Sinclair now holds much more leverage in distribution negotiations with the RSNs. The company also has a well-earned reputation as a tough negotiator. Adding the RSNs is sure to make those conversations tougher. Look for Sinclair to offer equity stakes in RSNs as their rights deals start to expire, which is how Sinclair's RSN relationships with the Cubs and Yankees are structured. Several teams already own stakes in the Fox RSNs. Ripley said, "We expect that to be a core tenet of renewals going forward because we do think that it aligns interest better and it variable-izes the expense structure" (John Ourand, SBJ Media).
BUSINESS AS USUAL: In Ft. Lauderdale, Wells Dusenbury noted while FS Florida will "soon be under new management, the Sinclair deal doesn't significantly impact negotiations" between the Marlins and the network. The two sides have been "working on a new deal for 20 months -- much of it with the knowledge there would be an ownership change -- meaning the Marlins wouldn't have spent all that time at the negotiating table if they had to start from scratch with a new group." The Marlins' current deal with FS Florida, which expires after the '20 season, pays the team $15-20M per season (South Florida SUN SENTINEL, 5/6).