Sinclair Stays the Course on DTC Launch Despite RSN Headwinds – Sportico Leave a comment

By Anthony Crupi
Sports Media Reporter
Sinclair Broadcast Group remains bullish on launching a new direct-to-consumer service before Opening Day of the 2022 Major League Baseball season, but as CEO Chris Ripley acknowledged Wednesday, the owner of the Bally Sports RSNs still has a lot of ground to make up on the streaming rights front.
Speaking to investors on Sinclair’s third-quarter earnings call, Ripley said the company has secured DTC streaming rights for four of its 14 MLB franchise partners, before adding that negotiations are underway with the other 10 clubs. “Our expectation there is that we will accumulate more direct-to-consumer rights as teams renew,” Ripley said.
While Ripley did not explicitly identify the four DTC-ready MLB partners, the clubs that have re-upped their carriage deals with Sinclair include the Kansas City Royals, Milwaukee Brewers, Miami Marlins and Detroit Tigers. The company confirmed its renewal with the Tigers and the NHL’s Red Wings, both owned by Ilitch Holdings, in a Nov. 3 filing with the Securities and Exchange Commission.

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The 8-K specifically notes that the Tigers renewal “includes direct-to-consumer and other digital rights,” although the same provision was not spelled out in the case of the Red Wings.
When pressed by analysts to provide additional detail on the projected launch date, Ripley said, “Things are moving in tandem in order to hit our timing.” Opening Day is slated for March 31, which gives Sinclair 147 days to negotiate renewals with the 10 outstanding MLB franchises. And with those expanded rights come inflated carriage fees; for example, when the small-market Royals reached a deal with Sinclair to remain on what is now known as Bally Sports Kansas City, the club negotiated an annual payment of $50 million, more than twice the value of its previous arrangement with Fox Sports.
Kansas City is the nation’s 34th-largest media market. A Bally Sports renewal with the world champion Atlanta Braves, which represent the seventh-biggest DMA, will cost a whole lot more. Atlanta’s legacy RSN contract expires in 2027.
Ripley’s remarks arrived on the heels of a blistering series of comments made by MLB commissioner Rob Manfred, who last month served up some chin music for Sinclair’s DTC ambitions. “Sinclair does not have enough digital rights from enough clubs in order to have a viable direct-to-consumer product,” Manfred said at the Oct. 11 CAA World Congress of Sports event in New York. “We’ve been very clear from the beginning that we see [the streaming and gambling] rights as extraordinarily valuable to baseball, and we’re not just going to throw them in to help Sinclair out.”
Beyond baseball, which generates the bulk of the ad sales revenue for the RSNs, Sinclair also has deals in place with 16 NBA and 12 NHL teams. Ripley told analysts that those contracts, which “have always [included] authenticated streaming and DTC rights,” are in the process of being renewed “as a part of a larger deal, which includes market expansion.”

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Ripley declined to provide guidance on the status of Sinclair’s ongoing talks with DISH Network, which hasn’t carried the RSNs since 2019, or just before Sinclair’s Diamond Sports subsidiary closed its $9.6 billion bid for the assets. As with all media companies, Sinclair doesn’t  discuss active carriage negotiations. DISH Net closed out the quarter with 8.42 million video subscribers, down 6% from the year-ago 8.97 million. When its Sling TV customers are tossed into the mix, DISH’s overall sub base is just shy of 11 million households.
After an analyst observed that Sinclair hasn’t been successful in extracting new money from Diamond Sports’ creditors—early last month, Diamond put together a bid to raise $600 million from its bondholders—Ripley said there was still a chance that the effort might bear fruit. “We continue to believe that a new money deal is possible and discussions with the creditor advisers are continuing in earnest,” he said.
October’s proposal followed an unsuccessful summer plan to issue $500 million in new Diamond Sports notes to existing bondholders. Per Wednesday’s 8-K, Diamond Sports’ debt now stands at $8.12 billion, which marks an increase of $94 million compared to the third quarter of 2020.
For all the headwinds the RSNs face, the Sinclair chief insists that there’s sufficient time and capital to make the jump into the DTC future. “There is ample liquidity at Diamond, and we are good for the next 12 months,” Ripley said, when asked about the company’s long-term prospects. “So, we’re comfortable there.”
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