Sinclair Still Faces Long Odds on DTC Regional Sports Streaming, Despite NBA Deal, Analyst Says
By Daniel Frankel
In October, Richard Greenfield, high-profile analyst for TMT research company LightShed Partners, blogged that it was unlikely that Sinclair Broadcast Group would secure direct-to-consumer streaming rights from the NBA, NHL and Major League Baseball for a new regional sports network model untethered by the linear MVPD business.
With NBA and NHL deals DTC deals now, in fact, under Sinclair's belt, how does Greenfield -- who headlined his Oct. 18 posting with a pungent "#Gameover" to describe Sinclair's RSN future -- like the station group's forward-looking plan now?
Still not so much.
Also read: Sinclair’s NBA Deal: Two Down, Two More To Go
The "primary problem," the analyst still maintains, "is that there is no economic model for regional sports networks that can generate enough cash to pay off their $8.7 billion of debt (nearly 22x levered); implying bankruptcy is a matter of 'when' not 'if.'
Indeed, despite last week's deal that gave 16 of the regional sports networks, branded under the Bally Sports moniker and operated by Sinclair's Diamond Sports Group subsidiary, streaming rights to local NBA teams, Sinclair's streaming plan does seem far from a slam dunk.
For one, Sinclair only has rights from the NBA to create a DTC stream of what's live and linear on its regional sports networks. For another, it still hasn't tied down DTC rights for 10 of the 14 MLB teams in its Diamond Sports Group portfolio.
"They cannot repackage the content or add content; they are only able to air exactly what is on the RSN today. More importantly, any stream would exclude MLB games, as there is still no deal with the MLB meaning a third of Sinclair’s teams are out," Greenfield noted in his latest posting.
Forget for a moment that Sinclair will be trying to sell an OTT service for $20 or more a month, facing the kind of churn one might expect with content that's programmed for only for late October through May. And forget that the typical RSN customer pays for an MVPD, and might be more inclined to keep paying for a pay TV service that has the sports networks they want rather than pay an additional $20+ over their current base MVPD bill.
There's also the matter of a foundational flawed assumption -- in pitching investors on a financial plan that will pay down Diamond Sports Group's massive debt, Sinclair is assuming that the enterprise's current bread and butter, revenue from pay TV companies, will decline at a rate of only 2% a year.
With Sinclair currently trying to renew its carriage deal with the No. 2 pay TV operator in the U.S., Charter Communications, Greenfield said the cable company won't accept the launch of a competing DTC service without major concessions on distribution requirements for the Bally Sports RSNs. This will have huge impacts on legacy MVPD revenue that far exceed a mere 2% annual decline.
Sinclair bought the Fox Sports RSNs from Disney, as well as the Marquee Network and YES Network, in August 2019 for $9.6 billion, putting them under the control of a separate company it owns, Diamond Sports, and selling the naming rights to the channels.