Sinclair Raising $250M+ For Streaming Service

Today’s Email Is Sponsored By…

Friends,

In 2019, Sinclair Broadcast Group Inc. paid nearly $10 billion to acquire 21 regional sports networks (RSN’s) previously owned by Fox, providing them exclusive rights to broadcast games for dozens of MLB, NBA, and NHL teams.

The two years since? It’s been rough, to say the least.

After being dropped by carriers like Hulu, YouTube TV, and FuboTV — which made up about 10% of their overall distribution — Sinclair wrote down the value of its regional sports networks by $4.23 billion last November. That’s almost 50% in less than two years.

Even worse, the COVID-19 pandemic continued to wreck their business model. Not only did advertising revenue fall off a cliff, but Sinclair owes more than $1.82 billion in rights fees alone this year.

The good news? In addition to a 10-year, $85 million deal to rename its regional sports networks after casino operator Bally’s, Sinclair has set its eyes on streaming.

The New York Post reported yesterday that Sinclair Broadcast Group Inc. has quietly been working with LionTree investment bank to raise more than $250 million for a new streaming service.

The details are scant, but here’s what we know:

• Sinclair is looking to raise $250M+ for a new streaming venture.

• The plan is to charge customers $23 per month for access.

• It will only be available to fans that live inside Sinclair’s 21 territories.

• Sinclair is projecting 4.4 million streaming customers by 2027, with a plan to break-even by 2024.

In total, Sinclair has exclusive rights to 42 teams — 14 MLB teams, 16 NBA teams, and 12 NHL teams — including popular franchises like the Dallas Mavericks, San Diego Padres, Miami Heat, and Los Angeles Clippers.

For those that aren’t familiar, here’s the reality: Two years ago, when Disney looked to offload the 22 sports channels it had picked up from Fox as part of its $73.1 billion acquisition of the company’s entertainment assets, most media analysts expected the RSNs to trade hands for as much as $20 billion.

Sinclair swept in months later and secured the assets for $9.6 billion, or less than half of what analysts initially expected. But now that Sinclair has written down the RSNs value by nearly 50% in less than two years, the steep decline in price represented a fire sale — not necessarily a significant discount like most had previously thought.

The $85 million in income from rebranding as “Bally Sports” will be nice — which also provides Sinclair with warrants to purchase up to a 30% stake in Bally’s down the road — but considering they owe $1.86 billion in rights fees this year alone, that’s merely a rounding error.

Now, as the tension between cable operators and broadcasters continues to rise, Sinclair will look to transform (or save) its RSN business through streaming.

Here’s why: Traditionally, out-of-town fans can watch their favorite teams through services like NBA League Pass or MLB.TV, but when it comes to hometown fans watching their local sports team, there are limited options outside of cable.

But with the cost to acquire these exclusive broadcasting rights increasing annually, there has been a constant tug-of-war between cable operators & broadcasters when it comes to increasing cable fees. For example, Dish Network stopped paying for rights to Sinclair’s games altogether in 2019, eventually proving that its customers wouldn’t drop their Dish subscriptions any faster than before.

Sinclair is now betting that fans will pay $23 per month for access, which is a steep price compared to traditional streaming services like ESPN+, Disney+, and Netflix, but significantly cheaper than an $85+ per month cable bill.

In simple terms, they are betting that a large percentage of people solely have cable to watch their local sports teams live. Only time will tell if that’s true, but with an estimated 1/3rd of US homes expected not to have cable by 2024, it’s probably not a bad bet.

In the end, this is probably inevitable. But given it shifts more power to consumers through discounted plans (think streaming vs. cable) — including fewer upfront fees initially — I’d imagine there will be some pushback in the short term.

Have a great day, and I’ll talk to everyone tomorrow.

If you enjoyed today’s email, please share it with your friends!

At 44,000+ subscribers, Huddle Up is quickly becoming one of the largest sports business communities on the internet — every addition helps :)

THE COMPANY COMMITTED TO IMPROVING SPORTS NUTRITION.

I’m constantly looking for ways to improve my energy and make the most out of my workout. But I’ve always had a challenge finding the best, nutrient-rich products that are healthy and effective. Unfortunately, most products on the market are high in sugar and give a short energy spike combined with a quick burnout.

Luckily, I’ve partnered with UCAN — a premier nutrition product that professional athletes and teams use to achieve next-level performance and metabolic fitness.I just started using UCAN myself, and I already feel an improvement in my strength and energy levels throughout my entire workout. You can, too :)

As a Huddle Up reader, you get 25% off your first order.