July 13, 2021

Regional Sports Leader, Sinclair is Bidding for NBC Regional Sports Networks

As reported in the New York Post, Sinclair Broadcasting has made an acquisition offer for NBCUniversal’s seven regional Sports Networks (RSNs). The offer is in the preliminary stages since Sinclair has not yet even seen the RSNs’ financials. However, the mere offer itself raises questions for both Sinclair and for NBCUniversal in terms of their perceptions regarding the future of RSNs and of live linear TV in general. Can both companies be right?

Sinclair
In 2019, Sinclair purchased Disney’s 21 RSNs for $10.6 billion. This transaction made Sinclair the #1 Regional Sports Network in terms of both number of stations and viewership. Unfortunately for its shareholders, Sinclair had to write off over $4 billion from the transaction due to the pandemic shutting down all sports. The uncertain economic climate caused by the pandemic also prevented Sinclair from closing two big OTT distribution deals.

In November 2020, Sinclair announced a strategic partnership with Bally’s, culminating in a March 2021 announcement of the “Bally Sports” rebranding for its Regional Sports Networks.

Sinclair’s RSN Strategy can be broken into 3 parts:

  • By purchasing NBC’s seven RSNs, Bally’s will own much of the NBA, MLB, and NHL media rights, thereby increasing their negotiating leverage in terms of sports rights.
  • Sinclair has been looking to stream live games and recently raised $250 million to fund that effort.
  • Controlling a bulk of regional sports strengthens the argument that actual sports-wagering could become a reality. For now, wagering will be available only through the Bally’s Bet platform, but the more coverage that Sinclair can achieve the faster things could change.

NBC Sports Network
Hurt by cord-cutting, and accelerated by the pandemic, NBCU has been openly looking to find a buyer for its Regional Sports Networks. According to recent Wall Street Journal reporting, rather than selling the networks, NBC also has been exploring ways to air games tied to its RSNs over Peacock. Unfortunately for Peacock, current rights agreements make it difficult for this plan to be executed in the near future.

Raising the stakes for NBC (and for parent company, Comcast) is the fact that sports are very valuable programming. It is likely that there are more people who subscribe to a Comcast cable package just for local RSN access – and therefore would cancel their expensive subscription were the networks to disappear – than would be gained by opening up a significantly cheaper streaming alternative.

Other Suitors?
Sinclair may not be the only party interested in the NBC Regional Sports Networks. Amazon may decide to become a player, as too may several other parties in similar good standing to purchase one or more of these properties. According to CNBC here are a few well-positioned suitors.

  • NBC Sports Philadelphia – Josh Harris, Owner of the Philadelphia 76ers
  • NBC Sports Washington – Ted Leonsis, Owner of the Washington Wizards and Capitals
  • NBC Sports Boston – RedBird Capital has a minority stake in ownership group of the Red Sox and Liverpool FC., and is an investor in the YES Network (Yankees)

AT&T is looking to sell their stake in RSNs making it an unlikely potential buyer.

What will likely Happen
It is extremely likely that NBC Sports will sell its RSNs because the networks are not part of its core business going forward. The focus for NBCU in the future is on streaming, and Regional Sports leagues make it difficult, if not impossible, to develop a robust strategy for building long-term profits.

Even so, although NBCU would like to sell its regional sports networks, I believe the properties will only be sold if the price is (very) right. Should NBCU be able to sell its RSN business, it would be a great victory for them, but, if not, they will still do fine. What they cannot do is sell at a price that is too cheap.

For Sinclair, RSNs are its core business. Plus, the relationship with Bally’s magnifies the need to increase reach, making it more likely that the bid price will be a serious one. The only item that may prevent a robust bid from Sinclair is financial data that is not up to its standards.

In Conclusion

NBC will likely sell its RSNs to Sinclair, as long as Sinclair is willing to bid a reasonable price, which I believe they will do. If NBC Sports does not like the price offered by Sinclair, then NBCU will likely sell the properties on an individual basis to well-established investors. Whatever happens, when NBCU sells its Regional Sports Properties, the murky future of RSNs will start to become much more clear.

Stick with TDG to Stay in front of the Curve.

 
 

A 20-year veteran media executive, Rob Silvershein’s success in today’s competitive media environment is a direct result of his unique experiences spanning traditional, emerging, and startup media platforms. He is an accomplished strategist and spends most of his time advising media companies on how to structure themselves for long term success. He currently lives in Manhattan Beach, CA.

Sign Up for Weekly Analyst Insights


Recent Insights