Sinclair Broadcast Group is being sued by the bankrupt subsidiary it set up four years ago to manage a collection of 19 regional sports networks it paid, ruinously as it turned out, $10.6 billion to acquire. 

Early Wednesday evening, cover sheets for two separate but related lawsuits emerged in the document portal set up by the Houston court overseeing Diamond Sports Group's bankruptcy. 

One lists Sinclair, company executive chairman David Smith, CEO Christopher Ripley and several other Sinclair executives as defendants, along with Bally’s Corp. All the Diamond-branded holding companies are being sued by Diamond Sports LLC, as well. 

The other cover sheet calls out JP Morgan Chase & Co. as the defendant. Diamond lawyers subpoenaed JP Morgan officials two weeks ago. 

Next TV wasn’t able to see the actual lawsuits, but an individual with knowledge of the complaints told us that Diamond, equity for which will soon be owned by  secondary creditors once restructuring is completed, is trying to claw back Sinclair's preferred equity repayment to JP Morgan.

In February, with Diamond about to enter bankruptcy, Sinclair paid JP Morgan $190.2 million, a transaction that nearly made the investment bank whole on the $1.025 billion in preferred equity units it purchased back in 2019 to help Sinclair buy the Fox-owned RSNs that became Bally Sports.

The plaintiffs contend that even though Sinclair knew the bankruptcy would wipe out all equity in Diamond Sports, including its own, it manipulated the payment schedule so that JPMorgan was nearly made completely whole on its investment.

Put another way: Diamond's lawyers are asking the court why the secondary creditors should be left holding the bag for the bankrupt and bleeding Bally Sports regional sports networks business when JP Morgan got mostly paid in full on its investment?

Entering Chapter 11, the more than $8 billion in debt tied to the original purchase of the Fox RSNs was attached to Diamond and not Sinclair, which has written off its investment and has been largely banished from Diamond management control for some time now.

According to our source, Diamond is also suing over how Sinclair has profited from the $100 million Bally naming rights deal with Bally's Corp. 

Diamond also claims that Sinclair charged it too much for management services. 

Neither Diamond or Sinclair has yet issued a statement. 

Diamond entered bankruptcy in March, aiming to trade equity for debt relief, while using Chapter 11's leverage to compel Major League Baseball to play ball with its direct-to-consumer streaming service, Bally Sports Plus. Diamond also wanted MLB teams with unprofitable local sports linear contracts to lower their fees. 

The outcome has been different. 

Two MLB teams, the San Diego Padres and Arizona Diamondbacks, refused Diamond's terms and Diamond tore up their contracts. MLB has stepped in and is now showing their games on new channels it has established. 

Diamond is now largely paid up with MLB teams for the 2023 season. But with seven still out of the Bally Sports Plus fold, the future remains uncertain. 

Updated: An earlier version of this story incorrectly identified plaintiffs. Several other points of legal terminology and nomenclature have also been corrected. We try not to look back, but we do regret errors. 

The Walt Disney Co. said Friday that it has named former J.P. Morgan media analyst Alexia Quadrani as senior VP of investor relations. She will report to Disney’s senior executive VP and chief financial officer Christine McCarthy.

Quadrani replaces Lowell Singer, who left Disney last year. As head of investor relations, Quadrani will serve as the company's chief liaison with Wall Street and a key adviser to its senior management. Her responsibilities will include expanding Disney’s relationships with both sell-side and buy-side investment analysts, industry analysts and investors globally, providing input on Disney’s financial reporting activities, managing stock share administration and leading ongoing engagement with the governance community and environmental, social and governance-focused investors. 

“Alexia is a highly-skilled financial professional whose expertise as an industry analyst and strong network of relationships across the investment community make her an excellent choice to lead our investor relations team,” McCarthy said in a press release. “I am confident that Alexia’s deep knowledge of the media sector, and Disney’s business in particular, make her especially well-suited to communicate our long-term strategy and financial performance to the investor community, and I am very excited to welcome her to my team.”

Quadrani was managing director and senior analyst, U.S. Media Equity Research at J.P. Morgan for the past 14 years. Her coverage included entertainment, advertising and video game stocks. She joined J.P. Morgan in 2008 through its merger with Bear Stearns, where she had served as senior managing director since 1997. She was an Institutional Investor-ranked analyst for over 20 years.

“It is an honor to be joining The Walt Disney Company and to be named to this role at such a dynamic time for the company,”  Quadrani said in a statement. “I look forward to working with Christine, [CEO] Bob Chapek and the company’s talented investor relations team, contributing the perspective I’ve developed in my many years as a media analyst. It’s an exciting time to join Disney, with many opportunities ahead in this rapidly evolving media landscape, and I look forward to helping inform the investment community’s understanding of the company’s results and progress on strategic initiatives.” ■ 

J.P. Morgan media analyst Philip Cusick lowered his fourth quarter broadband subscriber growth estimates for Verizon Communications on Wednesday, but maintained his “overweight” rating and $62 per share price target on the stock.

In a research note Dec. 22, Cusick wrote that he now expects Verizon to add about 70,000 Fios broadband customers in Q4 -- down from previous estimates of 80,000 customer additions. He also lowered his consumer wireless customer expectations in the quarter to about 575,000 additions, down from the previous mark of 600,000 additions. 

Verizon stock was relatively unaffected by the change in estimates, priced at $52.68 per share in afternoon trading Dec. 22, down 10 cents (0.18%) each.  

Analysts across the board have rejiggered their broadband subscriber growth estimates for cable and telco service providers alike, as record growth rates during the height of the pandemic are expected to slow substantially.  

Cusick attributed his lower estimates to recent comments by Verizon executives at industry conferences, continued low move activity and potentially higher involuntary churn after New York state ended its COVID-19 related utility service (including broadband) shutoff moratorium on Dec. 21. The state still offers financial assistance and consumer protections to help consumers maintain services and pay off accumulated charges. 

On the wireless front, Cusick wrote that competition remains high, and although he expects business wireless customers to increase in the quarter -- he raised business net estimates to 200,000 from 175,000 customers -- he anticipates residential growth will be lower -- about 375,000 additions instead of the previous estimate of 450,000 additions. 

“The wireless consumer competitive environment remains high, and it sounds like store traffic, while good, has not been robust, but small business formation and enterprise continue to see positive trends,” Cusick wrote.  

Also: Verizon Fios Subscribers Facing Tegna Blackout in Fee Dispute 

The J.P. Morgan analyst also believes that while the recent completion of Verizon’s purchase of prepaid wireless provider Tracfone will add substantial incremental service revenue, it will be offset by increased investment.

Tracfone has about 20 million subscribers, 13 million of which are already on Verizon’s network. In his note, Cusick added an incremental $15 in ARPU for those customers, while the 7 million Tracfone customers on competitive platforms, he added in $30 of ARPU. Cusick’s revenue estimates for the partial quarter -- the deal was closed in November -- are about $500 million in incremental service and around $125 million in adjusted EBITDA for Tracfone in Q4. For 2022, Cusick estimates Tracfone will add about $4.8 billion in incremental service revenue from Tracfone and $1.2 billion in EBITDA.

“We expect to see more Tracfone-branded dealers over time challenging Cricket and Boost – and could see a turn in prepaid sub trends to positive but don’t look for that now,” Cusick wrote.  ■ 

Dish Network stock fell more than 5% Wednesday after JP Morgan media analyst Phil Cusick downgraded the stock, casting doubt on the satellite TV giant’s wireless plans and adding that the one potential bright spot in the strategy is at least two-to-three years off.

Cusick downgraded Dish shares to “underweight” from “neutral,” but raised his 12-month target on the shares from $38 to $45 each, saying that its plans to build a wireless network in the next several years could be extremely costly and that the No. 2 satellite TV service provider enters the market at a time when barriers are high and competition is fierce. 

Dish shares fell as much as 7.3% ($3.16 each) to $40.42 per share on June 9, closing at $40.44 each, down 7.2%. 

“We can’t find a way but to be skeptical on the Dish story,” Cusick wrote. “[W]e have nothing but respect for Dish chairman Charlie Ergen and his team, but can’t get over our skepticism on three major issues.”

Those issues, according to Cusick are the difficulty in building a wireless network, Dish is expected to struggle to compete against wireless carriers with double and triple its spectrum holdings, and fears that Dish may be too late to the 5G game as other carriers have accelerated deployment and eliminated any advantage Dish would have had if it had been first. 

Dish has said it would spend about $10 billion to build a nationwide 5G wireless network based on ORAN technology, a figure that many analysts said is shockingly low. Dish has about one year to make the network available to 20% of the country as part of the federal requirements for its wireless spectrum licenses, and to 70% of the country by June 2023, deadlines the company says will be reached easily but that other analysts are skeptical can be achieved without a partner. Dish has said it will launch service first in Las Vegas in the third quarter. 

Also Read: Dish: No Partner Needed for Wireless Dance 

Some had hoped that partner would be Amazon, and Dish said in April that it picked the e-retailing giant to provide cloud services for its wireless offering. But so far, Dish is expected to build the network on its own. 

In his report, Cusick wrote that the only bright spot for Dish’s wireless endeavors -- a possible partnership with Amazon in some sort of “Prime Wireless” offering -- if it were to occur, is at least two to three years off in the future. 

“What could a ‘Prime Wireless’ offer look like? What would it bring? We think a lot about where we could be wrong, and how Dish could really disrupt the wireless industry,” Cusick wrote, adding that it’s difficult to see how the satellite company could offer disruptive pricing on its own. 

While Cusick says it is possible that Dish and Amazon could mirror what e-retailers Rakuten and Jio have done with wireless -- offering months or years of free wireless service to drive Prime subscriptions -- he still has doubts.

Also Read: Satellite TV: Five Years, That’s All You’ve Got 

Cusick estimated that it could cost Amazon as little as $11 per subscriber per month to offer a Dish wireless service with Amazon Prime, but he wondered “why Amazon would do this until Dish’s network is proven and of sufficient quality. It makes a lot more sense to us, if it happens, 2-3 years from now at earliest.”

Cusick also speculated on a possible merger of satellite TV assets with rival DirecTV, which in February said it would spin off its TV business with private equity firm TPG. He added a deal is more likely to happen now, especially as content providers continue to unleash direct-to-consumer products, but would likely take at least a year to complete.  

Also Read: Dish Gets Back to its Rural Roots

“We believe that a combination of Dish and DirecTV is likely to face substantial regulatory scrutiny should the parties come to an agreement given the rural concentration of the sub base, but we believe that a deal can eventually be approved,” Cusick wrote. “A deal could be announced by 2022, after AT&T's sale of DirecTV to TPG closes, but getting Ergen and AT&T executives to agree on a price is likely to face hurdles.”

Cusick noted that while the 2007 merger of Sirius Satellite Radio and XM Satellite Radio Holdings is often cited when predicting federal approval of a Dish-DirecTV union, it took 17 months for that earlier deal to get the regulatory nod, “despite the stress that the businesses were under.”

Speaking at an investor event Monday, Roku CFO Steven Louden broke down his company’s seemingly complicated dispute with Google to its essence. 

The fight, which has resulted in the removal of YouTube TV from the Roku Channel store, stems from Google trying to erode the cost advantage Roku has in terms of licensing its OS to third-party smart TV makers vs. Google’s Android TV platform.

Google, Louden told virtual attendees to the JP Morgan Global Technology, Media and Communications Conference, is trying to “require us to do certain things on the device side that would increase our cost basis and hence, erode our [bill of materials] cost advantage that we have from Google products like Chromecast and like Android TV.”

Last month, Roku removed the app for Google’s virtual pay TV service, YouTube TV, from its app store. Roku cited Google’s manipulation of search results on its platform, as well as allegedly unreasonable demands for certain user data. 

Left tacitly implied was Google’s demand that Roku advance its own hardware—and importantly, the hardware of OEM brands that run its OS—to meet the specifications of AV1, a codec Google wants to use to establish 4K video on the broader YouTube platform. 

Google responded by integrating YouTube TV access and functionality to its flagship YouTube app, which is still available in the Roku Channel Store, at least until the contract expires at the end of 2021. 

Roku shot back with a statement calling Google an “unchecked monopolist,” and here we are, with two of the biggest streaming video platform technology providers at odds. 

In March, Next TV postulated—based largely on the personal experience of its lead editor, as well as a lot of bad reviews on Amazon—that the qualitative experience delivered by all those inexpensive smart TVs might be leaving a bad taste in the mouths of many consumers. 

You'll never hear a FAANG company like Apple or Google tout their cheapness, but Roku seems to wear it like a badge of honor.

In fact, at JP Morgan, Louden reiterated Roku’s oft-noted position—that its OS now powers 38% of the smart TVs sold in America, and that there’s a key reason for that: “It’s cheaper to build a Roku,” he said.

Louden also offered a bit of a smart TV OS history lesson, or at least Roku's version of one.

“Actually, Android TV predated the Roku OS in the licensed TV format,” he said. “So if you look at the market share trends over time, we've competed very successfully. We've gone from 0 market share to 38% in the U.S. Android TV’s market share has kind of bounced around a little bit, but certainly, they have not made anywhere close to our progress.”

Roku’s proliferation on smart TVs—its OS controls a third of sets sold in Canada, and it’s the No. 2 smart TV OS in Mexico—has fueled huge growth in platform usage. Roku now touts 53.6 million active users globally. 

With all that platform usage has come massive increases in advertising sales growth—Roku platform revenue was up 101% in the first quarter to $466.5 million, much of that coming from the 3 1/2-year-old Roku Channel, for which Roku splits ad revenue 50/50 with content providers, Louden said. 

But streaming is a global business, and Roku feels it has to compete with Google to keep expanding in areas like Europe. 

“We need TV OEM relationships ideally,” Louden said, when asked about the keys to Roku’s international expansion. 

Without mentioning Google by name, Louden implied that Roku has the staying power to outlast this competition. 

“A lot of times, they're sort of focused on something, then they're not,” he said.

Charter Communications chief financial officer Chris Winfrey, citing the company ‘s past success with wireline phone service, said its wireless service could have a similar trajectory over time, growing mobile subscribers as much as four-fold over the next several years.

At the JP Morgan Media & Communications conference Monday, Winfrey said that Charter’s approach to the wireless business has helped it grow that product significantly since it launched in 2018. Pointing to the company’s success in the wireline phone business, it’s not much of a stretch to assume the same growth path could be ahead for wireless. 

Charter launched Spectrum Mobile in June 2018, part of an MVNO agreement the company has with Verizon Communications. In Q1, Spectrum Mobile had 2.7 million residential and business subscribers, nearly double the 1.4 million in the prior year period. Wireline phone customers peaked around 2016 at about 11.5 million and were at 10.4 million residential and business customers in Q1.

Also Read: Cable Knocks on Wireless Giants’ Door 

Wireline penetration rates have been about half of broadband penetration over the years. As more and more cable companies begin to bundle wireless with broadband service, those penetration rates are expected to climb. 

“I don't think people took us seriously when we came into the voice market,” Winfrey said, adding that today, Comcast and Charter are the largest wireline phone service providers in the country. “And the way we did it is because we weren't the incumbent, we had the ability to save customers money, we had the ability to bundle it, and as a result we took down phone pricing dramatically across the entire industry and the entire US. Over 20 years we became the largest operators. At its peak you could almost count as clockwork that voice subscribers would be about half of broadband and if it hadn’t been for mobile substitution, those numbers were continuing to increase. I think our opportunity is at least that.” 

Charter finished the first quarter with 29.2 million broadband subscribers and has been growing at a 7% annual rate over the past 3 years. Charter’s wireless customers have doubled over the past two years, and if it were to continue that pace, would reach about 15 million customers by mid-2023. While that may be a bit optimistic, many analysts predict that Charter will add about 1.1 million mobile customers annually over the next few years, even at that pace it could have nearly 15 million wireless customers by 2030.

At the JP Morgan conference, Winfrey said Charter does not view wireless as a standalone product, but rather as an extension of its broadband service. He added that all of its sales channels are required to sell wireless with its other products.

“We ask that mobile is part of every single selling opportunity we have, whether that's in inbound sales, whether that’s in the stores, whether that’s in direct sales,” Winfrey said. “Every single one of our sales channels, including online, is required to have that conversation.”

Dish Network has named former JP Morgan Chase executive Jay Roth chief marketing officer, responsible for the satellite TV company’s marketing, advertising and consumer insights.

Roth will report to Dish Network EVP of marketing, programming and media sales Warren Schlichting.

Roth spent the past decade at JP Morgan Chase, leading direct to consumer marketing efforts for its consumer banking and home lending units. Prior to Chase he held senior marketing roles for Bank One.

"Dish is all about challenging the pay-TV industry’s status quo," Schlichting said in a statement. "We believe Jay’s precision marketing experience and approach to the entire 360-degree consumer experience will be a strong complement to DISH’s bias towards innovation and service in the highly competitive pay-TV landscape."

Roth will assume his new position later this summer.

"For 30 years, Dish has brought tremendous innovation to entertainment,” Roth said in a statement. “I’m proud to join a company with the vision to break through new frontiers, and I’m excited to lead Dish’s marketing organization as we navigate a changing pay-TV environment."

Comcast NBCUniversal has named Dalila Wilson-Scott senior vice president of community investment and president of the Comcast Foundation. She will serve as a corporate officer of Comcast  and will join the company on April 4 from JPMorgan Chase & Co., where she has been head of global philanthropy and president of the JPMorgan Chase Foundation.  

She will report to Comcast senior executive vice president and chief diversity officer David Cohen and will have a dotted-line reporting relationship to NBCU executive vice president Adam Miller.

Comcast also announced that Charisse R. Lillie, who has led Comcast’s community investment team for the past seven years, will assume a new role as Comcast Fellow and vice president, community investment, and will continue to serve as an executive of the Comcast Foundation, where she has been president.

In her newly created role, Wilson-Scott will work across Comcast NBCUniversal to provide strategic leadership throughout all aspects of the company’s community investment and corporate social responsibility programs, including Comcast Cares Day, Green is Universal, the company’s annual United Way campaign, and the Leaders and Achievers Scholarship Program. She also will provide leadership over Comcast NBCUniversal’s national and global partnerships, including Global Citizen, Red Nose Day, City Year, Boys & Girls Clubs of America, and Big Brothers Big Sisters, as well as other national and local partnerships. In addition, she will be responsible for coordinating the company’s financial contributions from all sources. Since 2001, Comcast NBCUniversal has invested more than $4 billion in cash and in-kind with its community partners nationwide.  

“For more than a half century, giving back to the community has been a part of Comcast NBCUniversal’s culture, from when we were a small cable system to the global media and technology company we are today,” Cohen said in statement.  “Dalila is highly respected within the philanthropic community and her extensive experience in overseeing charitable initiatives at a worldwide level, combined with the exceptional strategic thinking she brings to her work, makes her the perfect leader for this integrated role.”

Wilson-Scott spent more than 16 years at JPMorgan Chase where she held several roles, most recently in the Office of Corporate Responsibility, leading the firm’s philanthropic initiatives, including employee engagement and volunteerism and helping to set the company’s overall corporate responsibility strategy. Prior to that, she served in the firm’s Corporate Merger Office as member of the team managing the integration of JPMorgan Chase and Bank One. Before this role, she was a Senior Strategic Planning Director focused on evaluating new business initiatives and acquisition opportunities for the retail and commercial banking businesses.  

“I am thrilled to join the exceptional team at Comcast NBCUniversal with its impressive record of community engagement and investment,” said Wilson-Scott said in a statement.  “Leveraging the unparalleled reach and innovation of the Comcast media and technology platform to help address pressing issues facing our communities today is truly an exciting opportunity.”

The Walt Disney Co., battered by fears over flagship cable-sports network ESPN’s declining subscriber base and inability to release an over-the-top product, may not be a lost cause after all, according to a JP Morgan analyst who found the hole the programmer fell into six months ago may not be as deep as some think.

In a 22-page report last week, JP Morgan media analyst Alexia Quadrani called the panic over ESPN’s subscriber losses and fears that the network paid inflated prices for sports rights to keep them out of rival networks’ hands “exaggerated,” adding that even with a 2% annual decline in its subscriber base, Disney’s cable networks can continue to grow.

Despite reports to the contrary, ESPN could introduce an OTT product as soon as 2018 at a price that could be compelling to rabid sports fans.

CRITICS HAVE PILED ON

Disney stock has never quite recovered from its slide in early August, when the company said ESPN had lost 3 million subscribers in 2014 and 7 million since 2012. The idea that the network, long believed to be pay TV’s must-have service, was affected by cord-cutting and so-called skinny programming bundles triggered a sell-off across the sector, with programming stocks losing a combined $60 billion in market capitalization.

The bad news kept coming even as Disney’s movie studio prepared for the much-anticipated December release of Star Wars: The Force Awakens. BTIG media analyst Rich Greenfield, a longtime Disney critic, said in a blog post that ESPN’s fee structure would make it impossible for it to launch its own direct- to-consumer offering.

Later, Greenfield introduced a survey by consumer marketing and intelligence company Civic Science that said more than half of those surveyed would drop ESPN if they could save $8 per month on their pay TV bill.

Other analysts also have lowered their ratings on the stock, including Barclays media analyst Kannan Venkateshwar, who downgraded Disney to “underweight” on Jan. 15, primarily on ESPN fears. ESPN has about $53.4 billion in off-balance sheet programming costs because of sports, Venkateshwar said, which could be exacerbated by a declining subscriber base.

“If the company’s subscriber loss trend lines do not stabilize, the company’s cost recognition may have to accelerate to catch up with revenue trends,” Venkateshwar said in a report.

Quadrani hasn’t ignored the declines; she just doesn’t think they will have as great an impact as others who follow the sector. Even with a 2% annual subscriber decline, ESPN could still grow its affiliate fees by 53% over the next five years, she estimated, from $6.64 per subscriber per month in 2015 to $10.18 per sub per month by 2020.

At that rate, ESPN would grow its affiliate-fee revenue by 39%, from $7.4 billion in 2015 to $10.3 billion in 2020, even with the subscriber decline. Quadrani also estimated that ESPN could go over the top as early as 2018 with a $20-permonth offering, or about the same price that OTT service Sling TV charges for about 20 channels, including ESPN and ESPN2.

OTT OPTIONS OPEN

That’s still considerably less than some earlier estimates that ESPN would have to charge upwards of $36 per month for a standalone offering, a factor of its investment in sports programming. While others have criticized the worldwide sports leader for paying big for football, basketball and baseball rights, Quadrani argued that is exactly what would make an OTT offering most compelling.

Quandrani said the OTT offering could capture about 15% of the 12 million subscribers lost from 2010 to 2018 in its first year and 15% of incremental customers lost in each subsequent year.

Disney has said it has no plans to offer an ESPN OTT product anytime soon, and Quadrani said it doesn’t need to. “If Disney chooses not to move forward with an OTT offering, we still see ESPN remaining a healthy and profitable business,” she wrote.

SIDEBAR: Up With OTT

JP Morgan media analyst Alexia Quadrani believes ESPN can launch with a direct-to-consumer offering for as little as $20 per month, beginning in 2018 — and that it could help recapture some of the subs linear ESPN has lost.

                                                      2018E                     2019E            2020E

Subscribers                                   1.75 million             2.02 million      2.27 million

Penetration of Lost Linear Subs   15%                         15%                    15%

Annual affiliate fees at:

$15/month                                     $315 million             $363 million       $409 million

$20/month                                     $421 million             $484 million       $546 million

$25/month                                     $526 million             $605 million       $682 million

SOURCE: JP Morgan estimates