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As All-Star Break Approaches, Sinclair RSNs Near Tipping Point

Los Angeles Dodgers player Justin Turner during a 2019 regular season game.
(Image credit: Scott Clarke / ESPN Images)

Next week’s Major League Baseball All-Star Game — the traditional midpoint of the season — is just one of a series of crucial events that could profoundly impact Sinclair Broadcast Group’s regional sports network experiment, according to some analysts.

The All-Star Break (the few off days after the All-Star Game, scheduled this year for July 13 in Denver) is usually the point when the baseball gods decide whether teams are in or out of playoff contention. While there have been a few exceptions over the years, it also is traditionally the time of year when fans decide whether it’s worth it to religiously follow said ball clubs for the remainder of the year. 

For Sinclair’s RSNs, owned by subsidiary Diamond Sports Group and marketed under the Bally Sports Networks moniker, it means the beginning of a series of events that could seal the fate of the channels they bought just two years ago for $9.6 billion.

The All-Star break will likely pass without a streaming carriage deal for the RSNs with YouTube TV, Hulu and fuboTV, which earlier dropped the channels over pricing. YouTube TV has been without the Sinclair RSNs since September, while Hulu and fuboTV dropped the channels in October and January, respectively. 

So far there seems to have been little impact from the decision to drop the channels on the streamers. On June 2, Evercore ISI media analyst Vijay Jayant issued a report that downloads for the YouTube TV, Hulu and fuboTV apps were up sharply during June, largely because of sports like the U.S. Olympic Trials, NBA Playoffs and other non-RSN related fare. 

While Sinclair and the streamers appear to be living well without each other, another deadline approaches that could have a far greater impact — Sinclair’s upcoming broadcast retransmission consent negotiations with Dish Network. That deal expires in August and is expected to include at least discussions regarding the RSNs. Dish dropped the Sinclair RSNs in 2019, and restoring that deal is a key part of Diamond Sports’ attempts to restructure its $8 billion in bond debt. According to documents filed with the Securities and Exchange Commission in June, Diamond Sports based its future revenue projections on getting that Dish deal done.    

“The countdown clock is ticking,” said LHB Sports, media & entertainment CEO Lee Berke, adding that the more pressing deal to get done is probably the August Dish deal. “It’s July 8. We’ve got 23 days to go.”

“The All-Star Game is coming next week, pennant races are underway, you’ve passed the midpoint of the season,” Berke continued. “If they [Sinclair] are going to cut deals for the RSNs with vMVPDs and Dish, it’s going to have to happen very, very quickly.”

Dish Deal Looms Large

One sports executive who asked not to be named said the importance of the Dish deal can’t be exaggerated.

“I wouldn’t say it’s do or die, but it is ultra, ultra important,” the executive said.   

Dish has driven a hard bargain in past RSN negotiations and seems to have the advantage with Sinclair. After two years without the channels, the subscribers Dish would have lost as a result are already gone. For some observers, the only incentive for Dish to do a deal for the RSNs would be a steep discount in retrans fees for the broadcast channels. 

“That flies against what everybody is looking for in the marketplace from a broadcast standpoint,” Berke said. “If they can achieve it, that’s what Dish does, they negotiate very aggressively.”

On the other hand, Sinclair plans to launch a direct-to-consumer version of the RSNs next year, which could offset those losses. Still, Sinclair has taken an extremely conservative approach to the DTC service, which according to the SEC documents is expected to have 4.4 million customers in five years. Dish represents about 8 million subscribers to the RSNs.  

In a research note last month, Wells Fargo media analyst Steven Cahall wrote that he believed the Dish deal needs to get done before bondholders would commit to a restructuring.

RSNs in general have been under pressure as distributors seek lower prices and pay TV customers jump ship for streaming services. Cord cutting has carved a huge chunk out of the traditional affiliate fee structure of the RSN business — about 6 million cable, satellite and telco TV customers cut the cord in 2020 — and programmers have been hard pressed to find a replacement. While DTC could solve part of that problem, it isn’t expected to be the be all, end all for the business. 

As a result, programmers are looking for other ways to monetize and distribute sports content in addition to traditional models.

NBCUniversal said it plans to shutter sports network NBCSN at the end of this year and shift some of that programming to USA Network and streaming service Peacock. Others like AT&T’s Root Sports Networks, were put on and taken off the block in the past two years, as demand for the channels waned. Root Sports recently agreed to carry the NBA’s Portland Trail Blazers on its Root Sports Northwest RSN — jointly owned with the MLB Seattle Mariners — beginning in 2022. That deal could mean that NBCU’s NBC Sports Northwest will close its doors.   

Berke added that whether the NBC RSNs are up for sale or not, it appears that come next basketball season, at least NBC Sports Northwest will be no more. 

“That one’s dropping out of the portfolio regardless of what takes place with the rest," Berke said, adding that an RSN losing all the professional teams in a single city hasn’t happened since 2004, when Fox Sports Chicago lost the Bulls, Cubs, Blackhawks and White Sox to Comcast SportsNet.

“That’s a major shift,” Berke said. “It sure seems to confirm that once the basketball season rolls around, they won’t have anything to show.”    

And while sources said that NBCU has not started a formal process to sell its other RSNs yet — no bankers have been hired nor consultants consulted as of July 9 — the programmer has been thinking outside of the box regarding sports programming.

Peacock‘s Philly Experiment

On June 18, 19 and 20 NBC aired a three-game series between the Philadelphia Phillies and San Francisco Giants exclusively on Peacock. The move was thought by many to be another experiment by the league to look at different ways to distribute content.

In a press release, Major League Baseball said the move was part of its “ongoing commitment to deliver unique game presentations via emerging distribution platforms within the evolving media landscape.”

Back in April, MLB chief operating officer Chris Marinak told SportsPro Media  that the league was trying to “figure out what type of structure would make sense for an over-the-top product that may not require authentication.” 

Currently, RSNs stream in-market games to their pay TV subscribers, not on a standalone basis. The league has its own standalone streaming product — MLB.tv — that allows customers to stream every team’s out-of-market games for $44.99 per month or a single team’s out of market games for $34.99 per month. Blackout restrictions apply. 

Some reports have said that Sinclair has failed to secure approvals from some distributors for its DTC offering, but the company appears to be going full steam ahead with its streaming plans. In the meantime, Sinclair is scheduled to report its Q2 results on Aug. 4, and may have some updates on its DTC status, as well as that of its Dish negotiations. Maybe then investors will decide whether it's worth sticking around for the rest of the regular season.  

Mike Farrell

Michael Farrell is senior content producer — finance.