Canceled Games Could Cost Sinclair $130M, Says Analyst
Refunds to MSOs exceed right rebates from teams
With the Major League Baseball season about to belatedly begin, analyst Steven Cahall of Wells Fargo calculates that regional sports networks will cost Sinclair Broadcast Group $130 million in cash when the baseball, hockey and basketball seasons end.
Sinclair’s RSN Group, called Diamond Sports, will get money back from the sports teams networks carry.
Cahall figures that Diamond pays about $1.9 billion in sports rights, 62% of those going to baseball teams. Diamond will get no money back from the NHL teams, minimal money from the NBA teams and a good chunk from baseball teams, which are playing just 60 games in this shortened season, fewer than the 142 games they promised to MVPDs.
In total, Cahall estimates Sinclair and Diamond will get back $693 million of the $1.9 billion in sports rights.
According to Cahall, only the largest distributors get rebates from Diamond’s networks, which will deliver about 64% of the games they contracted for, resulting in an $823 million rebate to the MVPDs.
That leaves Sinclair and Diamond out $130 million.
“With cord cutting also accelerating, we think Diamond remains a high-risk asset for an eventual restructuring, which remains a distraction to Sinclair’s equity,” Cahall said in a research note. He rates that stock “Underweight,” but “would turn more positive if Sinclair were to exit the RSN business, especially in light of accelerating cord cutting.”
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Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.