Sinclair: Sports Rebates Could Come

Sinclair Broadcast Group, owner of about 21 regional sports networks across the country, offered analysts a sliver of insight into its sports rights deals Thursday, adding that it could expect some rebates from leagues for undelivered live games during the COVID-19 pandemic, but that they would probably be small and wouldn’t come until at least next year.

Sinclair, which acquired 21 RSNs from The Walt Disney Co. last year and has interests in Marquee Sports Network (the Chicago Cubs RSN), The YES Network (with the New York Yankees) and smaller sports-centric channels like The Tennis Channel, told analysts during its Q1 earnings conference call Thursday that any rate relief would be based on individual rights deals.

On the call, Sinclair CEO Chris Ripley said the rights agreements between its RSNs and various leagues typically include a minimum game delivery obligation and that the RSN would receive a rebate if a respective league falls short of that obligation. Without specifying what those game delivery minimums are, Ripley said that the NBA and NHL, which were pretty much finished their regular seasons when they suspended play in March, have likely met their minimum requirements. And any refund, if warranted, would be determined at the end of the year.

Related: Want Sports Rate Relief? Not So Fast

“The mechanism for truing up for any content not received under our sports rights agreements or not delivered under our affiliation agreements generally takes place at the end of the season or calendar year,” Ripley said on the call. “While we believe that sports will come back this year and be in high demand, at this time the leagues have not indicated when games will resume. Therefore, we do not know where we will end up in relation to the game delivery minimum. Keep in mind that the NHL and NBA regular seasons were almost complete when the seasons were suspended, so shortfalls in those weeks if any should be minor.”

But Ripley added he expected at least some leagues to fail to deliver the required games, which would require a rebate of a portion of their fees. He just said it is impossible to determine how much that would be at this time.

“We think we're likely going to be headed into a situation where there [are] rebates,” Ripley said on the call. “We won't know the magnitude of those until we get more clarity on when the games will be played and how many will be played. What we will do is update our guidance once we have a clear picture -- my guess is that will be the next quarter -- and from there you'll be able to tell what the impact is.”

There has been an outcry lately from consumers and legislators angry that pay TV customers still pay high sports fees for networks that aren’t showing live games during the pandemic. Three of the four major sports leagues -- the National Basketball Association, the National Hockey League and Major League Baseball -- suspended their regular seasons in March, and haven’t played live games since. With sports fees accounting for more than half of some pay TV distributors’ total programming costs, cable, satellite and telco TV providers have said if they receive any rate relief from sports programmers, they will pass the savings on to customers.

New York State Attorney General Letitia James fired off letters to pay TV distributors in her state last month calling for them to voluntarily provide “appropriate refunds” to consumers for lost games. But distributors have argued that they are the last link in the chain -- they can’t provide rebates until they receive them from programmers, which can’t give refunds until they receive them from the leagues.

Baseball is the remaining wildcard, because it hasn’t played any games yet. While each agreement is different, according to Sports Business Journal, some contracts call for MLB to deliver between 120 and 150 games per season. That could get tricky as the pandemic continues to keep Americans in lock down. The MLB season is 162 games long, so some pundits warn that to avoid any rights deal problems, regular season play would have to start soon.

According to ESPN, MLB is expected to offer its proposal on resuming games in about a week. ESPN said that one offer on the table is resuming spring training on June 10, with the season to start on July 1, meaning that  about 80 to 100 regular season games would be played. Earlier during the pandemic, there was a proposal to play all games in the Phoenix, Arizona area -- which has 10 stadiums within a 50-mile radius -- but more recent offers call for most games being played in teams’ home stadiums.