inclair Broadcast Group announced Friday a deal that would see the firm and partner Byron Allen of Entertainment Studios pay Disney $10.6 billion for 21 regional sports networks (RSN) around the country. Shares shot up in early trading by more than $13 a share, to as much as $58.84, and on Monday sent the company's stock up 30%.
Federal regulators forced Disney to divest the sports networks as part of completing its $71.6 billion acquisition of most of 21st Century Fox. Previously, Sinclair joined with the New York Yankees and Amazon in the $3.5 billion acquisition of a 22nd RSN, the YES Network in New York. Sinclair also partnered with the Cubs baseball team to launch Marquee Sports Network in Chicago, and that channel will launch in 2020.
Sinclair, with about 200 stations under its control, is now betting on the likelihood that sports gambling soon will be widely legal across the United States, and very lucrative for those outlets that possess access to game and game information, as well as technology for easily betting on those games.
“This acquisition is an extraordinary opportunity to diversify Sinclair’s content sources and revenue streams with high-quality assets that are driving live viewing,” Sinclair CEO Christopher Ripley said in announcing the deal. “We also see this as an opportunity to realize cross-promotional collaboration, and synergistic benefits related to programming and production.”
The main holdup for further gambling expansion likely will be efforts by the major sports leagues, led by the NBA, to get a cut of the take. They’re pushing provisions in legalization bills for so-called “integrity fees.” Those issues are expected to get worked out, given projections that legalized gambling across most of the U.S. could generate tens of billions of dollars.
And that’s what Sinclair is betting on with the RSN acquisitions, according to Forbes. Ripley told Reuters on Sunday that his company would be open to licensing some of the sports content it acquired in the deal to outlets such as Amazon, Disney and AT&T as those companies jostle for position in the increasingly competitive online-streaming space.
“There is only going to be more competition and more interest for key assets like this in the future,” Ripley said. “We have an interest in as broad a distribution as possible.” He called the RSN deal “a bargain”. The price is far below the estimates of $15 billion to $20 billion that most analysts had predicted for the portfolio, but the networks could be valuable for several reasons.
For instance, the company expects to profit from advertising about gambling, Ripley said. He estimated industrywide, some $1.5 billion to $2 billion in new revenue would come in from sportsbook operators and other companies in the space.
Sinclair already owns The Tennis Channel, which holds rights to many of the major tennis tournaments held around the world. And sports of all kinds are about to become even more lucrative with the increasing legalization of gambling. Ripley stated months ago that tennis is already the second-most wagered-upon sport in Europe, where gambling is widely legal.
Most of the tennis gambling “handle,” or amounts wagered, comes from in-game “prop” bets, who will win the next game or set, or how many aces will a player serve, rather than overall match outcomes, Ripley explained. The company already is working on technology that could be used to power in-game betting on its broadcasts, he said.
The company also owns other sports properties, including online service Stadium, Ring of Honor Wrestling and high school sports programming on its local stations. The deal also could boost Sinclair’s recently launched STIRR online service, which features local news and sports content from its broadcast stations that cover about 40 percent of the country. That Sinclair-owned content is woven in with entertainment and news content from about 30 partners in an ad-supported service. Initial viewership results for STIRR have reportedly been well above internal projections, but the company has not released any details.
Adding the RSN content to STIRR’s offerings, either directly as Viacom is doing on new acquisition Pluto.TV with limited versions of its cable properties, or as a premium upsell, could further boost STIRR.
Sinclair also has been a big proponent of ATSC 3.0, the new broadcast technology now being rolled out around the country. Among other capabilities, ATSC 3.0 will allow broadcast groups to provide addressable, targeted advertising to viewers, and to offer new channels and data services within the same bandwidth they’re now using to broadcast their main signal. Those potential data services including sports-related information could be tied to the RSN networks' teams, as well as gambling information.