Sinclair Sports Networks Seeking Better Debt Terms
It seems the Sinclair takeover of the Fox Sports RSNs isn’t going too well.
According to a report by Bloomberg, Sinclair is inviting creditors to sign non-disclosure agreements to begin formal debt leniency talks.
The negotiations follow submitted proposals by Diamond Sports Group LLC, the subsidiary of Sinclair that operates the former Fox RSNs (now branded as Bally Sports RSNs,) that address ways the company could pay back its debts — which total about $8 billion according to Bloomberg.
Sinclair purchased the former Fox Sports RSNs from Disney for $9.6 billion back in the summer of 2019, and reached a 10-year, $85 million branding agreement with gaming company Bally’s Corporation in November that would brand the RSNs as Bally Sports. Since then, it’s been tough sledding for Sinclair as far as revenue is concerned.
First, Sinclair lost distribution on Dish Network and Sling TV, then YouTube TV and Hulu Live TV followed suit. Sinclair pointed to them as a cause for a “decline in distribution revenue,” as well as “elevated levels of subscriber erosion” in their Q3 2020 earnings report. The pandemic’s disruption of live sports didn’t help things, either, especially since most RSNs traditionally have revenue splits with the teams they cover. No sports means no revenue.
So what’s Sinclair to do? Obviously, talking with creditors and hammering out financials is a key step in this process, but a direct-to-consumer service could go a long way to chipping away at that debt. While Sinclair’s leadership has said this app will “compliment” their existing broadcast programming, the DTC app would be a way to circumvent pricy broadcast carriage deals and bring the action right to the fans.
Sinclair CEO Chris Ripley acknowledged the shift in the company’s business plan on their Q1 2021 investors call, saying, “If you’re noticing a difference in tone on direct-to-consumer for sports, I think that is an accurate pickup as we dig into the details of our business plan and really, realize what the other opportunities are when you get a fan that’s coming in, day in, day out, to watch your games on a digital interactive platform when you know who the viewer is and you can funnel them into other opportunities. (There) are massive adjacencies growing really, really fast, like sports betting, like merchandise, like what’s going on with NFTs. And that becomes a platform for interaction and socialization for the fan.”
Born from necessity, Sinclair’s DTC pivot could be what saves them in the end.