Sinclair buys Disney regional sports networks in the $ 10.6 billion deal
On Friday, Sinclair Broadcast Group said it had agreed to buy 21 regional sports networks from the Walt Disney Company in a $ 10.6 billion deal, giving the largest local television station operator in the United States a foothold in the cable industry with the rights to broadcast games of dozens of professional teams.
Disney was forced to sell the networks to receive antitrust approval for its 71.3 billion US purchases of most of Rupert Murdoch's 21st Century Fox in a deal concluded in March. The Ministry of Justice demanded the sale of the networks, which were part of Fox, because Disney, through its ownership of ESPN, already dominates the television sports market.
One of the 22 sports features Disney had to sell, the JA Network, is being procured by the New York Yankees and the ecommerce giant Amazon for about $ 3.5 billion, according to people familiar with the transaction. Sinclair also has a stake in that deal.
Disney gets smaller for the sports network than some analysts had expected. Last year, the Guggenheim Securities estimated that, including the JA network, the channels had a value of $ 22 billion. Regional sports networks have lost value in recent years, while fewer people pay for television.
Chris Ripley, CEO of Sinclair, said the company was well positioned to manage the networks. "This is a very exciting transaction," he said in a statement. "While consumption habits have shifted, the tradition of watching live sports and news is still involved in our culture."
Sinclair takes a significant portion of the debt to secure the agreement, borrows NOK 8.2 billion, or more than 80 percent of the purchase price, to complete the acquisition. The company said it would create a wholly-owned subsidiary to buy the sports nets so that it could keep that debt from Sinclair's balance sheet. The broadcaster itself already has $ 3.9 billion in debt and a modest profit margin of 11 percent. Last year, earnings fell by 41 percent to $ 341 million.
Sinclair, which owns nearly 200 local TV stations, is a leading voice for conservative views. There has been criticism in recent months of demanding its stations for air segments that defend the use of tear gas on immigrants at the border.
Sinclair made a bid last year to buy rival Tribune Media for $ 3.9 billion in a move that would have created a conservative media worm with the potential to challenge Fox News as the prominent media exit on the right. The deal fell apart in August after meeting opposition from federal regulators.
Sinclair was known mainly as a broadcaster, and could become a major player in cable with the acquisition of the regional sports networks, which are only available on pay-TV systems. The company now has the opportunity to pack the sports networks with local news broadcasts to attract customers. (Broadcast stations, although freely available over the air, are also carried by cable and satellite operators for a fee.)
Sports content is considered extremely valuable because it continues to draw the largest audience on television, and seen most seen live, put a prize on playing time advertising. The networks that Sinclair acquires are largely devoted to handing over baseball and basketball games and carrying high price tags for cable operators, which transfer the cost to customers.
The activity in the operation of regional sports networks has become difficult in recent years. The networks are actually intermediaries of sports rights. They are paid by the cable and satellite companies that carry them, but they must pay sports teams for broadcasting services.
With more people leaving cable and satellite TV, the operators of these services have begun to push regional sports networks, either by refusing to carry them or by deleting any increased fees. It has put the network's owners in a difficult position, as sports teams continue to increase rights fees each year. And because they do not usually own streaming rights for games, networking capabilities in digital audiences are an increasingly important part of the media industry.
There are tools that Sinclair can employ to own their new acquisitions worth. Bundling networks with local stations can strengthen their negotiating position with cable operators in raising license fees. The company already owns stations connected to the four major nights, giving it access to the National Football League and other sports.
Sinclair has previously invested in sports. Three years ago, it agreed to buy the $ 350 million tennis channel, and it operates the digital TV station Stadium. It is planning to launch a new regional sports network, Marquee Sports Network, with the Chicago Cubs next year.
