Sinclair’s regional sports networks, known in most markets as Bally Sports, appears headed for bankruptcy, Gerry Smith, Erin Hudson, and Rachel Butt at Bloomberg reported on Wednesday. Considering that Bally Sports televises games for 14 MLB teams, a major shift in the industry may be afoot.
Bally Sports also televises NBA and NHL games for several teams. Sinclair was having trouble finding a potential buyer for the regional networks, as Josh Kosman of the New York Post reported in December, but the more pressing issue is they are running out of money.
“The company has about $585 million in cash on hand, as of September 30, but owes about $2 billion in fees to teams this year. Rights payments in the first quarter are usually the highest of the year,” reported Bloomberg.
But as Daniel R. Epstein at Baseball Prospectus noted, with the number of U.S. households paying for television services dropping since 2014, this is something Sinclair should have seen coming, especially considering they bought the regional sports networks in 2019. But instead, as Epstein laid out, Sinclair has spent its money on stock buybacks instead.
Billy Chambers, who was CFO and COO of all the regional sports networks acquired by Sinclair, and before that had a similar role at Fox Sports for two decades, was hired by Major League Baseball on January 12 to oversee distribution of local media rights across the sport.
“He will work closely with the 30 clubs on the most effective means to distribute games to fans in local markets throughout the country,” MLB’s introductory press release explained.
Local media rights have been on the rise for decades. The Dodgers are in year ten of a 25-year, $8.35-billion television rights deal with Spectrum (nee Charter and Time Warner Cable) that averages $334 million per year through 2038, for instance. But in the first six years of the contract, SportsNet LA was not distributed widely for those who did not have Spectrum cable.
Now the issue, especially with cord-cutting, is trying to get games televised locally for folks who don’t have cable at all.
In-market streaming is a stated priority for Chambers, but that is complicated by local television contracts. With nearly half the league’s regional sports networks nearly in bankruptcy, perhaps one major hurdle will be cleared, though with the potential for slashed revenues for those teams.
The suddenly-not-for-sale Angels are one of those teams, with its $3-billion, 20-year local TV deal signed before the 2012 season. Same for the Cardinals, whose 15-year deal worth over $1 billion runs through 2032. “We’re operating like it’s going to stay, but the reality is, there’s going to be change,” said Cardinals managing partner Bill DeWitt Jr. said in December, per Fox2 in St. Louis.
“It’s been a golden goose. You remove cable TV from the scenario, and franchises are worth a fraction of what they are today, players make a fraction of their salaries,” said Greg Bouris, a longtime communications executive who worked in the NBA, NHL, and in the MLB Players Association. “This boom has been going on for almost 30 years. But the vast majority of people that pay never watch. That’s been the model.”
That model, at least as it relates to MLB, seems to be changing fast.