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If Sports Content Is King, Sinclair's DTC Model Could Be A Home Run

Sinclair Broadcast Group Inc (NASDAQ: SBGI) acquired the regional sports channels from the Walt Disney Co (NYSE: DIS) in 2019.

05/08/2021 11:00

Sinclair Broadcast Group Inc (NASDAQ:SBGI) acquired the regional sports channels from the Walt Disney Co (NYSE:DIS) in 2019.

Since then, Sinclair has struggled to gain traction with streaming and monetizing the regional sports networks, even taking a writedown on the acquisition. A new plan to monetize the sports content could be coming and is one that investors should watch.

What Happened: On its first-quarter earnings call, Sinclair announced plans to launch its regional sports networks in a direct-to-consumer (DTC) platform with several pricing plans.

The company recently rebranded the channels from the Fox Sports name to Bally Sports through a naming partnership with Bally's Corp (NYSE:BALY). The local channels carry rights to MLB, NBA and NHL teams. 

The teams are:

Bally Sports West/Bally Sports Socal: Los Angeles Angels, Los Angeles Kings, Anaheim Ducks, Los Angeles Clippers

Bally Sports Arizona: Arizona Coyotes, Arizona Diamondbacks, Phoenix Suns

Bally Sports Southwest: San Antonio Spurs, Texas Rangers, Dallas Stars, Dallas Mavericks

Bally Sports New Orleans: New Orleans Pelicans

Bally Sports Oklahoma: Oklahoma City Thunder

Bally Sports Kansas City: Kansas City Royals

Bally Sports Midwest: St. Louis Cardinals, St. Louis Blues

Bally Sports Indiana: Indiana Pacers

Bally Sports Ohio/Bally Sports Great Lakes: Cleveland Cavaliers, Cleveland Indians, Columbus Blue Jackets, Cincinnati Reds

Bally Sports Southeast/Bally Sports South: Atlanta Braves, Atlanta Hawks, Carolina Hurricanes, Memphis Grizzlies, Nashville Predators, Charlotte Hornets

Bally Sports Florida/Bally Sports Sun: Tampa Bay Lightning, Tampa Bay Rays, Orlando Magic, Florida Panthers, Miami Marlins, Miami Heat

Related Link: Is Sinclair Broadcast The Next Sports Betting Stock To Watch

Why It’s Important: Sinclair has had carriage fee disagreements with streaming companies including Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), Disney-owned Hulu, and Dish Network Corp (NASDAQ:DISH), which owns Sling TV.

Right now, sports fans struggle to find their local teams on their streaming services. To get coverage from the Sinclair regional sports networks, most fans have to subscribe to basic cable packages.

By going direct-to-consumer, Sinclair could see strong subscriber numbers with sports content being a key item that fans want.

Given the demand around sports betting, more people are also tuning into games outside their local teams, which could help a premium pricing model offering all the regional sports networks.

Sinclair is in discussion with the leagues and teams to secure the ability to go direct-to-consumer. Major League Baseball is already encouraging teams to go direct-to-consumer with streaming content.

Financials: Sinclair Broadcast Group reported $1.51 billion in revenue in the first quarter, down 6% year-over-year. The results were better than expected, the company said. Sinclair remains optimistic about a rebound in advertising.

Advertising revenue for the company was down 7% in the first quarter. Distribution revenue fell 5% year-over-year in the first quarter.

The company expects second-quarter revenue to come in a range of $1.58 billion to $1.62 billion.

SBGI Price Action: Shares of Sinclair Broadcast Group were up 1.55% to $33.47 on Friday at market close.

(Photo: Courtesy Sinclair Broadcast Group)