By Kenneth Li and Hilary Russ
NEW YORK (Reuters) – Sinclair Broadcast Group Inc would consider teaming up with Amazon.com Inc (NASDAQ:) and other tech giants to offer live sports, its chief told Reuters, fresh from announcing a $9.6 billion deal to buy Disney’s regional sports networks.
On Friday, Sinclair announced a deal to buy Walt Disney (NYSE:) Co’s collection of 21 regional sports networks (RSNs), turning the largest U.S. broadcast station owner into one of the biggest live news and sports companies this side of Rupert Murdoch’s Fox Corp.
With Walt Disney Co, Amazon, Netflix Inc (NASDAQ:) and AT&T Inc (NYSE:) just some of the combatants now in the video streaming wars, “There is only going to be more competition and more interest for key assets like this in the future,” President and Chief Executive Officer Chris Ripley said, in response to a question about licensing sports to big tech companies. “We have an interest in as broad a distribution as possible.”
The deal is a capstone to Sinclair’s expansion from a stodgy TV station owner to a conservative-leaning media company stitching together 190 local TV stations across the country.
In January, it launched an advertising-supported streaming TV service called STIRR. It is also modernizing its broadcast technology to the new ATSC 3.0 standard, which will let it act more like an online TV company by offering interactivity and ads targeted to viewers.
In an interview on Sunday, Ripley said the deal was a bargain because Disney needed to sell the assets to gain approval for its $71.3 billion deal to buy the entertainment assets of 21st Century Fox from Murdoch.
The sports networks are valued at five and a half times earnings before interest, tax, depreciation and amortization, after tax benefits, compared to MSG Networks which trades at around eight times.
Disney is selling the YES Network separately for $3.5 billion to the New York Yankees and Amazon, according to a person familiar with the deal. Sinclair also reportedly has a stake in that deal. Amazon and the Yankees did not immediately reply to a request for comment.
But Sinclair’s doubling down on traditional TV appears to run counter to the shift in consumers away from traditional television, broadcast and pay TV to digital services owned by Netflix and Google.
Ripley said battling the tech giants head-on, as Disney and AT&T are preparing to do with upcoming digital video services, made no sense for the much smaller Sinclair.
“We’re a local media company with a strong focus in local news and we continue to see that as an area that will have strong relevancy if we took it multiplatform and not be an area flooded by cheap cash by big tech,” he said.
The company views live sports as a long term profitable business because of its scarcity.
“There are only 160 or so baseball games a year,” Ripley said. “No matter how much money that Amazon or Google or Apple (NASDAQ:) throws at the MLB (Major League Baseball), they can’t really change that dynamic very easily.”
Profits could be hurt as the sports network’s contracts with pay television providers are up for renewal in the next two year, according to BTIG analyst Richard Greenfield.
Ripley said those contracts expire over as long as a few years to 15 years.
Sinclair already distributes content to multiple cable, satellite and streaming companies, including YouTube, owned by Alphabet (NASDAQ:) Inc’s Google. Adding more digital clients like Amazon would be just another distributor relationship, he said.
BETTING THE FUTURE
The acquisition will see Sinclair capitalizing on the new U.S. sports betting market.
In addition to increased fan engagement and viewership, he expects $1.5 billion to $2 billion of new ad revenue industry-wide “in short order,” from sportsbook operators and other companies marketing in the space.
Ripley also plans to eventually allow viewers to place bets right from their screens during live games, similar to how fans can wager in Europe now.
“If you’re interested in gaming, we’re going to add on extra stats, the ability to do prop bets in the game, pitch by pitch, play by play,” he said. “You can play along and wager while you watch.”
The in-game, on-screen wagers, which it is currently exploring with its Tennis Channel, would be done in partnership with sportsbook operators, but Sinclair would not want to become a bookie itself.