NEWSLETTER
I presume the timing on all of this stuff is not a coincidence – baseball season is about to kick up, and the huge cache of live sports programming that comes with it looms – but this week has been rife with TV carriage update stuff, from Crane Kenney’s thoughts to YouTube’s announcement that they were dropping the FOX RSNs and YES Network.
And now we’ve got an update on this stuff from Sinclair, which owns those FOX RSNs, and has a stake in YES Network and the Cubs’ new Marquee Sports Network. Of note, it is Sinclair that is negotiating carriage deals, and they got into it in their earnings conference call this week.
I reviewed the transcript to see what they said about the RSN issues, and their take – what they’re telling their shareholders after their stock has been in free fall – was very interesting to me. After noting that their play in this space was largely about legalized gambling(!), Sinclair says this about Marquee, specifically (emphasis mine):
Just last week Marquee announced that mark – that Hulu Live TV will carry the network. We now have agreements in place for market-wide carriage of Marquee with more than 40 distributors including AT&T U-Verse, DirecTV, Mediacom, Charter and over-the-top providers Hulu and AT&T TV Now which means that 100% of the Cubs geographic footprint are able to watch Marquee. Speaking of which Marquee had a successful launch last week with the start of the Cubs’ Spring Training. And with opening day on March 26 we are ready to go with the beautiful new studio.
We remain in negotiations with Comcast and ultimately given the value of these properties and demand for local viewers we are confident that we will come to an agreement and they will allow their subscribers to watch and enjoy their favorite home team. We continue to have discussions with Dish for the carriage of the RSNs and remain confident that our two companies will eventually reach mutually acceptable carriage agreement.
Although that second paragraph was more generally about RSN carriage, later in the call, Sinclair confirmed all their properties – including Marquee – were included in those negotiations. In other words, the confidence applies to Marquee, in addition to their other RSN properties.
Sinclair’s confidence with respect to Comcast generally echoes that of the Cubs, but that DISH note is certainly new. As we’ve discussed, DISH has generally dropped sports coverage, so if Sinclair is saying they are confident they’ll eventually get carriage deals in place for their RSNs – including Marquee – that’s a pretty huge revelation. I have no idea what the timeline would be on that, since it involves much more than the Cubs, but that’s still good to hear.
Of course, you have to keep in mind that there’s some level of bluster here. Sinclair can’t lie to their shareholders, but they can certainly play with words like “confident” and “discussions.”
Clearly, Sinclair is concerned about how much their stock has been crushed since they aggressively jumped into the RSN space:
I do want to mention that there has been some misinformation in the marketplace that has unfortunately depressed our stock valuation. In fact, if you do a sum of the parts on us, you will find that our current stock price describes no value to our Sports segment despite having over 70% of the RSN subscribers locked in, including multi-year deals completed with Charter, AT&T DIRECTV, MediaCom as well as 200 other completed deals with medium and small distributors, having very few team renewals on the horizon, $1.6 billion of liquidity as of year-end 2019, exclusive rights on linear and digital and future sports betting and synergy opportunities.
Based on the current trading levels of our stock, it’s hard to argue that there’s a better return for us than repurchasing our own shares. And while we repurchased over 4.5 million shares in 2019 at these trading levels, we will look to be more aggressive.
At a very broad level, this all matters to the Cubs and Marquee. Because Marquee pays the Cubs a rights fee to broadcast the games – $132 million annually, per Bloomberg – the Cubs need Marquee to be successful to justify the money that flows into the baseball organization (to say nothing of any extra profits Marquee generates that the Ricketts Family decides to make available to the Cubs organization). And if the entire RSN landscape is in such a dire state that it’s crushing Sinclair and YouTube is dropping RSNs and DISH refuses to carry them and etc. etc. etc. … well, that would not bode well for the long-term future of Marquee.
On the YouTube thing, though – later in the call, Sinclair indicated that they are still in active negotiations with YouTube about Marquee. I think it’s still fair to assume that if YouTube is dropping the FOX RSNs, they aren’t going to separately just carry Marquee … but hey, if negotiations are still ongoing, maybe there’s a small hope?
