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Analysts positive on Sinclair-Bally's RSN branding pact, but expect challenges

Analysts said Sinclair Broadcast Group Inc.'s expansive promotion deal with Bally's Corp. should be an effective way to capitalize on the burgeoning sports betting industry. However, they expect the parties to encounter some difficulties navigating a playing field in which leagues and teams have their own relationships with sports betting companies.

Under a 10-year deal, the Bally's brand will be promoted and benefit from content integration across the 21 FOX-branded RSNs that Sinclair bought in August 2019; Sinclair's 190 broadcast TV stations; the Tennis Channel (US) and sports streaming platform Stadium. Those efforts will also extend to the broadcaster's direct-to-consumer app, which Sinclair President and CEO Chris Ripley said will launch next spring.

Sinclair will also get a 15% stake in Bally's and have the right to pick up an additional share if certain performance targets are met. Bally's also will reportedly give Sinclair $85 million over 10 years for the naming rights to the 21 RSNs and a percentage of Bally's interactive marketing budget.

However, the deal is not exclusive, as other sports betting companies will be able to buy commercials on the networks. Analysts said this is a key factor as the industry, which Bally's estimates will reach $12 billion by 2025 and $50 billion at maturity, takes shape.

"Sinclair is gaining an equity position that it can grow and is opening up a new revenue source with the naming rights component," said media consultant Brad Adgate, who previously held executive roles at ad agency Horizon Media Inc. "Bally's will take a certain amount of inventory, but Sinclair can continue to sell ads" to other sports betting companies.

The deal comes as Sinclair's RSN business has been battered by the COVID-19 pandemic that shortened the NBA, NHL and MLB seasons, reducing attendant ad revenue. Sinclair is also reimbursing fees to distributors for not delivering the requisite number of games. During the third quarter ended Sept. 30, Sinclair recorded an estimated impairment loss on its local sports segment of $4.23 billion relating to goodwill and definite-lived intangible assets of $2.62 billion and $1.61 billion, respectively.

Lee Berke, owner of consultancy LHB Sports, Entertainment & Media, said he has been advising clients to pursue network entitlement deals as a new revenue stream, noting that venues, tours and events have long sported corporate monikers. However, there will be challenges.

"The devil is in the details for Bally's and Sinclair in terms of what can be done with leagues and teams rights, policies and sponsorship deals," Berke said. "Things have to be sorted through with the NHL, NBA and MLB partners, and there are complications around NFL, high school and college programming that appear on the RSNs."

SNL ImageA Major League Baseball field features ads from various sponsors.
Source: Fox Sports Arizona

Curt Pires, president of media management and consultancy CAP Sports, said navigation will also be necessary relative to team owners doing their own venue naming pacts with sports betting companies and casinos, as well as sponsorship pacts for in-stadium signage that could dilute the promotional power of the Bally's deal.

With Sinclair paying almost $10 billion for the RSNs in August 2019 and then having to take a major write-down, Pires also said the 10-year, $85 million naming rights deal "is not a lot of money.”

Adgate agreed Bally's is getting "a good deal" for the amount of exposure it will have in games, during the pre- and post-game segments and in listings for the networks in programming guides.

Pires further highlighted that the Bally's name does not give Sinclair any brand association with the RSNs or enable the company to realize any marketing benefits across its platforms.

"There isn't any brand recognition that lifts the profile or ties in any marketing or advertising flowing back to the company," he noted.

Pires also said Sinclair is taking a risk assuming that Bally's will emerge with a significant share in the sports betting space because it could be trumped by another player. Pires also questioned Sinclair affixing the Bally's name on RSNs in markets where it does not yet have wagering capabilities.

"Bally's is a nice name, but it's not Coke, Ford or General Motors," he said.

For his part, Berke anticipates some consumer push back.

"Some have or will embrace sports betting, and the Bally's name will resonate [for them]," he said. "For others, it will not."