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Sinclair secures carriage for regional sports networks with Charter

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Sinclair secures carriage for regional sports networks with Charter

Though Sinclair Broadcast Group Inc. has yet to close its purchase of 21 regional sports networks, the broadcaster is already signing carriage deals for the channels.

Sinclair CEO Chris Ripley told analysts on an Aug. 7 earnings call that the company recently renewed its retransmission consent agreement with Charter Communications Inc. in a multiyear deal, which also provides carriage for the 21 regional sports networks that the station operator is set to acquire from Walt Disney Co. The media conglomerate was required to sell the RSNs as a condition of the U.S. Department of Justice signing off on Disney's purchase of myriad assets from 21st Century Fox.

Beyond the RSNs, the Charter agreement also covers Sinclair's Tennis Channel (US) and the Marquee Sports Network, a joint venture with Major League Baseball's Cubs franchise that will yield a regional sports network launching in February 2020.

The carriage deal with Charter contrasts with an ongoing disconnect for the RSNs with DISH Network Corp. Sinclair CFO Lucy Rutishauser said the company expects the RSNs "to be picked back up by DISH," although that may have to wait until Sinclair gains control of the channels and can negotiate for them.

Asked why Sinclair was able to negotiate for the RSNs with Charter but not DISH, Ripley said that was something governed by the contract with Disney. Fox Sports is reportedly handling the DISH negotiations, and DISH Chairman Charlie Ergen noted in July, "Fox had a lot of leverage to get people to overpay ... Having said that, the new owner, Sinclair, we think, is a company we want to do business with."

After DISH, Ripley expects all the other distribution deals going forward will be "handled by us."

"We continue to work with Disney towards Department of Justice approval in a third-quarter close of the RSN acquisition," said Ripley.

Since it does not yet own the RSNs, Ripley also noted that Sinclair has been unable to enter discussions with teams about controlling rights fees outlays in exchange for equity stakes in the services. "We already do have significant ownership with key teams and a lot of the RSNs," he said. As such, relative to rights renewals, Ripley believes more and more teams will gain ownership interests in the years ahead.

Consolidated revenues during the second quarter rose more than 5.6% year over year to $770.7 million as media revenues rose 3.6% to $720.9 million and nonmedia revenues improved to $49.8 million from $34.3 million.

Net income available to the company was $42.3 million, or 45 cents per share, up from $28.0 million, or 27 cents per share, in the second quarter of 2018.

Results reflected a 25-cent-per-share impact for nonrecurring costs for legal, regulatory and transactions in the most recently completed period, versus a 35-cent-per-share impact of nonrecurring costs for legal, regulatory, transaction and financing ticking fees the year before.

The S&P Global Market Intelligence consensus EPS estimate for the second quarter of 2019 was 49 cents on a GAAP basis and 41 cents on a normalized basis.

For the third quarter, Sinclair forecasts media revenues within the $695 million to $703 million range and nonmedia revenues of $49 million.