Sinclair Won’t Share All the Money It Gets From Canceled Sports

(Bloomberg) -- Sinclair Broadcast Group Inc., the biggest owner of regional sports networks in the U.S., touted an unusual achievement this week: making money from canceled games.

The broadcaster stands to collect more in rebates from team owners for scrubbed events than it will return to its distributors -- the cable companies and other pay-TV operators that carry its channels.

“We do expect rebates from the teams to be greater than what we pay out to the distributors,” Sinclair’s chief financial officer, Lucy Rutishauser, told investors on a conference call Wednesday. The company said it has different terms in its contracts with teams and cable companies regarding how to account for canceled games.

Others saw it in more stark terms. “The lack of sports is a net positive for cash,” Wells Fargo & Co. analyst Steven Cahall said in a post-earnings report. After spending billions to acquire regional sports networks, Sinclair could use the funds. Cahall titled his note, “It’s my money and I need it now.”

Big Gamble

Sinclair, which already owned scores of local TV stations, took a big gamble last year when it paid $9.6 billion for the 21 regional sports channels formerly owned by Fox. The networks, which still operate under names such as Fox Sports Arizona and Fox Sports Detroit, broadcast games from more than half of the major-league baseball, hockey and basketball franchises in the U.S.

Live sports were shut down for much of the year due to the coronavirus -- and though leagues have generally resumed play, the seasons are shorter. Baseball, for example, will play just 60 games, down from its usual 162.

There are other costs associated with running the channels, Sinclair noted. Advertising has declined during the pandemic.

In statement to Bloomberg News, the company said its contracts with distributors require it to deliver content over an extended period of time and included programing beyond baseball. “Our networks continued to provide value with NHL and NBA games earlier this year, as well as nonlive events and other nongame programming,” the company said.

Contentious Issue

For consumers, the cost of cable TV -- particularly without live sports -- has been a contentious issue. In April, New York Attorney General Letitia James called for seven major cable and satellite television providers in the state to reduce or eliminate fees attributable to live sports.

“Just like the insurance industry is being pressured to return money to consumers who are not driving or making many auto claims, the cable industry should reimburse customers for these fees,” said Linda Sherry, director of national priorities for Consumer Action, a San Francisco-based advocacy group.

Cable operators Comcast Corp. and Charter Communications Inc. have said they will pass along any rebates they get for canceled events back to consumers. Both companies also operate regional sports networks.

“We expect that we’ll be getting some monies back from some of the sports leagues based on games played or not played in the U.S.,” Comcast Chief Financial Officer Michael Cavanagh told investors last week. “When that does happen, as we’ve said, we’ll pass that back along to customers.”

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