Sinclair: Sports Betting A Growth Area

Sinclair Broadcast Group faces some headwinds for its former Fox Regional Sports Networks as Dish Network continues to hold out on carriage. Will that become a distant memory as the company books revenues from a new growth category — sports betting?

CFO Lucy Rutishauer insisted during the company’s 4Q Wall Street conference call today that the Dish disruption should not be viewed as permanent. Not mentioned was that retrans negotiations for the company’s nationwide portfolio of broadcast stations will eventually give Sinclair considerable added leverage with Dish. The two last cut a deal in 2015, but only after a significant blackout of stations on the satellite service.

Also, Sinclair’s retrans deal with the biggest cable company, Comcast, comes up later this year. That helps explain why distribution revenues for the legacy TV stations were up only 13% in 4Q, compared to larger percentage gains for some other broadcasters. Still, that helped ease a $29 million decline in total revenues for the legacy company to $820 million, along with a 7% increase in core advertising revenues as political dropped in the off year for elections.

The newly acquired RSNs ballooned revenues for the sports segment to $788 million for the quarter, with only $60 million coming from advertising and most of the rest from distribution, even without Dish.

Sinclair President-CEO Chris Ripley lamented that Wall Street seems to ascribe no value to the sports business in the company’s current stock price. So, it’s no surprise that Sinclair anticipates more stock buybacks. And Riley is bullish on the sports business, with contract escalators countering subscriber declines.

“Sports betting we think will have large new revenue pools associated with them. We think ultimately they will be bigger than advertising — not as big as subscriptions — but it also helps viewership, which helps advertising and viewership, which helps you with your MVPD negotiations,” explained Ripley. “We see a new revenue stream forming around sports betting, which will likely be bigger than advertising” for the RSNs.

Ripley told analysts that Sinclair’s core TV advertising business is off to a good start this quarter. Auto was slightly down in 4Q and is expected to be flat in the current quarter.

Coming back to the topic a few minutes later, the CEO said “on a continuing basis we’re less reliant on auto. Our sales structure has been to focus on many different categories, so we’re looking for the full year to be flat to slightly up.” Even so, auto is still about a quarter of TV ad sales.

Looking at other categories, Ripley said “our services business, from legal to pharmaceuticals, to insurance, we’re seeing big success.”

Meanwhile, political is already pacing ahead of expectations in this election year. Ripley is sticking with a projection that 2020 political ad revenues will top the previous pro-forma record of $266 million.

Editor’s note: This story was updated to correct the spelling of Chris Ripley’s name.