Sinclair Puts A Value On Its Spectrum

Sinclair Broadcast Group could sell $2 billion worth of spectrum in the FCC auction and it would have only about a 3% impact on broadcast cash flow, CFO Chris Ripley said during this morning’s second-quarter financial results conference call with analysts and investors.

Those numbers stem from a market-by-market, station-by-station analysis of Sinclair’s spectrum based on the most recent Greenhill median estimates for spectrum value.

Ripley also noted that the company is “in active discussions with people around the option of channel sharing,” though the spectrum sale-BCF analysis does not include the potential impact of sharing deals.

While Ripley’s comments pinned a value estimate on the spectrum Sinclair could sell at the auction, they apparently weren’t intended to signal a change of course.

Sinclair top boss David Smith has said the company can realize more value retaining its spectrum and potentially leasing some of it while deploying new products and services through an updated broadcast standard, ATSC 3.0.

“There hasn’t been a change internally that we will participate,” Ripley said, noting that “The market perception is that we won’t participate … We’re here to maximize shareholder value and the auction is a way to do that.

“When you do the math and look to maximize shareholder value, there’s substantial opportunity for Sinclair,” via the spectrum auction.

Many broadcasters are playing it close to the vest on spectrum auction plans while conducting due diligence on the auction potential. One reason could be that sending a clear signal of participation could, in effect, drive down prices.

Smith, meanwhile, remains bullish on the potential for ATSC 3.0.

“We’re going to be demonstrating some really exciting capability of the technology,” Smith said. “It’s really on a fast track to be adopted by industry. Once that’s done, we go to the FCC. Once that’s done, we start to prepare for the transition.”

On another key issue, the company said it recently completed a long-term affiliation agreement with CBS. What makes the deal somewhat unusual is that it’s for five years instead of the typical three.

“Our view is the longer the better in terms of affiliation agreements.” Ripley said. “We’re very pleased with the outcome and visibility it gives us.”

In addition, Ripley said, Sinclair has signed up for CBS All Access, the network’s OTT offering, in all Sinclair markets.

On the advertising front, executives acknowledged that core broadcast advertising revenue growth is flat at best but noted that digital is growing steadily.

“The issue with national spot is that it has become a little cumbersome to buy,” said Steve Marks, Sinclair vice-president and co-COO. “When we’re selling something, we sell multi-screen. If there’s an issue nationally, it’s really with the rep firms that represent us. They need to be a little more aggressive in going after these multi-platforms and they’re beginning to do that.

Noting that national spot advertising dollars have been diverted from broadcast to digital, Marks emphasized that, “We are going after those dollars.

“The business is going through a transformation and it’s called follow the dollars. Frankly, the transformation is custom made for our industry.”