Sinclair Broadcast Group, the largest television station owner in the US, has posted a 40% drop in revenue in its 2023 first-quarter earnings as it works to separate itself from its bankrupt Diamond Sports Group (DSG) regional sports networks unit.
Yesterday (May 3), Sinclair revealed it took in $773 million of revenue during the first quarter of 2023, down 40% from the $1.288 billion reported last year. The dip has been attributed in large part to operational issues at DSG and its 19 regional sports networks.
Removing DSG from the equation, revenues were only down 7% year on year.
Advertising revenues fell 17% in the first quarter, while distribution revenue places including cable TV fees dropped from $873 million to $426 million year-on-year.
In total, DSG, the parent company of Bally Sports, lost $94 million in the first two months of 2023 leading to its bankruptcy.
DSG filed for Chapter 11 bankruptcy in March after missing a $140 million interest payment in mid-February. At the time, DSG said it was in the process of finalizing a restructuring support agreement with its creditors to “eliminate over $8 billion” of its $9 billion outstanding debt.
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The process included DSG separating from Sinclair and becoming a standalone company.
Chris Ripley, Sinclair’s president and chief executive, said: “Sinclair is seeing a solid start to 2023, meeting or beating guidance on all key financial metrics.
“Nonetheless, we remain cautious for the full year on expectations for a weaker economy. As we continue our evolution from a traditional broadcast company to a diversified content and data distributor, we have begun the process of reorganizing our company structure to increase transactional flexibility and transparency around the sum of the parts and unlock value for our organization.
“Our end goal is to create an even more efficient company, designed to use the breadth of our assets to identify and accelerate growth.
“This year, we are allocating capital towards technology that will transform our operational workflow, both strengthening our returns on investment and improving operational outcomes.”
Since the bankruptcy filing, Sinclair has made partial sports rights payments to some professional teams and leagues, while skipping out on payments to others. Among the teams that have not been paid include the Arizona Diamondbacks, one of DSG’s biggest creditors.
DSG operates 19 RSNs and broadcasts games for 16 National Basketball Association (NBA) teams, 14 Major League Baseball (MLB) teams, and 12 National Hockey League (NHL) teams. In total, it provides regional broadcasts for nearly half of the games across the NBA, NHL, and MLB competitions.
Sinclair bought the RSNs (21 of them at the time) in 2019 from Disney in a deal worth $10.6 billion. The channels were put on the market by media giant Disney as a condition of regulatory approval for its deal to buy multiple assets of the 21st Century Fox media and entertainment conglomerate.
However, DSG has since struggled under the weight of its huge long-term broadcast deals as viewers have moved away from cable subscriptions in the US towards streaming platforms.
During a conference call with investors yesterday morning, Sinclair executives said the regional sports subsidiary was being grouped into the broadcast side of the company as part of a broader restructuring of Sinclair’s business.
Ripley also touted the strength of its dedicated Tennis Channel and T2, its free ad-supported streaming TV channel, which last month secured a distribution deal with streaming service YouTube TV.
He said: “It’s a very significant win for the company that YouTube TV is going to be carrying Tennis Channel and T2. There are incremental opportunities for tennis, it has not been on the [streaming services] for a few years, and Fubo is really the only one it had. Now, it’s adding YouTube TV, so I’m optimistic about having Tennis Channel fully distributed on all platforms.”
image: Win McNamee/Getty Images