Sinclair's NBA Rights Deal May Forestall $600 Million Loan Call

A month after locking in streaming rights for NHL games, Sinclair has closed a similar deal with the NBA that will further bolster its nascent direct-to-consumer service, while also securing $600 million in debt financing.

As part of a renewal of its distribution deal with the NBA, Sinclair subsidiary Diamond Sports Group has nailed down the rights to stream live games to subscribers in 16 home markets. The deal further ratifies Sinclair president and CEO Chris Ripley’s recent assertion that the company will have sufficient content deals in hand ahead of the spring rollout of the new DTC platform.

Among the 16 franchises included in the agreement are the Atlanta Hawks, Cleveland Cavaliers, Indiana Pacers, Los Angeles Clippers, Milwaukee Bucks, Oklahoma City Thunder and Phoenix Suns. The defending champion Bucks in 2020-21 put up the NBA’s sixth-highest local-market deliveries, notching a 2.7 rating on Bally Sports Wisconsin.

“We are looking forward to the launch of our DTC platform in 2022, ushering in a new era of local sports viewing with a more personalized and dynamic viewing experience,” said Ripley, by way of announcing the NBA streaming deal. “Sinclair places the highest importance on connecting sports fans with live games and other sports content.”

In December, Diamond Sports inked a multiyear renewal with the NHL that includes streaming rights in 12 local markets. Bally Sports is affiliated with some of the NHL’s top-rated local franchises, a roster that includes the St. Louis Blues, Minnesota Wild, Columbus Blue Jackets and the 2020 and 2021 Stanley Cup champions Tampa Bay Lightning. The Blues last season scared up the league’s third-highest local ratings, drawing a 4.3 in the St. Louis market.

The NHL and NBA streaming deals represent a breakthrough for Diamond Sports, which looks to use the new DTC service as a means to reach younger fans who have walked away from the traditional cable bundle. The erosion of the legacy TV model is impossible to ignore; per MoffettNathanson estimates, the number of old-school cable/satellite/telco-TV subs dropped to 69.7 million at the close of the third quarter of 2021, which marks a decline of 25% versus the analogous period in 2017.

At its peak, the bundle reached north of 100 million U.S. households. At present, only 57% of TV homes subscribe to a bundled pay-TV package. Four years ago, the penetration figure was 78%.

If the shrinking base of pay-TV subs weren’t troubling enough, many of the consumers who have stuck with the bundle remain shut off from their local RSNs, thanks to cable and satellite operators that have jettisoned the pricey sports channels. The Bally Sports RSNs have been blacked out in 8.42 million DISH Network homes since before Sinclair acquired the networks in 2019, and more recently, leading U.S. cable provider Comcast dropped the MSG Networks.

As Sinclair was making the necessary steps to enhance its NBA rights, the company also went a long way toward keeping the wolf from the door with a $600 million loan from an unidentified group of existing bondholders. At last count, Diamond Sports’ debt stood at around $8.12 billion.

While Sinclair hasn’t broken out its rate card for the streaming service, the new venture is expected to fetch a monthly sub fee as high as $20. The company last summer projected that a viable DTC product could attract 4.4 million customers, with revenue reaching $2 billion by 2027.

If the completion of its NHL and NBA renewals puts Sinclair and Diamond Sports on solid footing ahead of the DTC launch, making headway with Major League Baseball is proving to be a far more slippery undertaking. The Bally Sports nets have distribution deals in place with 14 MLB clubs, but only four of these (Detroit Tigers, Milwaukee Brewers, Miami Marlins, Kansas City Royals) have signed off on a streaming agreement with Sinclair.

In October, MLB commissioner Rob Manfred hurled some chin music at Sinclair’s streaming aspirations, telling attendees of an industry conference that the league’s primary RSN partner “does not have enough digital rights from enough clubs in order to have a viable direct-to-consumer product.”

Sinclair has been working to acquire these rights in a piecemeal fashion, making inroads with teams as their individual carriage deals wind down. The prospects of a blanket arrangement with the remaining 10 clubs appears unlikely; certainly, MLB isn’t making any efforts to facilitate a one-stop shopping spree.

“We’ve been very clear from the beginning that we see [the streaming and gambling] rights as extraordinarily valuable to baseball, and we’re not just going to throw them in to help Sinclair out,” Manfred said last fall.