The nation’s largest broadcaster has just made a major sports play, acquiring 21 regional sports networks from The Walt Disney Co. in a deal valued at $10.6 billion.
Sinclair Broadcast Group, based in Hunt Valley, Maryland, will get the 21 sports networks and Fox College Sports, assets that Disney had acquired in July 2018 as part of its $71 billion bid for a collection of Twenty-First Century Fox’s assets.
But the Justice Department required Disney to sell the networks to gain the merger’s overall approval, saying the addition of these networks to ESPN would give it too much power and likely result in higher prices for consumers.
The networks acquired include Fox Sports West/Prime Ticket (it broadcasts UCLA, USC, Los Angeles Chargers, and Los Angeles Clippers), Fox Sports Detroit (Detroit Tigers, Detroit Red Wings, Detroit Lions, Detroit Pistons, Michigan State University and University of Michigan) and Fox Sports Florida (Miami Heat, Tampa Bay Buccaneers, Miami Dolphins, Tampa Bay Rays, Florida Marlins, University of Miami, Florida State University), and Fox Sports Ohio/SportsTime Ohio (Cleveland Cavaliers, Cincinnati Reds, Ohio State University).
Disney has already reportedly sold one of the networks the YES Network, which broadcasts the New York Yankees, for about $3.5 billion to a collective including the Yankees, Sinclair and Amazon, The New York Times reported in March.
Sinclair said it would pay $9.6 billion, after adjusting for minority equity interests. The networks will be part of a new subsidiary Diamond Sports Group, which will gain Entertainment Studios CEO Byron Allen as an equity and content partner.
The deal, which will require DOJ approval, “is a very exciting transaction for Sinclair,” CEO and president Chris Ripley said in a statement. “While consumer viewing habits have shifted, the tradition of watching live sports and news remains ingrained in our culture. As one of the largest local news producers in the country and an experienced producer of sports content, we are ideally positioned to transfer our skills to deliver and expand our focus on greater premium sports programming.”
Industry observers had expected the price tag for the networks to reach as high as $20 billion. If these prices are accurate, the networks are fetching a lower price than analysts anticipated, said Tuna Amobi, an equity analyst at CFRA Research.
“With regional footprints that traverse several major U.S. markets, the RSNs had been expected to fetch a much higher valuation, after a seemingly competitive months-long auction that attracted several other potential bidders,” he wrote in an investor note Friday.
Regardless, the stations will complement Sinclair’s online sports channel and Tennis Channel, which it acquired in 2016, and its 24-7 sports channel Stadium, which is broadcast and can also be watched online, Amobi says. Despite stressors such as cord-cutting in the “pay-TV ecosystem,” he said, “we see a relatively steady dual revenue stream (subscription and advertising) that could bode well for Sinclair’s long-term return on investment.”
This acquisition would likely lessen the pain from Tribune Media nixing its $3.9 billion sale of 42 TV stations to Sinclair after Federal Communications Chairman Ajit Pai said the agency had “serious concerns” about Sinclair unlawfully continuing to control some stations it would have to divest to gain the deal’s approval.
That would have grown Sinclair to 215 TV stations; it currently has 191.
Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider.