The regional sports subsidiary of the Sinclair Broadcast Group has hired two investment banks that are active in sports media deals, according to a recent report.
Last week, the Sports Business Journal said executives at Sinclair's Diamond Sports Group think the hiring of the two investment banks — LionTree LLC and Moelis & Company — may suggest that the broadcaster is interested in divesting its regional sports business.
Unnamed sources reportedly told the Sports Business Journal's John Ourand that Sinclair's hiring of the investment banks was intended to "improve the sports group's capital structure to make it more attractive to potential suitors or investors." Ourand has a good track record of breaking sports-related media news that ultimately turns out to be correct.
The hiring of the investment firms is interesting in part because of their prior work on behalf of media companies. LionTree recent took on Ted Leonsis, the chief executive of Monumental Sports & Entertainment, to help execute the purchase of 67 % of Comcast's Washington, D.C.-area regional sports network. (Monumental already owned a 33% stake in the network; the deal, which went through last month, brought that channel under Monumental's ownership entirely.)
Moelis & Company helps media companies restructure their balance sheets, so they look more attractive to buyers or investors, Sports Business Journal said. They recently worked with Diamond Sports Group to help raise a new round of funding that brought $635 million in new capital to the enterprise and defer certain management fees to Sinclair, according to a press release issued earlier this year.
In a statement, a spokesperson for Sinclair's Diamond Sports subsidiary affirmed the company has worked with both investment banks for some time now, but did not address reports of a possible re-structure or sale of its regional sports networks.
"Diamond has been engaged with Moelis & Co and Liontree for the last two years in pursuit of two objectives: strengthening the balance sheet and bringing in strategic partners," the spokesperson told Fierce Video. "As a result of those efforts, an exchange offer and financing was completed in March of 2022, and we continue to work with these advisors to further those same objectives."
Sinclair purchased nearly two dozen regional sports networks from the Walt Disney Company in 2019 for around $10 billion. The sale by Disney was part of a broader strategy to satisfy regulatory concerns over its acquisition of certain business assets from 21st Century Fox (now Fox Corporation).
In the three years since that deal was consummated, Sinclair re-branded the regional sports networks from Fox Sports to Bally Sports after forging an 10-year, $85 million deal with casino owner Bally's. It also developed a direct-to-consumer streaming service called Bally Sport Plus that offered live access to Sinclair's regional sports networks within each channel's home territory. The service costs $20 a month or $190 a year.
But the company has struggled to see a return on its financial investment: Sinclair has faced steep financial losses attributed to its regional sports business as pay television distributors like Dish Network, Google's YouTube TV and others have opted to drop the channels instead of renewing carriage agreements.
Dan Rayburn, a media analyst and Fierce Video contributor, acknowledged the complexities of the regional sports business during a recent interview, and said each business has to evaluate for itself whether investing in regional sports networks is worth it.
As far as Sinclair goes, Rayburn said it "wouldn't be too surprising that they would want to divest" the Bally Sports networks, particularly if it meant offloading debt or raising cash for its other ventures. (In addition to owning the sports networks, Sinclair is one of the largest independent operators of broadcast television channels in the country. It also operates the free, ad-supported streaming service STIRR.)
"I don't think anyone's figured out exactly the best way to monetize [regional sports]," Rayburn said. "We know sports is what keeps people subscribing to cable TV, so RSNs are very popular — the question is, can you really package RSNs into a service like what Bally Sports Plus is doing? I think that's debatable."
Updated with comment from Sinclair.