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Sinclair Broadcast Group announced on Friday that it has agreed to acquire 21 Walt Disney Company regional sports networks under a $ 10.6 billion contract, providing the largest operator of local television channels in the United States. United States a foot in the cable industry with the game broadcast rights dozens of professional teams.
Disney was forced to sell the networks to receive antitrust approval for its $ 71.3 billion purchase of most of Rupert Murdoch's 21st Century Fox, under a deal signed in March. The Department of Justice demanded the sale of networks, which were part of Fox, because Disney, through its ownership of ESPN, already dominates the televised sports market.
One of the 22 sports facilities that Disney was required to sell, the YES network is being acquired by the New York Yankees and the Amazon online trade giant for about $ 3.5 billion. , according to people close to the transaction. Sinclair also has an interest in this agreement.
Disney receives less for sports networks than some analysts expected. Last year, Guggenheim Securities estimated that the channels had a value of $ 22 billion, including the YES network. Regional sports networks have lost their value in recent years as fewer people pay for television.
Chris Ripley, Sinclair's general manager, said the company is well positioned to manage the networks. "It's a very exciting transaction," he said in a statement. "While consumer habits have changed, the tradition of watching sports and live news remains rooted in our culture."
Sinclair incurs a considerable debt to secure the transaction, borrowing $ 8.2 billion, or more than 80% of the purchase price, to finalize the acquisition. The company announced that it would create a wholly-owned subsidiary for the purchase of the sports networks, which would allow it not to exclude this debt from Sinclair's balance sheet. The broadcasting company itself already has a debt of $ 3.9 billion and a modest profit margin of 11%. Last year, profits fell 41% to $ 341 million.
Sinclair, which owns nearly 200 local television stations, is a leading advocate of conservative views. In recent months he has been criticized for forcing his stations to issue segments defending the use of tear gas on border migrants.
Last year, Sinclair made an offer to buy $ 3.9 billion from its rival Tribune Media, which would have created a conservative media giant likely to challenge Fox News as the main media outlet for right. The deal was broken in August after being struck by the opposition of federal regulators.
Known primarily as a broadcaster, Sinclair could become a major cable player with the acquisition of regional sports networks, which are only available on pay-TV systems. The company now has the opportunity to bundle sports networks with local news programs to attract customers. (Broadcasting stations, although freely available over-the-air, are also distributed by cable and satellite operators for a fee.)
Sports content is considered extremely valuable as it continues to attract the greatest number of television viewers and is primarily watched live, giving priority to advertising broadcast during the game. The networks acquired by Sinclair are largely devoted to the broadcast of baseball and basketball games and have high prices for the cable companies, which pass on the costs to the customers.
The operation of regional sports networks has become difficult in recent years. Networks are actually the intermediaries of sports rights. They are paid by the cable and satellite companies that send them, but they have to pay the broadcast fees to the sports teams.
As more and more people abandon cable and satellite television, operators of these services have begun to exert pressure on regional sports networks, either by refusing to broadcast them or by curbing any increase in royalties. This puts network owners in a difficult position as sports teams continue to increase their fees each year. And since they generally do not have streaming rights for gaming, the ability of networks to take advantage of digital audiences – an increasingly important part of the media sector – is hampered.
Sinclair could use some tools to monetize the acquisition of its new acquisitions. Consolidation of networks with local stations could strengthen its negotiating position with cable operators when it is necessary to increase license fees. The company already has affiliated stations to the four main networks giving it access to the National Football League and other sports.
Sinclair has already invested in the sport. Three years ago, the company agreed to buy Tennis Channel for $ 350 million and operates the stadium digital TV station. He plans to create a new regional sports network, the Marquee Sports Network, with the Chicago Cubs next year.
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