The Talented(?) Mr. Ripley

You may not know who Chris Ripley is, but if you live in any one of 100 markets around the U.S. and/or are a sports fan, you’ve likely watched one of his networks.

Ripley is the CEO and president of Sinclair Broadcasting, which is very, very good at optimizing quirks in how U.S. television stations’ footprints are legally defined, as well as exploiting the business benefits of operating multiple stations in less opportunistic markets, to create a hugely profitable empire of 193 stations spanning the gamut of network affiliations.  By combining back room resources and sharing both local news and syndicated programming across two or more stations, Sinclair has been able to achieve prominence and, relative to many competitors, dominance in the world of local television, with Ripley being given particular acclaim for his necessary model in an era where competition stems as much from technology than it does content.

So when the opportunity to purchase the regional sports networks which FOX started up, and that Disney was legally obligated to sell when it acquired the assets Rupert Murdoch unloaded on them, Ripley was all too aware of the business model that FOX used alongside its own local television stations, notably in Los Angeles.  In a pre-streaming era, RSNs not only were leaders in what cable and satellite operators would pay per subscriber to carry those them, but on a local basis broadcast rights were often shared with the over-the-air stations, and could be aggregated in each market to provide a powerful franchise and positive sponsorship opportunity.  Indeed, at one time Los Angeles was considered a “quadopoly”, with KTTV, KCOP, Prime Ticket and FOX Sports West, with games of the Clippers, Kings, Lakers, Angels and Galaxy spread out among all of them.

Bur by the time Sinclair got into the RSN game, the game had changed markedly.  As the New York Post’s Josh Kosman reported this week, things have gone very, very wrong for Ripley and Sinclair:

MLB, the NBA and the NHL may orchestrate a buyout of the nation’s dominant owner of regional sports TV networks, whose shaky finances pose an increasing threat to their teams, The Post has learned.

The trio of pro-sports leagues are expected to soon begin talks with Diamond Sports, which operates 21 regional Bally Sports networks that account for more than half the local broadcast markets around the country, sources close to the situation said.

A prospective deal is looming as Diamond — owned by Baltimore-based Sinclair Broadcast Group — has been hemorrhaging cash and could be headed for a possible bankruptcy filing if it doesn’t find a white knight in the coming months, the sources claimed.

Sinclair in early 2019 won an auction to buy Fox Sports Networks from 21st Century Fox for $10.6 billion, giving it exclusive rights to broadcast the games of 42 teams. These included 14 MLB teams like the St. Louis Cardinals and San Diego Padres; 16 NBA teams including the Miami Heat; and 12 NHL teams including the Detroit Red Wings.

But soon after the buyout, cable TV giants including Charter Communications and Comcast began slashing the fees they were willing to pay for sports amid rampant cord cutting. Meanwhile, satellite-TV provider Dish dropped out of regional sports networks altogether, sparking losses for the so-called RSNs that haven’t let up since.

Now, insiders say Diamond might fetch $3 billion including its debt, which is currently trading at a heavily-discounted $2 billion. Sinclair is expected to propose giving over Diamond’s equity to creditors who would then sell most of the operation to MLB, the NBA and the NHL while Diamond retains a minority stake in the business, the sources said.

“They will offer it to all three leagues,” one source close to the talks said. “There is a reasonable likelihood this will all happen. That’s where this is heading.”

.Regional sports networks overplayed their hands with highly charged negotiations in many key cities that often saw key teams blacked out for years.  The Dodgers’ Spectrum Sports Net and DIREC TV were unable to reach an agreement for several years, denying many fans the cnace to see several championships and the last seasons of Vin Scully.  The Yankees were off Comcast systems in the New York DMA when they started the YES Network at the beginning of their successful early 2000s run.  And now the leagues have, and need, leverage, and that’s where things really get ugly for Sinclair/Diamond, as Kosman continued:

If a deal isn’t reached in what is being described as a “grand solution,” there is a growing possibility creditors — mostly hedge funds that have scooped up Diamond’s distressed debt — could force Diamond and its Bally RSNs into bankruptcy in the next three to six months, sources said.  

While Diamond does have the cash on hand to survive through next year, it is technically insolvent and creditors could soon force it into bankruptcy, sources close to the situation said.

“I believe Diamond is getting pressure from hedge funds to call the liquidation question early,” a source close to Diamond opined.

Diamond has been telling the leagues in recent days if it goes bankrupt it will be able to keep broadcasting games, but will not need to pay teams their rights fees as it will have protection from creditors, sources close to the talks said.

Meanwhile, it is MLB which in recent months has effectively ended Diamond’s last best hope of surviving on its own, according to some insiders.

Diamond on Sept. 26 is launching an over-the-top streaming service so consumers can pay a roughly $20 monthly fee and watch games in their home markets without a cable subscription. Since MLB teams are the only ones playing in the summer months it is seen as essential to Diamond’s success.

However, MLB has transferred streaming rights for only five of 14 teams, demanding extra fees even as Diamond has argued those rights should be included in its existing contracts with the teams — privately blaming MLB Commissioner Rob Manfred in the dispute, sources claimed.

MLB, meanwhile, has been considering the launch of its own streaming service that would carry local games as early as next year, The Post reported exclusively in October. Elsewhere, Amazon has the capability now to broadcast local games and air them on a regional basis, sources said. So does Apple, ESPN plus and even NBC’s Peacock.

Yes, Peacock, the streaming service under the corporate purview of Jeff Shell.  And Amazon, which currently has rights to many New York Yankees games in their DMA.  (And yet, won’t even be able to provide coverage of Friday night’s Yankees-Red Sox game which could feature Aaron Judge making baseball history, which Apple TV+ controls exclusive rights to).

Not only was Mr. Ripley arguably getting into the game at the wrong time, but their choice to allow a casino operator to buy naming rights to these RSNs was perhaps a fatal branding blow to boot.  Yes, gambling is unquestionably a key component of any sports media, and the looming potential of online wagering becoming legal in California is seen as a key driver for Disney CEO Bob Chapek’s about face on the bullishness of ESPN in their long-term strategy.  The embracing of partnerships with DraftKings and, this week, NBC Sports and BetMGM, is a stern reminder of that.

But FOX Sports sold the passion of fandom as well, a valuable lesson I learned from David Hill, the genius who designed the brand proposition for the company.  “Sports fans are tribal”, he reminded, “and tribalism knows no geography”.  The RSN model, and their ability to be offered as a package of networks to fans outside their local markets, made an awful lot of money for MVPDs.  That model is now in the hands of streamers, and if the leagues can control the narrative as well as the content by including fans who can’t or won’t bet on outcomes, it is to everyone’s advantage, most notably theirs.

Sinclair simply hasn’t been successful with networks as they have with local stations.  Questionable branding, bad timing, and lack of true market control.  And an even more daunting future ahead.

Sinclair has attempted to downplay this article, but I for one am not buying it.  To be fair, the Post has some resentment toward Ripley and Sinclair, given both his ties to FOX and his stations’ political affiliations, which often give FOX News and their sentiments a run for their money in extremism.  But they’re also extremely good at reporting on sports media, and , what’s more, they have the perspective of being part an era and a timing that was far more favorable than the one in play now.  As did I.   And I can see the handwriting on this wall very clearly.

Game over, Mr. Ripley?

Courage…

 

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