Another Sinclair dispute surfaced on Thursday, with YouTube saying it would drop the company’s sports networks after being unable to reach a deal.
A new cable channel that carries the Chicago Cubs made its debut on Saturday, but Ken Matuszak, a lifelong fan of the team, wasn’t able to tune in.
His cable company, Comcast Corp., doesn’t carry the new Marquee Sports Network, which is jointly owned by Sinclair Broadcast Group Inc. and the Cubs. That means Comcast’s 1.56 million subscribers in the area, the most of any pay-TV provider, are shut out as preseason baseball gets underway.
Another Sinclair dispute surfaced on Thursday, with YouTube saying it would drop the company’s sports networks after being unable to reach a deal. That includes the YES Channel, which airs New York Yankees games.
“They’re doing a disservice to the fans,” said Matuszak, 58, who lives in Third Lake, Illinois, and says he’ll switch pay-TV services if he can’t get the games by opening day on March 26. “They need to work it out or there will be a lot of unhappy people.”
From Los Angeles to Denver and now Chicago, the ranks of angry fans are growing. In recent years, giants like Sinclair, Comcast, AT&T Inc. and Charter Communications Inc. have paid huge sums to carry pro baseball, basketball and hockey in local markets. There’s just one problem: The companies are demanding high fees from rival pay-TV providers and their subscribers in those markets, and some are saying no.
Sinclair investors have been especially hard hit. Their shares have lost about half their value since the company agreed to buy 21 regional sports networks last May.
Making matters worse, millions of cable- and satellite-TV customers are dropping service every year, opting to stream movies and shows on Netflix or Hulu instead. The standoff in Chicago is the latest sign that local sports are especially vulnerable as the cable-TV model unravels.
Before last year, Sinclair was best known as a big owner of local TV stations affiliated with ABC, Fox, CBS and NBC. In 2019, the broadcaster paid $9.6 billion for local sports channels owned by Walt Disney Co. That same year, Sinclair created Marquee Sports with the Cubs. The team’s games previously aired on Comcast’s NBC Sports Chicago and on free broadcast television.
But since last summer, satellite-TV provider Dish Network Corp. has refused to carry Sinclair’s 21 regional sports networks, affecting fans in San Diego, Cincinnati, Detroit and elsewhere. And now Comcast has dropped the Cubs, though the parties are still talking.
“Given the value of these properties, and demand from local viewers, we are confident that we will come to an agreement and they will allow their subscribers to watch and enjoy their favorite home teams,” Sinclair, based in Hunt Valley, Maryland, said in a statement.
Such fights are hardly new in pay TV. But regional sports channels, or RSNs, are getting squeezed hard because they’ve paid so much for broadcast rights and were counting on high subscriber fees from all of the pay-TV providers in their markets. There’s also the broader issue of cord cutting: From its peak in 2013, the industry has shrunk by 18% to 85.8 million subscribers.
“If you look at the cable bundle, the RSNs are in the worst position,” said Geetha Ranganathan, an analyst at Bloomberg Intelligence.
Chris Ripley, Sinclair’s chief executive officer, has said that local sports channels are among the few types of programming that people still watch live, which boosts advertising sales. And legalized sports betting will open up new revenue opportunities, he argues.
Investors may not be as certain. They’ve sent Sinclair shares tumbling from their all-time closing high of $61.81 in May 2019, days after the Disney deal was announced, signaling growing doubt that the company’s big bet on sports will pay off.
The business of local sports channels made more sense back when the pay-TV industry was still growing, according to Leo Hindery, the former CEO of YES Network, which is 20% owned by Sinclair and carries the New York Yankees.
“As the industry evolves to an ‘a la carte’ environment and the legacy bundle begins to evaporate, the economics underpinning these channels will change dramatically,” he said.
That kind of pessimism may also be hurting AT&T’s efforts to sell four regional sports channels it acquired with the $85 billion takeover of Time Warner in 2018. Bids for those networks have come in lower than expected due to a decline in profit, the New York Post reported.
Marquee Sports recently agreed to pay $132 million a year on average for the rights to Cubs games, or more than double the previous deal. The network stands to lose about $100 million a year in subscriber revenue from the blackout on Comcast, based on a $5-a-month price. Even a settlement at less-than-ideal terms could force the network to “dramatically trim its revenue outlook,” Ranganathan said.
Sinclair isn’t the only local sports broadcaster under pressure. MSG Networks Inc., led by Jim Dolan, lost subscribers at an annual rate of about 8% last quarter, which is faster than the overall industry. The company, which carries the New York Knicks and New York Rangers, has seen its stock price fall 46% in the past year.
According to spokeswoman Kimberly Kerns, the company has renewed carriage deals with four of its top five pay-TV distributors, “which speaks to the power of live sports and the deep relationships we’ve formed with our partners over our 50 years in the market.”
As Matuszak, the Cubs fan, weighs his options, sports lovers in other markets with longer-running disputes are growing accustomed to not seeing their favorite teams. Ultimately that will mean less money for the networks and franchise owners.
In Denver, Comcast and Dish customers still can’t get the NBA’s Nuggets because of a fight with Altitude Sports & Entertainment, which is owned by billionaire Stan Kroenke.
And for several seasons, many Los Angeles Dodgers fans have been unable to watch games because Charter, the distributor of SportsNet LA, hasn’t come to terms with AT&T Inc.’s DirecTV or other pay-TV providers in that market.
“Dodgers fans have been in the dark for six years,” Ranganathan said.
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