Major League Baseball (MLB), the NBA and the NHL are said to be readying a joint bid for the regional sports networks (RSNs) bearing the Bally’s (NYSE:BALY) name.
The Rhode Island-based casino operator does not own the RSNs. Rather, those assets are controlled by Sinclair Broadcast Group (NASDAQ:SBGI). In November 2020, Bally’s announced it would pay $85 million over 10 years to put its name on the RSNs, marking what was at the time one of the splashiest media/sports wagering accords.
Nearly two years later, the networks remain in financially precarious and while that has nothing to do with Bally’s, the pro sports leagues opportunity to acquire what could be valuable assets at discounted prices.
Sinclair acquired the 21 RSNs from Walt Disney (NYSE:DIS) for $10.6 billion in 2019 as part of the latter’s efforts to divest some assets to gain regulatory approval for its acquisition of 21st Century Fox. At the time, the networks, which bear the Fox Sports name, were reportedly valued at least $16 billion.
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,” reports The New York Post.
Diamond Sports, which runs the RSNs, is in a financial bind and creditors could compel the firm to sell the networks to raise capital.
Leagues Could Prop Up Bally’s RSNs
The Post notes a buyout of Diamond Sports could command as much as $3 billion and that Sinclair is willing to fork over equity in the RSN operator to creditors, which would pave the way for a sale to the aforementioned trio of leagues.
The RSNs have broadcasting rights for 12 NHL, 16 Major League Baseball (MLB), and 17 NBA franchise, so there’s clear reasoning for the leagues to be interested in a deal. How Bally’s fits into the equation remains to be seen.
Financially, the casino operator is on the hook for the $85 million licensing fee and Sinclair can own up to 30% of the gaming company’s equity if certain objectives are met. It’s not clear if that part of the agreement will remain in place if the RSNs are sold.
It also remains to be seen if the leagues will maintain the relationship with Bally’s or pursue a more lucrative branding agreement.
RSNs Sports Betting Reach not Impressive
In theory, Bally’s attaching its name to the RSNs can be seen as a marketing tool to drive foot traffic to the company’s casinos and generate more sports wagering clients.
However, the bulks of the RSNs bearing the Bally’s brand are in states where sports betting currently isn’t permitted and is unlikely to be anytime soon.
Even when excluding Bally’s Sports Ohio because sports wagering will soon be permitted in that state, the Arizona and Detroit RSNs and those that reach into Iowa and Indiana, the remaining RSNs’ penetration in states where mobile sports wagering is currently permitted isn’t impressive.
Several of the other RSNs are available in California, Florida, Hawaii, Oklahoma, Texas and Utah. With the exception of California, it’s unlikely the other states’ current sports wagering policies will change over the near-term and California’s fate is left in the hands of voters.
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