The big news in media circles on Monday was Sinclair Broadcast Group buying Tribune Media for $3.9 billion.
A multi-million dollar to deal acquire local TV stations might seem curious in an era where audiences increasingly spurn TV to watch news and other content online through their computers or mobile devices. But there is money to be made from fees which cable and satellite companies pay to retransmit local stations.
There is certainly a political component to this, with Sinclair aiming to become a stronger voice in the conservative media landscape as the pedestal Fox News has been on gets more wobbly. President Donald Trump and his newly appointed FCC chairman have also relaxed restrictions on how many stations a conglomerate like Sinclair can own, which opens the door for the company’s grab. Owning more stations means Sinclair can charge more for retransmission fees.
But there is also a sports component to this Sinclair deal, as noted by Recode’s Edmund Lee.
What is making local channels and regional networks so valuable, thus driving up those fees, are local sports rights. Tribune Media, in particular, has local broadcast rights to many professional baseball, basketball and hockey teams — most notably the Chicago Cubs and New York Yankees.
That content is seen as extremely valuable because viewers watch games and events live, rather than record them on their DVRs and watch later, or watch on a streaming provider like Netflix, Amazon or Hulu. Those local stations aren’t likely to be on whatever over-the-top options that the likes of Hulu, Google and Sony are looking to offer.
As Lee notes, sports rights will also likely compel CBS and Fox to try buying local TV stations where NFL games are the top draw, such as Dallas, Houston, Cincinnati, Buffalo and Green Bay. Those aren’t local sports rights, per se, but acquiring those stations means that Sinclair would have to share some of those retransmission fees (up to 30 percent) with those networks.
That leaves a lot of money out there to be had, which should make competition between Sinclair, CBS and Fox for local stations worth keeping track of in the years to come.