Despite rising revenues, Sinclair Broadcast Group’s latest earnings report showed the extent of the Covid-19 pandemic’s impact on the company’s fiscal health.
The Maryland-based company reported $1.28 bn in revenue for the quarter ended June 30, an increase of 66 per cent from the same period a year ago, and consolidated operating income of $492m, up 364 per cent. But analysts had been expecting revenue of $1.4bn, and a bigger overall financial boost from Sinclair’s 2019 acquisition of 21 regional sports networks previously owned by the Walt Disney Co.
Sinclair’s earnings per share rose to $3.12, up from 45 cents in the comparable 2019 period. But analysts had been expecting an EPS of $4.77.
Furthermore, the company saw marked advertising sales softness with those RSNs during the quarter with many major US team sports out of action until July, and it will also be providing $124m in rebates to distributors based on agreements for minimum game guarantees. Those rebates will be offset by lower sports rights payments.
But the lower-than-expected financial results still prompted Sinclair stock to fall 10 per cent to $19.32 per share on August 5 following the earnings report, and another 1 per cent in pre-market trading the following day.
“These past five months have certainly been challenging for the country, the economy, the industry and us as we face the pandemic’s impact on businesses and consumers alike,” said Chris Ripley, Sinclair president and chief executive.
“We continue to judiciously manage our costs and to take the actions necessary to enable us to endure this period of economic weakness,” he added.
Ripley, however, pointed to potential for later boosts as several sports leagues covered by the league’s regional sports networks, most notably Major League Baseball, have restarted their competition following the end of the last fiscal quarter.
“We are pleased with the professional sports leagues that have resumed their schedule although they are shortened,” Ripley said. “It is very clear that viewers are excited as well with ratings for the first day of the MLB season up 32 per cent on our end as compared to last year’s Opening Day viewership.”
Sinclair’s earnings report arrives during a frenetic period of change for its sports operations. The company recently struck a large-scale distribution deal with Comcast that includes carriage of the Marquee Sports Network, named Steve Rosenberg as its president of local sports, and expanded the duties of current chief development officer Scott Shapiro to include an additional role as chief strategy officer of sports.
“The narrative that has been on the street regarding fears around completing the deal with Comcast or that terms would be unfavorable or that our broadcast stations would be dragged down by the RSNs was just incorrect,” Ripley said. “We were confident that we would reach an agreement with Comcast that was positive for us, and we are happy with the outcome in all regards.
“This agreement is another example of the benefits that come from negotiating for a large, diverse set of very popular programming assets in this business, and is an undeniable affirmation of the importance of local news and sports, which consistently get high ratings and are highly valued by distributors and subscribers,” he said.
Meanwhile, a new name and brand identity for the portfolio of RSNs, still carrying the Fox Sports name, is expected to be announced early next year, Ripley said.