Tennis Channel recently inked a multi-year deal with ATP Media that will make the Sinclair Broadcast Group-owned network the “exclusive U.S. television home of the majority of ATP Tour events” (Grand Slams excluded). Buying the rights to dozens of tennis tournaments made sense for Sinclair, with the content both a thematic fit for the Tennis Channel and aligned with the company’s announced strategy to invest in programming for their collective of regional sports networks. Patrick Crakes (principal, Crakes Media Consulting) suggests the rights acquisition could also be part of a greater plan still in its nascent stages: “I look at the 60 million homes [they’re in] as an asset. But not as the Tennis Channel. One opportunity would be to turn [the channel] into a more general sports and entertainment network with a programming mix similar to what is on CBS Sports Network today with an upside opportunity to evolve into something similar to FS1 or NBCSN in the future. Either a channel becomes more of a destination for the general market or eventually it will be sequestered to lower tiers or digital only distribution.”
Our Take: Tennis Channel commands a carriage fee of just $0.17/sub/month (which equates to $122.4 million/year in affiliate revenue), so the successful conversion of the channel into a national multi-sport network could certainly be an exercise in value creation for Sinclair Broadcast Group (SBGI). For comparison purposes, NBCSN charges $0.42/sub/month (generating roughly $405 million/year in affiliate fees), while FS1 gets $1.04/sub/month (or $996.8 million/year).
Having a general sports network under the umbrella would also benefit SBGI in its pursuit of Tier 2 and Tier 3 live rights that will bolster RSN programming lineups. “The way to make investments [in live rights] make more sense is to invest in a national pay-TV network at the same time. If you’re going to acquire something expensive or strategic, the more revenue streams it can be levered on the better,” Crakes explained. Sinclair’s ability to offer rights owners a national network (in 60 million homes plus potentially a digital solution via Tennis Channel or a larger streaming platform at some point), in addition to the RSNs, would also presumably make it an attractive broadcast partner.
SBGI would not be the first operator to rebrand a network. Back in 2013, Fox turned SPEED (formerly SpeedVision and Speed Channel) and FuelTV into Fox Sports 1 and Fox Sports 2, respectively, while adding the live content from FOX Soccer Channel (which became FXX). Crakes, who helped to execute the rebrand, explained, “The bundle had gotten too big and people were gravitating to the biggest and best [programming]. With viewership of the segmented channels getting lower and lower, the company [decided it] needed something more robust.” The transition into a multi-sport network was a success. “It gave the distributors a more concentrated general market channel and became a multi-billion dollar value creation exercise for Fox,” he said.
Like SPEED, FuelTV and Fox Soccer, Tennis Channel is a segmented sports channel—among the last of a dying breed. The newly acquired ATP rights undeniably enhance the network’s content lineup. Tennis Channel aired the bulk of this year’s French Open, with NBC swooping in for the semis and exclusive coverage of the men’s and women’s singles matches. But that’s the extent of it—their presence at the U.S. Open is limited to a morning pre-match show and some encore packaging of matches that aired live on ESPN the previous day, and Wimbledon and the Australian Open are all ESPN. Crakes doesn’t believe “the ATP investment will be enough for Tennis Channel to sustain itself over the long term in the pay-TV world. As the cable bundle continues to decline, distributors are going to say they will pay whatever Sinclair wants for the broadcast stations [and perhaps the RSNs], but refuse to pay for an increase on the Tennis Channel.” At that point, Tennis Channel’s “ability to grow is lost in the economics of the most important content [and it becomes] a low-growth, low-priority [asset]. To change that [Sinclair] has to invest,” he said.
While Crakes is skating to where he thinks the puck is going, Lee Berke (president/CEO, LHB Sports, Entertainment & Media) doesn’t think Sinclair needs to rebrand the Tennis Channel. He said, “Their recently announced acquisition deal for nearly all of the ATP Tour events, coupled with their ongoing programming portfolio, reemphasizes their positioning as the Tennis Channel. No one else covers the sport like they do.” If one believes—as Sportico media rights guru Anthony Crupi does—that “as the entertainment model begins to shift from linear, ad-supported TV to OTT, only sports and news and live events will be left standing. And since most brands don’t want to go anywhere near news, that will only enhance the value of what we might otherwise consider a niche sport.” Then the Tennis Channel’s affluent audience could be particularly valuable down the line.
It remains to be seen what Sinclair’s definition of success is for the network, but Berke sees value in maintaining a near monopoly on broadcast rights within a single sport. “Owning the tennis niche provides Sinclair with additional leverage in driving distribution for its sports and broadcast channel portfolio. [And] rather than compete directly against ESPN and other national sports networks, they’ve made themselves complementary to ESPN by offering in-depth coverage of one sport with solid ratings and valuable demographics.” There has been no indication the country wants or needs another national sports network, either.
It would also be a long and costly haul for SBGI to build out a formidable rebranded multi-sports channel. “They don’t [currently] produce any national sports content that is allowed out of its home market,” said Matt Cacciato (Executive Director, AECOM Center for Sports Administration at Ohio University). And considering the Wall Street Journal recently reported the company is carrying upwards of $8 billion in debt (and the debt is trading 30% below par), one could understand why Sinclair CEO Chris Ripley & Co. would be hesitant to make the investment needed to transition.
It’s not certain Sinclair could rebrand Tennis Channel—even if it wanted to—without voiding various carriage deals. “It was easier for [Fox to do it because the company] had a collection of significant assets and leverage in the marketplace,” said Cacciato. “The regional sports networks were still really powerful [in 2013] and cable operators and distributors didn’t want to [risk upsetting] subscribers [by dropping the channels].” That’s clearly not the case today, as evidenced by Hulu and YouTube TV’s recent decisions to drop the RSNs, which had been previously under 21st Century Fox. Crakes sees the Hulu/YouTube RSN carriage disputes as a short term problem and points to the recent deal with Comcast as a better indicator of the leverage Sinclair has with distributors on established platforms for its stations and RSN’s.
NFL negotiations aside, the lack of rights currently available would seemingly be another challenge Sinclair would face in an attempt to revamp the Tennis Channel. Theoretically, the company could attempt to reconstruct the old Raycom model and capture the rights to some secondary college sports conferences (think: leagues only getting digital distribution, minimal or no rights fees). But if it did, it would be competing with CBS Sports Network for programming. “Unless they’re going to open the pocket book and overpay for rights, I think the [national sports network] opportunity has passed [for them],” Cacciato said.
(This story has been corrected. Tennis Channel does indeed air portions of the Grand Slam tournaments: This year it aired the French Open, save for NBC’s exclusive coverage of the men’s and women’s singles matches. For the U.S. Open, it airs a morning pre-match show and encores of select matches.)