Sinclair is working on a direct-to-consumer streaming service for its Bally Sports regional sports networks (RSN) and it has disclosed to potential lenders how big it believes the opportunity could be.
In an 8K filing with the SEC, Sinclair included a presentation outlining the potential upside of launching an RSN DTC service, which it predicted could eventually attract approximately 4.4 million subscribers and generate around $2 billion in annual revenue.
The company projects about 1.7 million subscribers to the service would be from the cord-cutter/cord-never category and another approximately 1.4 million would be non-RSN subscribers from its distributor partners. About 1.3 million subscribers would come from current subscribers to its Bally Sports networks.
Sinclair said that breakdown suggests that there will be “minimal cannibalization to existing business.” The company expects just over $1 billion in subscription revenues with another $1 billion coming in from advertising and features including sports betting. Morgan Stanley said the subscription revenue projection seemingly implies a $19 per month subscriber price point.
“Our understanding is that the management team's goal is for the DTC offering to largely target new subscribers willing to pay a premium, with significant ancillary revenue streams including online sports betting,” wrote analyst David Hamburger in a research note.
In all, Sinclair anticipates that a Bally Sports streaming service would have a long-term addressable in-market household reach of approximately 87 million and that penetration levels would approach 5%.
Sinclair is targeting a 2022 launch for the Bally Sports streaming services. The company’s current 2021 revenue guidance expects between $3 billion and $3.25 billion in revenue (with the majority coming from distribution) and adjusted EBITDA between $458 million and $637 million. Those figures could look significantly different in 2022 if the Bally Sports DTC product launches.
Sinclair is currently in discussions with holders of its outstanding debt about raising additional capital to support the DTC launch but it hasn’t reached an agreement yet. Two disclosed terms sheets show that Sinclair subsidiary Diamond Sports—which operates the RSNs—is looking to raise between $500 million and $600 million.