Q1 Earnings: Sinclair Open to Selling Assets; Sook Blasts Streaming

Ripley said Wednesday that Sinclair has “no sacred cows,” and CNBC reported Thursday that the company engaged broker Moelis to sell some 60 of 185 stations in a variety of markets, including Minneapolis, Pittsburgh and Austin. Tideline Partners media broker Gregory Guy told us he expects small chunks of station purchases by a variety of small and midsize buyers rather than a large group buy from one company. Allen Media and Standard General are considered possible acquirers of large groups of stations, but Standard founder Soohyung Kim recently sued the FCC over racial discrimination (see 2404250059) and Allen Media CEO Byron Allen said last month he wanted to purchase Paramount Global (see 2404160058). Sinclair didn’t comment on the sale rumors.

Brokers told us the rumored Sinclair sale comes at a difficult time for offloading TV stations as the FCC is scrutinizing deal financing and sidecar arrangements. Speaking about the possibility of Nexstar purchasing CBS stations if they were divested in a purchase of Paramount Global, Sook made similar comments. The regulatory regime overseeing broadcasters must change “for anyone to have confidence they could pursue a complicated regulatory transaction in the current environment,” Sook said. The timing makes it unlikely that a sale would close in time for a buyer to benefit from heavy political ad spending. Moreover, selling stations near a presidential election that could potentially change FCC policy on broadcast deals is unlikely, brokers told us. Selling now would suggest Sinclair is under considerable pressure, a broker said.

Ripley said during Wednesday’s call that Sinclair asset sales would be in pursuit of deleveraging the company. “We think we're grossly undervalued and to the extent that asset sales make sense in order to unlock that value and help us de-lever, then that's something that we'd be open to as well.” Meanwhile, Adam Symson, the Scripps CEO, said the company is considering sell its network Bounce for a similar reason. Selling company assets for a high return on investment is an “important deleveraging and debt reduction strategy,” Symson said Friday. He said Scripps is seeing strong buyer interest in the network and expects an update on Bounce “later this summer."

On Nexstar’s call, Sook blamed direct-to-consumer streaming for hurting linear TV providers' bottom lines. Sinclair invested heavily in direct-to-consumer sports streaming before the bankruptcy of Diamond Sports, its subsidiary, he said. “To date, these products have generated billions of dollars of losses and market cap destruction,” and the disruption of those companies’ linear TV businesses, he said. Streaming “isn’t a good business,” Sook said. “Everyone wants to stream because they don't have broadcast assets that are free over the air, that can reach 100% of the population,” he said. “We expect to see direct-to-consumer and pay TV programming bundles, content spending, and pricing all to be rationalized across the industry going forward.”

Executives from Gray, Sinclair, Scripps and Nexstar said that presidential campaign spending was slower than anticipated this year, but they expect it will greatly increase in the final two quarters. “We still expect political advertising revenues for the full year to be strong and to materialize later in the year,” said Gray co-CEO Hilton Howell Monday. Nexstar COO Michael Biard said spending had been “relatively muted” but also said Nexstar expected it to pick up closer to the election. Symson said that ballot referendums on abortion in Florida and Arizona could drive increased political ad dollars for Scripps. There is “conventional wisdom that abortion on the ballot is likely to motivate the electorate” in a way that President Joe Biden’s presence on the ballot “does not,” Symson said.

The “cadence” of meetings with companies interested in making use of ATSC 3.0 datacasting has quickened, Sook said Friday. He said the earliest revenue-generating applications of the tech will be business-to-business offerings. “The time is now” for broadcasters to start realizing the potential of ATSC 3.0, Ripley said. 3.0 datacasting isn’t expected to generate “a material amount of revenue” now but will increase exponentially, he said. Gray co-CEO Pat LaPlatney said Gray could start seeing revenue from ATSC 3.0 in Q1 2025, but that it would likely be years before it became meaningful. “Sooner than the end of the decade,” he said.

Gray’s Q1 revenue was $823 million, an increase of 3% from Q1 2023, according to its earnings release. Sinclair’s Q1 total revenue also increased 3% from Q1 2023, from $773 million to $798 million. Nexstar’s Q1 net revenue was $1.28 billion, a 2.1% increase from the prior year quarter. E.W. Scripps' revenue was $561 million, a 6.4% increase from Q1 2023.