According to a report in the New York Post, the Cubs are in talks with media giant Sinclair Broadcasting to launch a direct-to-consumer streaming service for their games. The language in the report gets a little murky, but it seems as though the Cubs — who are 50/50 partners with Sinclair on Marquee Sports Network — would be joining Sinclair’s existing push for a standalone service rather than embarking on their own separate venture.
At one point, the piece notes the “$18-a-month price tag that’s being floated for the new Cubs streaming service,” making it seem as though a DTC Marquee app would cost that much. That’s more expensive than any major streaming app like Hulu, Disney+, Netflix, or HBO Max and would be a tremendous misstep for just one team. Two paragraphs later, however, we get the clarification that Sinclair believes it can justify the cost “once it has amassed streaming rights for 14 teams.”
Only five teams — the Tigers, Royals, Marlins, Brewers, and Rays — have reached a deal with Sinclair to be included on the offering, so we’re not exactly talking about big draws that really move the needle. The Cubs, on the other hand, have a great deal more cachet and could “set a precedent for other franchises to quickly follow suit.”
That isn’t something Major League Baseball would take lightly, particularly when Commissioner Rob Manfred has apparently been trying to push a league-wide streamer in the near future. Great timing there, what with the lockout and all. Just an awesome way to drum up interest in a product for which an increasing number of fans already feel they’re paying too much.
In a move that was as much about leverage as anything else, Manfred publicly took Sinclair to task over its massive debt load when he spoke to the CAA World Congress of Sports back in October.
“We’ve been very clear with them from the beginning that we see both those sets of rights (gambling and digital broadcast) as extraordinarily valuable to baseball, and we’re not just going to throw them in to help Sinclair out,” Manfred said. “The other part of their problem is there’s excessive leverage on that business.
“If you think about what they paid for it, how much debt they have on it, I mean, you think it’s over 80%, it’s a huge number. And that leverage has produced headlines that are more negative.”
A Post source explained that MLB approved the rights deals for the five teams currently involved, though you have to wonder whether the league is starting to regret that decision. The Tigers were actually supposed to be the guinea pig for MLB’s streaming service before opting to go with Sinclair instead, which is surely sticking in Manfred’s craw.
More teams are reportedly approaching Sinclair about selling their digital rights in order to get their broadcasts to more fans, with the Cubs potentially being the bell cow. Despite that aforementioned debt load and the bubble bursting on cable contracts, which is why the Cubs opted for the less lucrative (at least in the early going) Marquee deal rather than the multi-billion-dollar pact the Dodgers got from SportsNet LA, Sinclair has a little cash to throw around.
Per a Bloomberg report, the media company raised “$600 million in financing via ‘a new super-priority first-lien loan from an existing group of secured creditors’” and could go live with the new venture at some point in the first half of the year. That service would include 16 NBA teams with which Sinclair has a one-year deal and 12 NHL teams on a four-year deal. Adding a few MLB teams, particularly the Cubs, would add to the viability of the product.
Though it’s never mentioned how many other baseball teams have approached Sinclair, some basic deduction gets us to at least eight. With five already in the fold and the Cubs in talks, that’s what it would take to get to the 14 mentioned by a source in the article. Things really start to gain steam if the Yankees, whose YES Network counts Sinclair as a minority stakeholder, are among that group.
As difficult as it would be for the league to stop that kind of momentum, there’s still plenty of reason to doubt the long-term viability of such a product. The most obvious problem is the cost relative to the target market, since they need to find enough people who don’t already have access to their favorite team(s) and who are willing to pay $18/month to get it.
The bigger issue, something MLB is acutely aware of, is that Sinclair has about $9 billion in debt that is “trading at distressed levels with a value of about $5 billion” and is now trying to make it big in an industry that seems to be going nowhere. That debt was accrued by purchasing the former Fox Sports RSNs, now rebranded as Bally, but Sinclair’s sports division has been hemorrhaging money.
Adding to the intrigue is that MLB actually bid against Sinclair in the 2019 auction for those RSNs and was later rejected as a co-investor in the rebranded networks. Oh, the craw is most definitely experiencing some serious stickage. As Manfred said, there’s little chance the league would do Sinclair’s Diamond Sports outfit a huge favor by allowing it to accept bets through its Bally partnership, though the reported plan has been for this new streaming app to be heavily focused on gambling.
That’s obviously the angle they’ll be taking since sports wagering has become so ubiquitous, though you have to wonder whether things are already spread too thin for that to make up for what appears to be a mountain of hurdles. If I didn’t know any better, I might almost think that last sentence was about the Cubs.
Big debt load: check. New broadcast venture that feels a bit rickety: check. Using gambling to offset the whole works: checkity-check-check.
Even with baseball mired in a lockout that sees the owners refusing to divulge the combination, it feels like this streamer is going to be moving forward in short order. The Cubs, who have wanted to do something separate from MLB’s broadcast oversight since at least 2015, sure do make a lot of sense as being on board with it when it does.