Here’s why Liberty Media’s CEO called Sinclair’s sports deal with Disney a ‘perversion’

Brandon Dill/AP

Liberty Media CEO Greg Maffei called Sinclair’s recent purchase of 21 regional sports networks from Disney a "perversion of public policy."
Maffei complained the deal gives Sinclair "an edge" in broadcasting negotiations and could lead to less free programming.
Liberty Media made an unsuccessful joint bid for the sports networks.
Watch three of Liberty Media’s key holdings — SiriusXM, Formula One, and Live Nation — trade live.

Liberty Media CEO Greg Maffei has opened fire at Sinclair Broadcast’s recent purchase of 21 regional sports networks from Disney, complaining it could give the local-television giant a leg up in negotiations with distributors and result in less free programming.

"It is, to my mind, a little bit of a perversion of public policy," Maffei said on the media conglomerate’s first-quarter earnings call. "That perversity has led to giving Sinclair, probably, an edge."

Liberty Media’s key holdings include Formula One, SiriusXM, Live Nation, and the Atlanta Braves baseball team. Sinclair is one of America’s largest television broadcasters with 191 TV stations and more than 600 channels. Liberty Media and Sinclair didn’t respond to requests for comment.

Regulators forced Disney to sell Fox Sports Networks as a condition of its 21st Century Fox acquisition, which it completed in March. The US Justice Department determined that combining Disney’s ESPN sports network with Fox’s sports networks would "end the head-to-head competition between them," according to its competitive impact statement. The agency anticipated higher licensing fees for cable, satellite, and other video-programming distributors, driving up subscription fees for millions of households, if the networks joined forces.

Liberty Media made a joint bid with Major League Baseball for the regional sports networks (RSN), according to Bloomberg, but Disney ultimately sold them to Sinclair. The networks hold the local rights to 42 national baseball, basketball, and hockey teams — almost half of the total number. They generated $3.8 billion in revenue and boasted 74 million subscribers in 2018, according to the press release announcing the transaction.

More leverage for Sinclair

"We were trying to ensure that cable companies weren’t charging for free broadcasts," Maffei said on the call. Yet Sinclair "is now being given leverage … to ensure carriage of RSNs," he added. "But that’s for greater minds in Washington D.C. to worry about."

Maffei’s comments suggest he expects Sinclair to bundle its new sports channels with its existing core channels — it owns dozens of local TV stations affiliated with ABC, CBS, NBC, and Fox — and pressure cable-TV companies and other customers to buy them.

"Sinclair would be using its broadcast networks as leverage to ensure carriage for the RSNs," said Brandon Ross, an analyst at BTIG, in an email to Business Insider. "That’s the ‘perversion’ as I heard it."

Charging for free broadcasts

The local-TV giant’s expanded range of sports rights could also accelerate its efforts to shift free, over-the-air programming to paid cable channels. It recently formed a regional sports network with the Chicago Cubs to carry the baseball team’s games, dozens of which were previously available at no charge, according to the Wall Street Journal.

Analysts question whether that’s a genuine concern, however.

"The content and games on these RSNs were and still are only available on cable and satellite," said David Joyce, an analyst at Evercore ISI, in an email to Business Insider.

"There has always been a carve out for over-the-air broadcasts," he added. He doesn’t expect that to change under Sinclair’s ownership as "they want to still have local and national sports on their broadcast stations too."

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Source: Business Insider – tmohamed@businessinsider.com (Theron Mohamed)