Samuel Stern

Sinclair Broadcast Group Inc. Logo (Photo courtesy of blog.solidsignal.com) [1]

10706 Beaver Dam Rd

Hunt Valley, MD 21030

sbgi.net

Company Background

The Sinclair Broadcast Group Inc. (SBG), is the largest broadcaster of television content in the United States. Sinclair owns and operates the majority of 164 television stations in 79 US markets, and owns the rest through local marketing agreements. The company reaches the largest and smallest US markets and controls the largest number of ABC, CBS, CW, FOX and MYTV affiliates in the country. Sinclair also operates 3 radio stations in the Seattle-Tacoma Market [3].

SBG Network Affiliates (photo courtesy of sbgi.net) [2]

The Maryland-based broadcaster is the nation’s leading local news provider, has recently begun the distribution of premium college and high-school sports programming, and operates the American Sports Network and the Ring of Honor Wrestling league. After making making several lucrative deals to acquire stations in new markets, including a re-negotiation with DISH Network, Sinclair now reaches 37.6% of U.S. television households. Recent success has given Sinclair the opportunity to pursue new business ventures and acquire new assets [4].

ONEMedia logo, one of Sinclair’s most recent technology investments [19]

Sinclair also makes strategic equity investments through its Business Venture subsidiary. The company holds interests in multiple media and technology companies such as Acrodyne Services, ONEMedia, and Dielectric, as well as in real estate properties [5] (Scroll to investments).

Leadership

David D Smith, President & CEO (Photo courtesy of bizjournals.com) [6]

David D. Smith, President & CEO
Frederick G Smith, Vice President
Dr. J Duncan Smith, Vice President
David B. Amy, Executive VP & COO
Christopher S. Ripley, CFO

For further Bio’s of Sinclair Executives: http://sbgi.net/corporate-governance/

History

Julian Sinclair Smith, Founder (photo courtesy of sbgi.net) [10]

In 1971, Julian Sinclair Smith started the Chesapeake Television Corporation, which operated one station in Baltimore. That one station would eventually be the cornerstone of the nation’s largest broadcast company. Julian’s sons David, Fred, and Duncan would take over the company, and in the early 1980’s change the name to the Sinclair Broadcast Company, Inc. David D. Smith took over the company as president and CEO. Throughout the 1990’s, the brothers would go on a buying spree of content that allowed Sinclair to dominate the industry, increasing its number of television stations from 3 to 59. They purchased content in markets across the country, large and small. The passage of the Telecommunications Act of 1996 allowed for some deregulation of buying control by the FCC, which allowed the company to make more important station acquisitions. This entrepreneurial attitude and progressive vision is still integrated throughout the company today [9].

Financials

The Sinclair Broadcast Group Inc. went public in 1995 and is currently traded on the NASDAQ Global Select Market at $35.36 per share. The company has just released its Third Quarter Financial Results, revealing that the executives expectations were exceeded over the past year. Compared to the 3rd quarter of 2014, Sinclair realized a massive 10.8% revenue increase of $548.4 million versus $495.0 million the year before. The total yearly revenue increased 17.9% to $1.6 billion, versus $1.36 billion in the prior year period [7].

According to a late September Financial presentation at the Deutsche Bank Leveraged Financial conference, Sinclair reported a large increase in the amount of money the company can use to pursue its current ventures and find opportunities to enhance shareholder value, purchase more assets, and branch out to other revenue streams [8].

This influx of revenue has allowed Sinclair to work on technological advances to the company, a new initiative it has been following over the last year.

Key Initiatives

Sinclair has been on a buying spree throughout the past quarter.

The American Sports Network (ASN), Sinclair’s premiere sports division, broadcasts sports from 18 different NCAA athletic conferences [12]. The games are aired over stations that Sinclair owns or are syndicated through non-Sinclair stations. The ASN, launched in 2014, just made two deals in September with ESPN to carry Mid-American Conference football and basketball games, and to broadcast 10 American Athletic Conference Men’s basketball games per year on the large new sports platform [11].

American Sports Network logo (photo courtesy of wikipedia.com) [15]

Sinclair is being aggressive in order to bolster the progress of the ASN. They are currently negotiating a $500 million deal to buy the Tennis Channel, which operates 90% of Tennis content in the U.S. reaching 35 million homes [13].

On October 31st, the first-ever 24/7 Sci-fi multi-channel network was launched through a joint venture between Sinclair, MGM, and Michael Eisner’s Tornante investment company. The network is called COMET, and was the largest multicast channel release ever, reaching over 60% of the country [16]. The deal notes an effort by Sinclair to own its content due to the fact that it has almost reached the FCC limit for television ownership.

COMET logo, Sinclair’s newly owned Sci-fi Network (photo courtesy of comettv.com) [14]

On November 4th, Sinclair closed a deal with Pappas Telecasting and Lincoln Broadcasting in Central Nebraska to purchase a Fox affiliate and multiple ABC affiliated news stations. Sinclair purchased the stations for $31.25 million and the FCC has approved the deal [17]. This is a basic transaction for Sinclair in their pursuit of owning broadcast platforms in more markets.

Projections

Sinclair has taken advantage of its recent success to pursue initiatives that technologically advance the company and continue its dominance over the broadcast industry. One way to increase its footprint in an increasingly digitized world is the ability to broadcast and advertise on mobile platforms and enhance the broadcast experience. ONEMedia is working with all levels of the broadcast industry, from content producers to distributors, to design the “Next Level Broadcast Platform” that integrates mobile devices, creates an Ultra High Definition layout to broadcast, and creates new business models that improve upon the current structure of the industry [18].

Marketron Logo, Sinclair’s newest business partner. (Photo courtesy of contactworld.com). [25]

In late November, Sinclair and the leading media software provider Marketron negotiated a multi-year contract for Sinclair’s stations to use Marketron’s location-based mobile advertising. By studying demographics and utilizing mobile networks, Marketron allows advertisers to maximize accuracy and reach. This is a tactical move for Sinclair as it adds revenue streams by attracting potential advertisers to Sinclair’s growing reach [20].

Sinclair was recently part of a Memorandum of Understanding (MOU) with Pearl TV, a partnership of 9 leading broadcast companies, and Samsung Electronics America, the nation’s leader in television sales for the last 9 years [26]. The MOU will sustain technological advances in the industry and look to develop new ways to broadcast premium content to consumers. The three companies will implement the Advanced Television Systems Committee (ATSC) to overlook and advance the technical standards for broadcasting [21].

SAMSUNG Electronics Logo (photo courtesy of commons.org). [22]

To more accurately monitor the affect of these technological advancements on consumers, Sinclair signed a new deal with Rentrak, a demographic rating service, on November 11th. Rentrak has already been working with Sinclair on a smaller deal, but will now cover all of Sinclair’s stations. Rentrak will provide Sinclair with accurate qualitative data from large sample sizes that will benefit all of Sinclair’s advertisers [23].

Sinclair is looking to consolidate the growing responsibilities of the company in order to streamline the organization of new assets. On September 10th, Jerry Lilly, a former CNN executive, was named to the new position of Vice President of Operations. He will work closely with the VP of Data Systems and the VP of Engineering to incorporate new workflows into the company and ensure that Sinclair’s TV facilities around the country are equipped with the most up-to-date technology [24].

The buying spree that Sinclair has been on recently has brought it close to the FCC station ownership cap of 39% of TV homes [27]. The company will look to start owning more of its content to create revenue streams, while still upholding its current re-transmisison and affiliate contracts that have put Sinclair at the top of the broadcast industry.

Sources

(photos contain URL)

[1] SBG Logo. http://www.valuewalk.com/wp-content/uploads/2013/09/SBG-Sinclair-Broadcast-Group.jpg

[2] SBG Network Affiliate Logos. http://sbgi.net/wp-content/themes/sbgi-sparkling/images/affiliates.png

[3] SBG Summary Page.

[4] SBG Company News Release. Sinclair Broadcast Group Announces Agreement to Swap Television Stations With Gray Television,