Wall Street misunderstands new sports joint venture

Local TV station owners including Sinclair, TEGNA and EW Scripps all saw their valuations plummet this week after Disney, Warner Bros. Discovery and Fox announced a new sports joint venture set to launch this fall.

Sinclair dropped 12% Wednesday, TEGNA fell 7.2% and Scripps plummeted 24% as investors weighed the meaning of a new, skinnier cable bundle of sports networks that will include ESPN, TNT and Fox but will leave out CBS and NBC. Sinclair bounced back by rising 7% Thursday, but TEGNA and Scripps were little changed.

But Wall Street’s reaction is overblown, according to EW Scripps CEO Adam Symson.

For one, investors appear to be pricing in that local ABC and Fox affiliates wouldn’t be part of the new skinnier bundle, Symson told CNBC in an interview. They will be included, he said, citing assurances he’s been given in conversations with Disney executives. Scripps owns 18 ABC stations, in markets such as Phoenix, Detroit, Cleveland and Tampa, and 4 Fox stations.

“Affiliates are going to be compensated for being carried along,” Symson said.

The joint venture will work collaboratively with all local broadcast affiliate partners in a similar manner to other digital multichannel bundlers, such as YouTube TV and Hulu with Live TV, according to a person familiar with the matter, who asked not to be named because the discussions are private.

This means consumers of the new bundle will be able to get their local news and sports from ABC and Fox.

A spokesperson for the joint venture declined to comment.

Still, Paramount Global‘s CBS and Comcast‘s NBC are not part of the new bundle, putting affiliates of those broadcast stations potentially at risk.

But only if the bundle takes off. Which, according to Symson, is unlikely without those channels. Scripps has 9 CBS and 11 NBC stations.

“Wall Street acted like this was a sea change product,” Symson said. “I don’t take issue with the opportunity or the idea that there’s value here. But take March Madness. You’re only going to have access to TBS and TNT, but not CBS. It’s not the efficient bundle Wall Street is making it out to be.”

While one executive associated with the joint venture privately told CNBC it will be “a monster,” Symson disagreed with that premise, because, in his view, sports fans won’t be satisfied with a partial offering.

“People don’t want to go to a buffet where half the steam trays are missing,” Symson said.

FuboTV, another sports-focused bundle of networks, has yet to reach 2 million subscribers — and it offers more sports than the new bundle is likely.

A smaller bundle at a price of $40 or $50 per month probably won’t have a large audience either, said Symson.

“If you’re a sports nut today and you need access to all the live telecasts of your favorite sports, you’re best off maintaining the pay TV bundle as it is,” he said. “It calls into question the value of the consumer proposition.”

Even if Disney and Warner Bros. Discovery are able to juice subscriber additions by bundling the new service with existing streaming services Disney+, Hulu and Max, he noted the service should be viewed by investors as supportive of broadcast stations.

“If network affiliates like Scripps will be compensated for carriage on this platform like we are on other platforms, it’s potentially additive,” Symson said. “It’s just another product among products that are kind of already the same thing.”

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