Sinclair Earnings: Upcoming Affiliate Renewals and 2024 Political Revenue Won’t Change Our Outlook

Sinclair Broadcast Group SBGI is the second-largest television station operator in the United States, with 185 stations in 86 markets. Sinclair also owns 90% of Diamond Sports, formerly the Fox regional sports network group, which has filed for bankruptcy protection and likely holds no value for Sinclair shareholders.

Over the past decade, retransmission revenue has grown rapidly for local television stations and now accounts for about half of Sinclair’s total sales. To offer broadcast networks like CBS, pay-TV distributors like Comcast or Dish Network must retransmit local network station feeds and pay a fee to station owners like Sinclair. While retransmission revenue will continue to be an important revenue source, we project that national networks, like CBS, will also continue to raise the fees charged to local affiliates, decreasing the bottom-line benefit to Sinclair as the marginal cost for an additional dollar of retransmission revenue is relatively low.

Broadcast advertising will also remain an important source of revenue for Sinclair. Most of this revenue is generated at the local level by selling ad time to area businesses, including restaurants, auto dealerships, and retailers. Because of its size and geographic reach, Sinclair also sells advertising on a national basis to auto manufacturers, telecom firms, fast food restaurants, and retailers via their ad agencies. With increased political ad spending, the election cycle has become particularly important, especially around presidential or midterm congressional contests in even-numbered years. We expect that Sinclair will continue to benefit from political ad spending growth, offsetting weaker general ad spending.