Wall Street misunderstands new sports joint venture

Adam Symson, CEO of EW Scripps

Source: E.W. Scripps

Owners of local television stations, including Sinclair, TÉGNA And Electronic warfare scripts all saw their valuations fall this week after Disney, Discovery of Warner Bros. And Fox announced a new sports joint venture expected to launch this fall.

Sinclair fell 12% on Wednesday, TEGNA fell 7.2% and Scripps fell 24% as investors weighed the meaning of a new, leaner sports network package that will include ESPN, TNT and Fox but will leave aside CBS and NBC. Sinclair rebounded, rising 7% on Thursday, but TEGNA and Scripps were little changed.

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

On one hand, investors appear to be pricing in the fact that local ABC and Fox affiliates would not be part of the new, leaner package, Symson told CNBC in an interview. They will be included, he said, citing assurances he was given in conversations with Disney executives. Scripps owns 18 ABC stations, in markets including Phoenix, Detroit, Cleveland and Tampa, as well as 4 Fox stations.

“Affiliates will be compensated for being transported,” Symson said.

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

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

A spokesperson for the joint venture declined to comment.

A partial buffet

Always, Paramount WorldwideIt's CBS and ComcastNBC's channels are not part of the new package, potentially putting those broadcast stations' affiliates at risk.

But only if the package takes off. Which, according to Symson, is unlikely without these chains. Scripps owns 9 CBS stations and 11 NBC stations.

“Wall Street acted like this was a product of radical change,” Symson said. “I'm not disputing the opportunity or the idea that there's value here. But take March Madness. You'll only have access to TBS and TNT, but not CBS. That's not the “effective bundling that Wall Street offers. be.”

While an executive associated with the joint venture privately told CNBC it would be “a monster,” Symson disagreed with that premise because, in his view, sports fans wouldn't just 'a partial offer.

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

FuboTV, another set of sports-focused networks, has not yet reached 2 million subscribers – and it offers more sports than the new pack is likely to offer.

A smaller plan priced at $40 or $50 a month also probably won't have a wide audience, Symson said.

“If you are a sports enthusiast today and need to access all the live broadcasts of your favorite sports, it is better to keep the pay TV package as it is,” he said . “This calls into question the value of the consumer proposition.”

Even if Disney and Warner Bros. Discovery are able to increase subscribers by bundling the new service with existing streaming services Disney+, Hulu and Max, he noted that the service should be seen by investors as a support to broadcast stations.

“If network affiliates like Scripps are paid for carrying on this platform like we are on other platforms, that could add up,” Symson said. “It’s just one product among others that are already kind of the same thing.”

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