We can complain about a lot of things the Yankees do as an org, but arguably the shrewdest move the club’s made in the last decade was buying back the YES Network, partnering with Amazon, and having the entirety of their television broadcast conducted in-house. YES has one of the better productions across the entire league, and owning the regional sports network (RSN) gives the franchise incredible control over the final product.
More importantly though, it means the Yankees are slightly isolated from the news that very truly shook the sports world this week, as Sinclair Broadcasting Group signaled they would skip their upcoming $140 million interest payment. The company, ultimate owners of Bally Sports, only has enough cash on hand to cover 1/16th of their sizable debt, and it seems bankruptcy is the next step. Per Bloomberg, the likely plan is for Sinclair’s creditors to convert their held debt to equity, becoming owners of this dying quail.
This is a particularly American story, since RSNs are a cash cow. As streaming services have disrupted all other kinds of broadcast television, sports rights fees have continued to climb, becoming the primary revenue stream for leagues. The billions of dollars Sinclair took on to finance the purchase of RSNs from the Fox-Disney merger was supposed to be a good investment.
Instead, well, Sinclair did what we’ve seen airlines and banks and grocers do even while those industries also faced significant disruption, trading long-term capital investment for stock buybacks, boosting short-term returns to investors. This is the quintessential instrument of this final stage of financialization, that not only are shareholders the only entity a corporation need concern itself with, but that their quarter-to-quarter satisfaction trumps any concerns about economic headwinds, long-term solvency, and proper asset maintenance and management.
The irony of CEOs of Sinclair and Southwest and Loblaws being the exact type to stand up and tell 25-year-olds that they’re not saving enough for a rainy day should not be lost on any of us.
This almost uniquely American version of capitalism has now left 14 of the 30 MLB clubs in limbo as to how exactly their games will be seen come the spring. The creditors set to take over include Prudential Financial, Fidelity, Hein Park Capital Management and Mudrick Capital Management. If you notice, none of those organizations are broadcasters, sports media, or anything like that. They’ll undoubtably spin off Bally Sports after the issue of eight and a half odd billion dollars in debt is settled.
In the meantime, cable subscriptions continue to decline, with Comcast losing 11 percent of its customers in 2022:
Comcast pay-TV customers down 11% YoY in 2022 $CMCSA pic.twitter.com/K3fxqJINxe— Alex Morris (TSOH Investment Research) (@TSOH_Investing) January 26, 2023
This is why the Yankees push the YES app, why Amazon has moved games to Prime, why Apple TV+ started their streaming of ball games last season. The market has already shifted away from cable packages, and now the stewards of those packages have proven themselves incompetent at managing those assets.
That’s not to say that streaming is perfect, far from it. Especially for a premier club like the Yankees, trying to figure out whether a Friday night game is on one of three platforms gets, as charitably as possible, annoying. As we see ever more content locked behind an additional monthly subscription, I think we enter a new age of piracy. If a viewer is able to find alternative, free ways to stream online, the difficulty of managing so many online subscriptions makes that alternative much more palatable.
We’re on the cusp of a significant change in the way we consume baseball. Half the league’s clubs are in a state of limbo because a management team decided that quarterly returns and fatter shareholder pockets were more important than effective, long-term investing. If you’re someone opposed to the increase in streaming around MLB, it’s only going to get worse because of Sinclair’s buyback strategy.