Tennis Channel is likely to reach an agreement to be sold in the coming weeks or months, as owner Sinclair backs aways from its sports media business, a well-placed source said.
Reports in CNBC and Bloomberg first reported Sinclair was considering options, which could involve other paths than a sale. This source said while Sinclair might keep an equity slice, a sale is almost a sure thing.
“There’s going to be really exponential growth coming, but Sinclair says, `Look, it makes sense to have another strategic, probably majority partner, almost certainly majority partner who wants to take it to the next level in these areas,” the source said.
What are those areas that the capital-strapped Sinclair may not be able to fund? (It is paying $495 million to its soon-to-be-ex regional sports channel platform Diamond Sports as part of the settlement of litigation tied to Diamond’s bankruptcy.)
Tennis Channel is launching a new direct to consumer app this summer, and is in the early stages of taking the channel international. It also has launched PickleBall TV and in the future may add other racket and non racket sports. For Sinclair, which made a disastrous 2019 purchase of 19 regional sports channels, the order of the day is cutting back versus expanding.
Tennis Channel though is a great success story. When Sinclair bought it in 2016 for $350 million, the racket sports media company had just lost a protracted legal battle with Comcast over distribution of the channel. It came at a time when independent channels found it almost impossible to stay profitable as distributors like Comcast were placing them in tiers that cost extra to subscribers beyond the basic package. As part of Sinclair, Tennis Channel was bundled with the rest of the news company’s stations.
At the time of the acquisition Sinclair said TC had $200 million in operating losses. In the 2023 third quarter TC had $13 million of operating profit and $59 million of revenue. The core linear channel broadcasts 3,500 hours of pro tennis and its T2 streaming option, which shows matches not on the linear channel, has another 1,500 hours.
TC is bullish on T2 streaming on Free Ad Supported TV (FAST), as well as Pickleball TV on FAST channels. The source said TC is only now beginning to reap FAST ad revenues and that category will soon be a significant contributor to the bottom line.
The linear network continues to grow its audience, the source said, up 21 percent last year in viewership and 27 percent so far this year. “The gap with the pay TV world” is narrowed, this source said. “Revenues are up, rates, licensees are up with cable. TC is now a winner for basic domestic cable because it’s giving them more live hours than any other sports network by far.”
So who would buy Tennis Channel? There are several categories, the source said. There is always private equity, which increasingly has focused on sports as a growth category. There are the media outlets in the same business of streaming sports, though many of these from ESPN to Paramount are struggling to manage the transition from linear to digital.
The third category of potential buyer is the most intriguing. Pro tennis is currently engaged in backroom discussions on remaking the face of the pro tennis circuits. Whatever entity emerges from that morass, or if one does, could be a buyer.
“There’s obviously moves happening and things going on and there’s an argument that says,`Well, all of this talk of tours changing, and different roadmaps and all this stuff you’re hearing about, and countries and regions of the world participating more aggressively in tennis, unless you have a media strategy, you can do all the the deck chair realigning you want in terms of who owns events,’” this source said. “That doesn’t give you any greater lift in your commercial ventures. It all sounds nice,`Oh, we want to be like Formula One.’ So well, it’s not. F1’s a three- hour race several times a year. Tennis is 24/7 365, it’s a beast that has to be tamed a different way. So if you’re going to go to the trouble of trying to have a meaningful change in the sport, and somebody wants a higher level of control than they have now, or higher monetization… you have to generate the value. And that means building platforms that are 24/7 365.”
Asked how much TC is valued, the source demurred other than to say, “It’s a lot of dough. Not cheap.” Stay tuned.