Sinclair Broadcast Group has partnered with Bally’s to form a strategic partnership integrating the casino operator’s online sports betting technology into the Hunt Valley-based broadcaster’s regional sports networks and array of television stations.
Bally’s and Sinclair will use the partnership to create a more interactive gambling experience, the companies announced jointly Thursday.
The 10-year deal will give Sinclair entry to the lucrative potential of sports gambling, while positioning Bally’s to tap into the growing U.S. market for both sports and interactive gambling. Under the agreement, the 21 Fox regional sports networks Sinclair acquired last year will be rebranded with the Bally’s name. The deal also positions Sinclair to eventually buy up a minority stake in Bally’s — up to 29.9% of its common stock — pending regulatory approval.
Shares in both companies jumped on the news. Bally’s shares soared 20.9% Wednesday to close at $37.01 each on news of the deal. Sinclair shares rose 5.9% to close at $26.06 each.
That signals the market’s belief in the merits of this plan, said Karryl B. Leggio, professor of finance at Loyola University Maryland’s Sellinger School of Business.
She said consumer attitudes toward gambling have shifted dramatically over the years to the extent that virtual betting already has become prolific in parts of the country. People now view sports betting as a common form of entertainment, she added, and it would behoove all states to develop consistency across the borders so that each remains competitive.
“People don’t just do sports passively — betting is a huge part of the entertainment industry’s revenue,” Leggio said. “This is a good deal for both companies.”
The significance of this partnership hinges largely on what happens with the legalization of sports betting in the legislature and elsewhere, said James Karmel, a history professor at Harford Community College and the author of “Gambling on the American Dream: Atlantic City and the Casino Era.”
He likened online and virtual sports betting market to a “gold rush” for companies that have footprints in sports, media and casinos.
“This is a significant move from Sinclair into the sports betting realm ... because it will allow people to gamble on sports who would be inclined to do it anyway to do it anywhere,” he said. “This might make it functionally easier to do.”
Karmel said the state’s ventures into gambling have so far established a hunger for more betting opportunities. But with the coronavirus pandemic still disrupting normal consumer behavior, Karmel said the company was wise to seek an online component to gaming.
“The money is there,” he said. “It doesn’t make sense to expand gambling in 2020 without an online aspect, and with pandemic still playing out, we don’t know how much longer we’re going to be impacted by that.”
Chris Ripley, Sinclair’s president and CEO, said the partnership will change the way people think about and view live sports across the company’s platforms, especially as the U.S. sports betting and interactive gambling markets grow.
“Bally’s, with its strong brand name, premier sportsbook technology platform and expansive market access, is the perfect partner,” Ripley said in a statement. “By integrating gamification elements that allow audiences a more personalized and interactive game experience, consumers of live sports in the future can look forward to a more dynamic and engaging sports viewing experience.”
Bally’s, which currently owns 10 casinos in six states and employs more than 5,400 people, will integrate its content into the 190 television stations that Sinclair owns, operates or provides services to across 88 markets and its sports networks. It also enables the company to have media and marketing access to Sinclair’s network of local, live sports content, which also includes the Tennis Channel, the home of over 95% of all live tennis matches broadcast in the U.S.
Under the terms of the deal, Sinclair also will receive annual naming rights fees and committed percentage of Bally’s advertising for interactive gambling.
It also positions Sinclair to become one of Bally’s largest shareholders. The broadcaster will receive so-called penny warrants to buy up to 4.9 million shares of Bally’s common stock — a 14.9% stake — for a penny each and additional penny warrants to buy nearly 3.3 million shares, or 10%, of Bally’s stock, contingent on meeting performance goals, according to a Bally’s filing with the Securities and Exchange Commission. Sinclair also will receive options to buy more than 1.6 million shares, or 5%, of Bally’s stock at prices ranging from $30 to $45 a share in the future.
Sinclair cannot own more than 4.9% of Bally’s without obtaining necessary regulatory approvals from state gambling regulators where Bally’s operates. According to the SEC filing, Bally’s shareholders must approve any sale that gives Sinclair more than a 19.9% stake; Bally’s would have to pay Sinclair cash in lieu of shares if its stockholders don’t approve such a sale.
Soo Kim, chairman of Bally’s board of directors, said the deal positions the company to become one of the top U.S. sports betting and interactive gambling operators. Kim’s Standard General hedge fund controls Bally’s.
“Sinclair, with its broad holdings of stations, channels and [regional sports networks], provides immediate, national brand recognition that will support the development of Bally’s player database for both our traditional casinos as well as our future online offerings, and ultimately deliver significant shareholder value,” Kim said in a statement.
Separately, Bally’s also announced it acquired Bet.works, a technology platform for regulated online sports betting in a cash and stock deal valued at about $155 million.
Sinclair’s arrangement with Bally’s comes after the broadcaster reported a massive loss for the quarter ending Sept. 30, taking a $4.2 billion charge to goodwill and intangible assets as it wrote off part of the value of the regional sports networks it acquired last year for $10.6 billion. The write-off was related partially to disruptions to live sports programming caused by the coronavirus pandemic this year and partially to the inability to sign Hulu and YouTube to continue carrying the networks.
Ripley previously said that he expected Sinclair to bounce back from last quarter’s hit. Despite the recent COVID-19 challenges and shutdowns and delays of professional sports seasons, Sinclair is betting on the future of sports network ownership, Ripley told analysts during an early November call.
“We fundamentally believe that sports rights will be worth more in the future than they are today, that this is a growth industry,” Ripley said. “It needs to change, it needs to evolve. ... We intend on reinventing the [sports networks] around gamification, around community-based fandom and around direct-to-consumer. That’s going to be incredibly exciting and rewarding for Sinclair.”