For those who aren't as familiar with the broadcasting business, Sinclair Broadcast Group is the owner of 58 television stations in medium and small markets -- their largest markets are Pittsburg and Baltimore. The majority of their stations are Fox, CW, and MNTV (My Network Television) affilates. Per trade publication Broadcasting and Cable, they are the 12th largest TV station group in the country, with stations covering 21.54% of the country. Broadcasting & Cable's Top 25 Station Groups In addition to the stations that Sinclair directly owns, it also controls several additional stations that are nominally owned by Cunningham Broadcasting, but managed by Sinclair.
Five years ago, Sinclair was also the darling of the right for running that anti-Kerry documentary on all 58 of their stations, and for conservative editorials on all of those stations as well. Those who saw ever greater consolidation as the road to maximizing corporate profits were enamored of Sinclair's experiment with producing "local" newscasts for their stations from a central studio at corporate headquarters in Baltimore.
Unfortunately for Sinclair, viewers were unimpressed by "local" newscasts that were produced hundreds or even thousands of miles from home -- and tuned out in droves. And the right wing editorials created negative publicity for Sinclair's stations. Ultimately. the central studio for producing newscasts was shut down, and the right wing editorials were cancelled. And the group has, by and large, floundered in mediocrity ever since. So far as I'm aware, none of Sinclair's 58 stations is a market leader, and few are even in the top three -- when you run a group on the cheap and attempt to push a national agenda onto your local stations, the result is predictable: poor ratings and a weak identity in your local markets.
As a result, Sinclair was poorly positioned for dealing with the advertising downturn of the past 18 months. Earlier today, Sinclair reported that they may be unable to either pay or refinance their debt obligations:
Sinclair Broadcast Group Inc. said in a regulatory filing that it may file for bankruptcy protection, reports the Associated Press. A miserable advertising market and crippling debt burden may force the Baltimore-based broadcaster into Chapter 11.
Sinclair had $1.33 billion of outstanding debt as of March 31, according to the AP, and holders of its 3% convertible senior notes and 4.875% senior subordinated notes may require Sinclair to buy back nearly $500 million worth of that debt within the next 18 months.
Sinclair said it doesn't have the cash to buy back that debt in its SEC filing. It is negotiating with lenders to restructure the notes.
"In addition, under certain circumstances, creditors may file an involuntary petition for bankruptcy against us," the company said in the 8-K filing.
Sinclair Eyes Chapter 11
In a press conference this afternoon, Sinclair indicated that it's close relationship with Cunningham is what end up driving it over the brink:
Cunningham has until July 31 to pay off a $33.5 million debt. Should Cunningham default, Sinclair may be forced into Chapt. 11. Having Cunningham in bankruptcy could impact Sinclair to the tune of $50-$60 million, Sinclair execs said--$26 million in direct contributions for the LMAs, and the rest in annual cost savings and general synergies between the stations.
Sinclair: Cunningham May Drag Us into Chapt. 11
Should Sinclair land in involuntary bankruptcy, the outcome is hard to predict -- while it could lead to the station group being auctioned off in pieces, it could also just lead to a reorginization under existing or new management.
But whatever happens, it is one more nail in the coffin of the failed business models pushed in the last fifteen to twenty years that focused on consolidation and operating efficiencies in favor of actually treating you audience and advertisers with respect and offering a real service in your local communities. Should Sinclair fade away, they won't be missed.
EDIT: One additional link, courtesy of a comment from KingOneEye regarding another one of our least favorite media companies: Clear Channel in Trouble
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