Sinclair Broadcast Group has struck a $350-million deal to buy the Tennis Channel, one of the few independently owned cable TV channels left in a rapidly consolidating cable landscape.
Baltimore-based Sinclair, one of the nation's largest TV station owners, said Wednesday that the company was looking to own more programming and wanted to buy a cable TV channel rather than build one from scratch.
"Trying to find something unique is very difficult," Barry Faber, Sinclair's executive vice president and general counsel, said Wednesday in a conference call with reporters to discuss the deal. "And sports programming is some of the most important programming in distribution today."
The Tennis Channel, based in Santa Monica, is available in about 30 million homes in the U.S. and appeals to an affluent audience. Faber said Sinclair believes it can expand the channel's audience through increased promotion and by striking new distribution deals that should soon get the network into 50 million homes.
"It's really compelling content for a significant segment of the population. Obviously everyone is not a tennis fan but there are a lot of people who are," Faber said.
Eventually, Sinclair would like to increase the distribution of the channel to as many as 70 million homes.
Tennis Channel's growth had leveled off in recent years because the network, as a stand-alone channel, did not have sufficient clout with pay-TV distributors to demand full carriage.
Some major pay-TV operators, including Time Warner Cable and Comcast Corp., instead relegated the network to a less-distributed sports package, which limited the channel's revenue because fewer subscribers received the channel.
In addition, larger TV networks, including ESPN, aggressively bought the rights to major Grand Slam tennis tournaments, leaving Tennis Channel as a boutique operation that primarily appealed to the most faithful tennis fans.
"There were things we couldn't do because of our limited distribution," Tennis Channel Chief Executive Ken Solomon said. "This deal unlocks that completely."
The sports channel has been profitable, Solomon said. However, Sinclair said it would absorb historic net operating losses from the venture, estimated at about $200 million.
Sinclair said it would carry forward those losses to reduce future tax payments.
Sinclair acquired the channel from a group of private investors that included Apollo Partners, Bain Capital Ventures, Battery Ventures and Columbia Capital. The deal, which is subject to regulatory approval, is expected to close this spring.
The channel will continue to be based in Santa Monica, and Solomon said he was staying with the channel.
"We've managed to take this company from almost nothing, with 3 million subscribers, to where we are now," Solomon said. "We have become the go-to place for tennis in this country, and we needed to be able to take it to the next level."