Sinclair Broadcast Group, inc (SBGI) Q3 2021 Earnings Call Transcript

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Sinclair Broadcast Group, inc (SBGI 2.58%)
Q3 2021 Earnings Call
Nov 3, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Sinclair Broadcast Group Third Quarter 2021 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host, Lucy Rutishauser, Executive Vice President and Chief Financial Officer. Ma'am, the floor is yours.

Lucy A. Rutishauser -- Executive Vice President and Chief Financial Officer

Thank you, operator. Participating on the call with me today are Chris Ripley, President and CEO; Rob Weisbord, President of Broadcast and Chief Advertising Revenue Officer; and Steve Zenker, Vice President, Investor Relations. Before we begin, Billie Jo McIntire will make our forward-looking statement disclaimer.

Billie Jo McIntire -- Director of Investor Relations

Certain matters discussed on this call may include forward-looking statements regarding among other things, future operating results. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward-looking statements as a result of various important factors. Such factors have been set forth in the company's most recent reports as filed with the SEC and included in our third quarter earnings release. Company undertakes no obligation to update these forward-looking statements.

The company uses its website as a key source of company information, which can be accessed at www.sbgi.net. In accordance with Regulation FD, this call is being made available to the public. A webcast replay will be available on our website and will remain available until our next quarterly earnings release. Included on the call will be a discussion of non-GAAP financial measures, specifically adjusted EBITDA, adjusted free cash flow, and leverage. The company considers adjusted EBITDA to be an indicator of the operating performance of its assets.

The company also believes that adjusted EBITDA is frequently used by industry analysts, investors and lenders as a measure of valuation. These measures are not formulated in accordance with GAAP and are not meant to replace GAAP measurements and may differ from other companies' uses or formulations. The company does not provide reconciliations on a forward-looking basis. Further discussions and reconciliations of the company's non-GAAP financial measures to comparable GAAP financial measures can be found on its website, www.sbgi.net.

Chris Ripley will now take you through our operating highlights.

Christopher S. Ripley -- President and Chief Executive Officer

Good morning and thank you for joining us today. Before I go over the quarter's results and other developments since our last earnings call, I want to address the recent ransomware attack on our company. On Sunday, October 17th, the company identified that certain servers and workstations and its environment were encrypted with ransomware. And disruption of certain office and operational networks as a result of encryption and indications that data was taken from our network. Promptly upon detection of the security events, senior management was informed and we began to implement incident response measures to contain the incident, conducted an investigation and began to plan for restoration operations.

We were counseled and cyber security forensic firm and other incident response professionals who are engaged in law enforcement and other governmental agencies were notified. Investigation into the incident remains ongoing. Needless to say, we are ensuring that operations are back to where they need to be as quickly as possible. We are working with internal resources and outside forensic accountants to help determine the financial impact of the incident. While we maintain insurance to cover losses related to cyber security risks and business interruptions, such policies may not be sufficient to cover the losses. I want to thank our employees for their quick response and creative work arounds as we work through the recovery process. Their agility during this time is a testament to the ethos of our company and we're extremely proud of our team's dedication to restoring our systems.

Now I'll turn to the quarter's results. The combined company's third quarter adjusted EBITDA and adjusted free cash flow were at the high end of our guidance range, while third quarter media revenues were within our range when adjusting all for the one-time change in the distribution rebates of dollars tied to a shift in game talents in the calendar year by the weeks. Looking at recent trends, we are seeing a majority of ad categories recovering quickly. However, the auto sector and other associated -- others associated with the supply chain continue to lag impacted by lower inventories.

While it's difficult to ascertain when the inventory shortages will be alleviated, we're seeing continued strength in our largest category services, coupled with significant growth from sports betting companies that have helped to mitigate the weakness in auto. While we're also starting to see early ad spending for the 2022 mid-term political cycle, early indications from third party research reports are for a robust 2022 political spending cycle. When coupled with even a slow improvement from auto and continued growth in sports betting as more states legalize, we are optimistic heading into 2022.

Speaking of the RSM business, we had a busy last couple of weeks as far as sports rights renewals. On the MLB front, we renewed our exclusive local rights agreement with the Detroit Tigers. The Tigers agreement includes direct-to-consumer and other digital rights similar to the other three MLB teams we have renewed over the past 12 months or so. In regards to the NHL, we renewed our contract with the Detroit Red Wings. In regards to the NBA, we renewed our agreement with the Cleveland Cavaliers.

I would like to address the recent chatter about our direct-to-consumer initiative that we continue to work on for the first half of next year launch. Discussions continue with the leagues on the structure and other specifics of the direct-to-consumer product. This is an important initiative for all parties and all our partners, including the teams and leagues. The evolution of viewer habits makes it imperative that our current product is extended, so that it is attractive to all viewers in the teens territory, who can subscribe to it, whether traditionally through MVPDs or through direct-to-consumer. What's important to note is that we have exclusive local rights for our teams and those rights cannot be infringed upon by any other party to launch a direct-to-consumer product without significant ramifications. So we continue to negotiate in good faith with all interested parties to make direct-to-consumer a reality. In addition, we continue to engage in discussions with stakeholders around funding the direct-to-consumer product.

Now I'd like to take a minute to talk and for a minute about ATSC 3.0 or what has -- what is also referred to as NEXTGEN Broadcast. For those who are not familiar with it, this is a groundbreaking technology that is expected to transform the broadcast industry significantly, allowing us to move from just a purveyor of video and audio to a provider of data for a multitude of industries. I've talked in the past about its benefits, the ability to transmit four to five times the video content through our existing spectrum, a higher quality immersive video and audio experience, targeted advertising capabilities and a one-to-many platform that is more reliable, efficient, secure and cheaper for customers and many of the technologies they are currently utilizing.

The NEXTGEN Broadcast platform will enable significant enhancements for communities around more robust emergency alerting capabilities, not just the rudimentary warnings you see now for weather and such and will enable enhanced education opportunities for areas of the country where the Internet is either unaffordable, unavailable or unreliable. And then there's the technologies and attributes around its mobility and portability, precision GPS positioning and ultra-low latency, which make it ideal for connected automotive applications like mapping and self-driving capabilities, which rely on a great deal of precise and timely data delivery as cellular and Wi-Fi have difficulty economically delivering.

There are a myriad of other datafication uses for the technology as well, including mass software updates, new readings, remote monitoring and maintenance of buildings and countless other uses. I want to dig a little bit deeper to give you better insight into our current priorities for NEXTGEN Broadcast and the applications we and the industry are working on. One important priority is driving the enablement and adoption of NEXTGEN Broadcast by demonstrating the viability and data delivery as a service to potential customers.

Currently, there is testing going on in numerous markets and areas to confirm expectations around quality and versatility of NEXTGEN Broadcast services. Initiatives in this area include encouraging trials of data delivery to automobiles, testing the precision GPS capabilities through the use of drones, testing of NEXTGEN Broadcast reception with phones developed by our partner Saankhya Labs, infrastructure improvements developed by our CAST.ERA joint venture with SK Telecom and distance learning initiatives utilizing the new technology. Meaningful progress in testing in all of these areas is very encouraging and reinforces our belief that NEXTGEN broadcasting is a game changing technology that is the future of the broadcast spectrum and the broadcast industry.

So the question I'm sure everyone wants to ask is how far is it before we begin to monetize the opportunity. The question -- sorry, the answer is that while the timeline is not set just yet, the opportunities are starting to come together. The timeline is approaching for broadcasters to begin to utilize this technology in the mass market. As I stated earlier, the enablement and adoption of the technology at scale are key factors in getting monetization. The NEXTGEN broadcasting is currently expected to be available in approximately half of the TV viewing households by the end of 2021 and at least 75% by the end of 2022.

There are already 70 NEXTGEN TV models capable of receiving a new signal including all Sony TVs with an expected over 2 million NEXTGEN capable TVs to be sold this year according to CPA. Meanwhile testing continues on phones and business-to-business use cases expected to follow soon thereafter. Now, I previously talked about the value of this additional usage to our spectrum. $1.7 billion using the most recent auction pricing. Other ways we can monetize this spectrum are by utilizing it for our business use cases or wholesaling it out to third parties looking to transmit data to mass users. Either way, it's clear that NEXTGEN broadcast will be a game changing technology for the broadcasting industry and for Sinclair and we're very excited that this technology is that much closer to being ready for monetization.

I would also like to address some of the new programing that we are developing. At the end of September, we launched an evening addition of our successful news program, The National Desk. We have been very happy with the performance of the morning edition of The National Desk, which has added engaging news and engaging new program with a distinctive style and tone on stations we're previously running, syndicated programing that garnered fairly low ratings in that daypart. Since the launch of the morning edition of The National Desk, we have seen its ratings and impressions trend up meaningfully.

We have similar expectations for the evening edition of The National Desk, which will feature some new content features developed for the show. This includes the Fact Check Team in which a team of researchers are working on air and on set with the TND anchor team fact checking an issue of the day. These segments will delve into the details of an issue of bill or other hot-button political or government topics and explain in real time how it affects in there for people. Another new feature being added to The National Desk will be a rapid response team, a dedicated staff of digital writers exclusively covering breaking news. The rapid response teams post will live on the TND social channels and sites branded on The National desk and syndicated across all Sinclair television stations sites.

The ability to share content across our business and platforms is a key synergy that benefits our company. For example, we have a new show under development that will -- that is expected to launch at the beginning of next year, titled, The Rally. This show is planned to be a new fast-paced 90 minutes sports program covering all sports topics and infused with social influencers, interactivity and the voice of the fan. The show utilize Sinclair's sports talent from all of our platforms across the country, providing national coverage with a local authority and encouraging viewers to interact through contests, giveaways and commentary.

The new program will be aired across our RSN, Stadium and STIRR platforms, engaging all cohorts of sports viewers. And I would be remiss if I did not call out the growth of our Tennis Channel international platform, which is already expanded into the UK, India and Greece this year with more countries coming soon. The platform was recently nominated for platform of the year for best original content and best digital first production. So, we're very proud of our achievements in the tennis arena, where our content and reach really sets us apart.

Finally, we received quite a few calls from investors regarding the [Indecipherable] parts analysis we did in our last earnings call. I wanted to make sure people are clear on the pieces that make up that valuation. I think the value of investment is well understood, warrants and options to purchase up to 12.8 million shares which at today's price equates to approximately $600 million. The NPV of the tax shield as a result of the purchase of the RSNs is also fairly straightforward, which we estimate to be worth $1.2 billion over the remaining 13 years. The other two big pieces are the [Indecipherable] opportunity I discussed earlier on the call, which we believe to have a value of at least $1.7 billion based on previous spectrum auctions, as well as the non-core assets.

I'll give you a little bit more clarity on what resides in those non-core assets. There are several areas in which we have made investments, including real estate, investments in venture capital and private equity funds and direct investments in companies, mainly focused on technology, content and advertise. The more meaningful of these investments include a minority stake in place like Holdings and Saankhya Labs. Playfly is a marketing and multimedia rights holder, some of the most prestigious collegiate teams and sports ventures across the country, as well as a leader in collegiate esports.

Saankhya Labs is a key partner in the development of ATSC 3.0 and market-leading 5G products including transmission hardware, receiver, chipsets and mobile phones. Our investments in venture capital and private equity funds allow us to be opportunistic around businesses operating a new technologies, TMT adjacencies and complementary sectors to our core business. In total, these assets I have just outlined have a total value together that well exceeds our current market price, adding even and a conservative multiple for our 185 TV stations, our Tennis Channel, News on, STIRR as well as the RSNs and then subtracting out our debt gives you a value well over double where we trade today.

So I hope I've given you some idea of how we look at the opportunities that lie ahead for Sinclair. While the broadcast industry continues to evolve so do we. As we seek ways to grow organically in our television and sports businesses through building content, partnering with others that share our vision and seeking ways to engage our viewers.

With that, I'll turn it over to Lucie for some deeper commentary on the financials. Lucy?

Lucy A. Rutishauser -- Executive Vice President and Chief Financial Officer

Thank you, Chris. Good morning, everyone. For the third quarter results for broadcast and corporate and other, adjusted EBITDA for the quarter was better than we guided, driven by lower than expected media expenses. With 2020 being a presidential election year, results versus last year were down as expected due to the lower political ad revenues. Media revenues for the quarter were within our guidance range and down 3% versus the same period a year ago. Excluding the political ad impact, media revenues increased 10% on higher core advertising and distribution revenues.

For broadcast and other core advertising, revenues in the third quarter increased 17% compared to the same period a year ago and were down 2% versus 2019 pro forma. While the automotive category continue to be weak, strength in the services and sports betting categories help to offset the order weakness. Distribution revenues for broadcast and other increased 3% versus last year and was at the high end of our guidance range. Media expenses were 9% higher in this year's third quarter versus last year on higher network programing fees and production expenses, particularly around more tennis tournaments. Media expenses, however, were favorable to our guidance on both continued cost management efforts across multiple areas and timing of expenses.

Turning to the local sports segment. As discussed on previous earnings calls, distribution revenues and sports rights payments in the local sports statements can be impacted by the actual number of games delivered versus minimum game guarantees, which can result in rebates we paid to distributors or received from the teams. As a result, our prior estimate of rebates due to our distributors was increased this quarter by $14 million as the number of local games expected to be delivered decreased for the NHL. The rebate results in a reduction of distribution revenues for the third quarter. From a cash payment standpoint, there remains $201 million of distribution rebates to be paid, of which $15 million is expected to be paid in the fourth quarter of 2021 and $186 million expected to be paid in the first half of 2022.

Local sports adjusted EBITDA for the quarter was within our guidance range despite the distributor rebate accrual taken during the quarter and fewer games provided by the teams than expected. Adjusted EBITDA versus third quarter of last year was down due to the net benefits of team and distributor rebates that favorably impacted last year's third quarter. Media revenues for the local sports segment increased 4% to $759 million. The increase was the result of higher distribution revenues, partially offset by the $14 million distributor rebate accrual taken in the quarter. Ad revenues declined versus a year ago, in part due to the auto category weakness as well as pent up advertiser demand last year due to the absence of live sports for several months prior to them starting up again in the third quarter of 2020.

Distribution revenues came in higher as compared to Q3 of last year as the third quarter of 2020 included $128 million of distributor rebate accruals, which was offset by dropped carriage and continued subscriber churn. Excluding this quarter's distributor rebate accrual, media revenues would have been within our guidance range. Local sports media expenses for the third quarter were down 10% from a year ago on lower sports rights amortization due to the number and timing of games last year. Media expenses excluding sports rights amortization increased $17 million with the increase primarily driven by costs associated with transitional services and production expenses. Media expenses were favorable to our guidance in part due to timing and in part due to expense controls.

Our local sports adjusted EBITDA for the third quarter excluding the $20 million of non-recurring items was $264 million, down from the prior year, but within our guidance range. For the consolidated Company, Sinclair's total media revenues for the third quarter were $1.526 billion, up slightly from the third quarter of last year. Adjusted EBITDA which excludes $27 million of one-time expenses increased to $451 million. Compared to expectations, revenues were slightly below our guidance due to the rebate accrual and adjusted EBITDA was within our guidance range.

Third quarter consolidated adjusted free cash flow which excludes the adjustments for the non-recurring items was $277 million, which was at the high end of our guidance range. For the quarter, we had $0.25 diluted income per share on 76 million weighted average common shares compared to $43.53 diluted loss per share a year ago, which included an impairment charge. Adjusted for the non-recurring items and the impairment, income per share was $0.52 for the quarter versus income per share of $2.13 a year ago.

Now, turning to the consolidated Company balance sheet, consolidated cash at the end of the quarter was $1,051 million including $558 million at STG and $476 million at Diamond. Neither credit silos revolver were strong during the quarter. And as of the end of the quarter, the balance board under the accounts receivables facility was $183 million. Total debt at the end of the third quarter was $12.530 billion. The net leverage ratio for consolidated Sinclair at quarter end was 6.9 times. Sinclair Television Group's first lien indebtedness ratio on a trailing eight quarters was 2.7 times on a covenant of 4.5 and 3.9 times on a net leverage basis through the bonds, which is in our target range. Diamond's first lien indebtedness ratio on a trailing four quarters was 8.8 times on a covenant of 6.25 times, which only springs if the revolver is strong over 35%. Diamond's net leverage was 11.4 times. During the quarter, we paid down $15 million of debt and paid $16 million in common stock dividends.

Now before I turn to our fourth quarter and full year guidance, I want to note that our expectations exclude the impact of the cyber incident and therefore, guidance does not take into effect any cost or potential lost revenue from the event as the investigation is still ongoing and the financial impact not yet determined. As Chris mentioned, we maintain insurance to cover losses related to cybersecurity risks and business interruption, but such policies may not be sufficient to cover our losses.

For our broadcast and other segments, fourth quarter guidance reflects the absence of political, which is the main driver for media revenues to be down approximately 11% to 13% or $861 million to $880 million versus the fourth quarter of last year. Compared to pro forma fourth quarter of 2019, media revenues would be up 7% to 9%. Excluding the impact of political ad revenue, fourth quarter core advertising is expected to be up low double-digit percent versus Q4 of last year and up low single-digit percent versus Q4 of 2019.

For the full year, media revenues are expected to decrease 1% to 2% or increase 10% excluding political ad revenues. Fourth quarter adjusted EBITDA is expected to be between $240 million and $256 million compared to $408 million last year, primarily on the absence of the political revenue. Full year adjusted EBITDA is expected to be $792 million.

For the local sports segment, fourth quarter media revenue is expected to be up 33% to 34% to $703 million to $712 million versus Q4 of 2020. As a reminder, last year's fourth quarter included a distribution revenue rebate accrual of $168 million. For the full year, media revenues are expected to be up 14% to 15%. Fourth quarter adjusted EBITDA is expected to be negative $8 million to positive $1 million due primarily to timing of sports rights payments associated with the start of the NBA and NHL seasons and continued subscriber churn. As compared to fourth quarter last year, the decline is driven primarily by a $120 million of net rebate benefits booked in Q4 of 2020, continued subscriber churn, as well as distributor carriage dropped during the fourth quarter of last year.

Full year adjusted EBITDA is expected to be $505 million to $514 million. For the consolidated Company, fourth quarter media revenues are expected to be up 2% to 7% to $1.544 billion to $1.572 billion. Fourth quarter adjusted EBITDA is expected to be $232 million to $257 million. Our fourth quarter adjusted free cash flow, $33 million to $58 million. Full year media revenues are expected to be $6.159 billion to $6.187 billion, adjusted EBITDA of $1.298 billion to $1.322 billion, and adjusted free cash flow of $8.08 to $8.41 per share.

And with that, I would like to open it up to questions. Operator?

Questions and Answers:

Operator

Certainly. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions]

Billie Jo McIntire -- Director of Investor Relations

Operator, just checking on the questions?

Operator

Certainly. Please stand by one moment. The next question is coming from Dan Kurnos from Benchmark. Dan, your line is live, please ask your question.

Dan Kurnos -- The Benchmark Company -- Analyst

Can you guys hear me?

Christopher S. Ripley -- President and Chief Executive Officer

We can. Can you hear us?

Dan Kurnos -- The Benchmark Company -- Analyst

Okay, great. Thanks. Yeah, I can hear you back now, Chris. Explain [Phonetic] on this morning, but anyway, I certainly -- I think you rightly called out the amount of noise in the media around what's going on with the RSNs. I'd just love to hear from you rather than from them, you kind of laid out some options, I guess. So, to the extent, you certainly addressed your firm belief that they can't circumvent you from a DTC perspective, so you'd have to be involved in the conversations.

But maybe what's on the table in terms of -- do you have sufficient rights to be the leader in this? Would it have to be a group effort? Just kind of help us think through how you're trying to tackle this problem with the leagues. And attached to that, obviously, I think there's a lot of speculation out there and I have to take a shot, Chris, around the DISH negotiations being tied to some outcome around that. I don't know if you care to comment on the factual nature of that statement or not, but anything kind of helpful as I think you're still now going week-to-week, but this should be really helpful to us.

Christopher S. Ripley -- President and Chief Executive Officer

So, I guess, I'll address DISH first. We are in very short-term renewals at this point and we don't comment on live negotiations. So, that's what I'll say on that question. And then as it relates to the leagues that we have, for MLB, we have linear and authenticated streaming rights for all teams and we have direct-to-consumer rights now for four teams, which are all the teams that we've renewed post-acquisition. And our expectation there is that we will accumulate more direct-to-consumer rights as teams renew.

And then for NHL and NBA, we have always had linear authenticated streaming and DTC rights. And those are under current renewal discussions as a part of a larger deal, which includes market expansion, authenticated streaming and direct-to-consumer rights. So, that's where we stand from a rights perspective and we do think we have critical mass in terms of rights to launch a product, and that's what we intend to do.

Dan Kurnos -- The Benchmark Company -- Analyst

Do you think that -- I mean, the leagues -- having critical mass, I mean, is there any pushback from the league in terms of trying to have a unified product? Or -- obviously, you were interested in the other RSNs before, but to the extent that it requires more of a joint effort or something of that nature, I mean, is that being contemplated or do you really believe that regardless of how that goes forward you can get the product out in the front half of next year?

Christopher S. Ripley -- President and Chief Executive Officer

Well, if you're alluding to bringing in other groups like the Comcast does and the AT&T RSNs, I've always thought that consolidation of the rest of the industry makes sense. I mean, the -- we're in a much better position than anyone else to move forward on direct-to-consumer because we've been planning for this for quite some time. It's not something you can just flip the switch on overnight, but I do think ultimately adding in rights from other groups like Comcast and AT&T makes sense. Whether you do that through transaction, partnerships, contracts, consortiums, that is all, I think, things that will be contemplated in a stage 2.

Dan Kurnos -- The Benchmark Company -- Analyst

Got it. That's helpful. And then, obviously, I'm sure you're aware of where the unsecureds are trading. Just any kind of incremental thoughts on restructuring within the RSN silo?

Christopher S. Ripley -- President and Chief Executive Officer

Yeah. We continue to believe that a new money deal is possible and discussions with the creditor advisors are continuing with earnest -- in earnest. And we're also simultaneously continuing discussion -- discussions with our various commercial partners around that financing.

Dan Kurnos -- The Benchmark Company -- Analyst

Okay. Fair enough, and good luck getting past the ransomware stuff, that's never pleasant.

Christopher S. Ripley -- President and Chief Executive Officer

Thanks, Dan.

Operator

Thank you. Your next question is coming from Steven Cahall from Wells Fargo. Your line is live.

Steven Cahall -- Wells Fargo -- Analyst

Thank you. Maybe first just a follow-up on Dan's questions about restructuring the RSN silo. Could you maybe put a little more color on the liquidity position of Diamond today? Is that anything that you think is cause for a concern? And you mentioned those constructive discussions, do you think you'll need to draw any more liquidity as they'll get done? Or do you feel pretty comfortable about where Diamond is from a liquidity standpoint?

And then, Lucy, could you put some color around the implied retrans sequential growth in the fourth quarter? It looks like it's pretty solid. And I know we've talked a little bit about how net retrans has been negatively impacted by some of your renewal timing this year. So, could we start to look at Q4 as an accelerating net retrans profile into 2022? Thanks.

Christopher S. Ripley -- President and Chief Executive Officer

Great, Steve. I'll address on liquidity side, there is ample liquidity at Diamond and we are good for the next 12 months. So, we're comfortable there.

Lucy A. Rutishauser -- Executive Vice President and Chief Financial Officer

And, Steve, on the retrans. So, as we reported this morning, gross retrans revenue we're expecting to grow low to mid-single-digits for this year, which we've talked about for multiple calls the reasons why which is primarily just having the one renewal in the back half of this year. And then that also assumes mid-single-digit percent subscriber churn for broadcast. And on the churn side, and then I'll get to net retrans. On the churn side, we did see as you saw in the numbers for both broadcast and the RSN slight improvement in churn. You saw that in the revenues, but not really enough for us to change our full year outlook, which again is mid-single-digit churn on broadcast, high single-digit on the RSNs. And then on the net retrans, again, as we've discussed for multiple quarters on the earnings calls, net retrans, we continue to expect to decline mid-single-digits this year.

Again, that's due to the modest increase in the gross retrans as well as the mismatch in both the network and MVPD contracts that renewed this year and then timing of those contracts. So -- and then at this point, we're not really ready to talk about 2022 or beyond, but what I will say is we have approximately 25% of our subs renewing next year with a vast majority of those coming up early in the year. And then we have about 25% of the network subs coming up next year, but those are spread some at the beginning of the year, some later in the year.

Steven Cahall -- Wells Fargo -- Analyst

Great, thank you.

Operator

Thank you. Your next question is coming from David Hamburger from Morgan Stanley. Your line is live.

David Hamburger -- Morgan Stanley -- Analyst

Hi, thanks for the questions. I just wanted to clarify, you mentioned the direct-to-consumer product offering launching in the first half of next year. Just to clarify, is the plan to have a direct-to-consumer streaming product in the market for the baseball season next year, so by April?

Christopher S. Ripley -- President and Chief Executive Officer

Our launch expectations have not changed. Obviously, if there were a change in our rights versus the status quo, we would make that adjustment, but that is -- it doesn't look like what's going to happen here. So, that -- our plans on launch timing are -- remain the same.

David Hamburger -- Morgan Stanley -- Analyst

Okay. And if I go back to your comments on the first quarter earnings call, you had mentioned specifically there that you had the streaming rights for the vast majority of our teams and you did qualify that in maybe a caveat and said we are in discussions with the leagues and the teams on enhancing some of those rights to make the product even better. I was wondering, just to clarify your comments now, you're saying that you have direct-to-consumer rights for four baseball teams, so is it essentially you're saying for the other 10 baseball teams you do not have explicit direct-to-consumer streaming rights in place or an agreement in place with those 10 other teams?

And then with the NBA and NHL, last earnings call, you had highlighted that maybe the beginning of the NBA and NHL seasons this year would be kind of a finish line, if I can quote what you said, for negotiating those renewals. But just to clarify here, so essentially it would seem you have explicit stream rights for only four of your teams at this juncture. Is that fair?

Christopher S. Ripley -- President and Chief Executive Officer

Well, I think I would add to that, that the -- we expect to get to the finish line with the NHL and NBA on those renewal discussions. So, that's over 30 teams there.

David Hamburger -- Morgan Stanley -- Analyst

And then with baseball, I guess, because you're launching for the baseball season, any clarity on the other 10 teams to the extent that you have those rights? I mean, it sounded like the...

Christopher S. Ripley -- President and Chief Executive Officer

Our expectation...

David Hamburger -- Morgan Stanley -- Analyst

The MLB Commissioner gave recently was that you don't have those explicit rights.

Christopher S. Ripley -- President and Chief Executive Officer

On the 10 teams, that is correct. And so, how that has been working is that that those rights have been rolled in as we renewed the master agreement and that is our current expectation.

David Hamburger -- Morgan Stanley -- Analyst

Okay. And then just quickly on the financing for this product. I believe on the last call we discussed this, you are looking for new money as part of this launch effort. And it seems that at least to date, you have not been successful getting new money from existing Diamond's creditors. I'm wondering, what avenues you might pursue, would Sinclair be willing to put new money into this venture if that were needed? Or do you still hope that you'll be successful in maybe negotiating with Diamond Sport creditors? Or could there be another potential equity investor here?

Christopher S. Ripley -- President and Chief Executive Officer

Look, I think that's all possible, but we believe that a new money deal is still possible with the creditors and we continue to have constructive discussions with that -- in that regard. As it relates to other sources of capital, Sinclair or otherwise, that -- those were not -- we wouldn't exclude those from any possible solution here, but those would have to -- each party would have to have something in it for them to make such investments.

David Hamburger -- Morgan Stanley -- Analyst

And just so we have a sense of expectations here, when would we expect to hear some developments? I mean, April is not that far off and we're wondering how you communicate to the market that you have sufficient both financial flexibility, new money investment and that you have enough of a runway or time here to launch this product offering and sell into the market.

Christopher S. Ripley -- President and Chief Executive Officer

Well, I think what's important to note is that we already do have an app, and this is a product extension of what we're already building. So on the technical side, there's a lot of work and effort around making enhancements to that experience and making it available to be switched on to -- for purchase on a direct-to-consumer basis. So, things are moving in tandem in order to hit our timing. And as soon as we settle with the leagues, we will lay out more specifics at that time.

David Hamburger -- Morgan Stanley -- Analyst

So, just one quick follow-up on this, the last question. With regard to your renewals with the distributors, it's like that [Phonetic] Suddenlink and Optimum, you did cost communications earlier this year, were there any part of those renewal discussions? And I imagine they might be part of the discussions with DISH about the direct-to-consumer product offering and how that fits into the existing relationships you have with those distributors?

Christopher S. Ripley -- President and Chief Executive Officer

Yes. Where applicable, we have built in what I've referred to in the past in terms of pricing protection for the distributors where they get to buy on a wholesale basis and the consumer will buy on a retail basis. And so, there's a significant margin there in terms of price differential that is in every one of our renewals over the last couple of years we have implemented, where needed, that provision.

David Hamburger -- Morgan Stanley -- Analyst

Okay. Thank you very much.

Operator

Thank you. Your next question is coming from Aaron Watts from Deutsche Bank. Your line is live.

Aaron Watts -- Deutsche Bank -- Analyst

Hey, everyone. Thanks for having me on. Chris, is it fair to say that the takedown on the top end of guidance for Diamond for the full year in EBITDA mainly reflects DISH not coming back this year? And, I guess, relatedly, as we're now approaching the midpoint of the NFL season, which I at least view as the time of year when you probably have peak negotiating leverage with distributors. I guess, I'm just trying to understand, like, your willingness to provide extensions at this point in contrast maybe to some of your peers right now and kind of what agreements or terms have maybe been laid down that give you comfort in providing extensions this deep into the NFL season with DISH?

Christopher S. Ripley -- President and Chief Executive Officer

Yeah, Aaron. So, there's not a lot I can say on DISH because it is still an active negotiation. As I mentioned, we are in very, very short-term renewals at this point in time for a lot of the dynamics that you just mentioned. And our expectations -- our guidance reflects sort of what our current expected outcome is.

Aaron Watts -- Deutsche Bank -- Analyst

Okay. All right. And one follow-up on kind of the launch of a D2C platform in the first half of next year. Would that -- would it be your plan to launch that with just the four MLB teams you currently have the D2C rights to? Or is it your expectation that by that launch, there would be some further traction on rights with the teams and/or the league?

Christopher S. Ripley -- President and Chief Executive Officer

That certainly is a possibility. But at this point, things are still fluid. So, I wouldn't want to commit one way or the other to how that might play out.

Aaron Watts -- Deutsche Bank -- Analyst

Okay. And if I could just ask two others. On the station side, given some of the actions being taken by your network partners to bolster their own streaming services, such as placing content on those services that used to be exclusive to broadcast, do you see any opportunity during the next round of renewals with the networks to push back on increases in reverse comp? And, I guess, relatedly, how should we think about where the margin is today on retransmission fees and where that might be headed over the next few years, especially in light of the new long-term NFL broadcast deal?

Christopher S. Ripley -- President and Chief Executive Officer

Look, we're -- as we've, I think, stated many times, margin isn't really something that we focus on. We focus on growing the net dollars because we don't create EBITDA with a percentage margin, we create it by adding incremental dollars. And we had sort of tough timing this year on net retrans, which we've talked a lot about, so I won't repeat it. And we think we'll be able to get back on the growth trend after we get through this adjustment year. And really, that's what matters at the end of the day in terms of how we grow additional profitability. And we see big upside on retrans still existing, given the relative strength of broadcast versus what's happened to cable channels over the following -- over the last few years.

Aaron Watts -- Deutsche Bank -- Analyst

Okay. Got it. One last one, and I appreciate the time. Just around the capital allocation policy for the TV station group. I believe there's been a little bit of an overhang at least on the STG credit side due to worries about direct or -- and/or implied support for Diamond encompassing cash distributions or retransmission fees. I would appreciate your latest thoughts on how to -- how much support direct or otherwise you see the TV station group providing Diamond going forward? And thanks again.

Christopher S. Ripley -- President and Chief Executive Officer

Thanks, Aaron. So, as we've stated many times, the two silos, we view them quite independently in terms of their capital structure and funding their business plans going forward. To the extent that Sinclair or sort of the TV side were to support the Diamond, there would have to be a strong financial reason to do so. So, just think about it as two independent parties and the investment makes sense, then, obviously, it could happen. But if it doesn't, then it wouldn't.

Operator

Thank you. Your next question is coming from Lance Vitanza from Cowen. Your line is live.

Lance Vitanza -- Cowen -- Analyst

Thanks, guys. I wanted to go back to the recent New York Post story and the way it was written suggests that MLB is thinking about or moving ahead on direct-to-consumer and possibly doing it without Diamond or Sinclair. But my read is a little different. I mean, I would think that MLB, their incentive, right, is just to ensure that consumers have broad access to live games online, not only for guys that are in Diamond RSN territories, but for all of the teams in its leagues.

And in other words, the league won't be content with Bally Sport doing a great job, for example, if AT&T and NBC are failing to promote their own app. So, am I crazy to think that all parties actually could be better off -- all parties, including the RSNs, instead of each RSN having its own local sports app, there was some sort of national MLB app that essentially plugged in to each of the RSN's local content, the RSNs could still get paid for providing the content, but could benefit from Major League Baseball branding and promotion and that kind of thing? Or do you think the league really is just trying to disintermediate the RSNs?

Christopher S. Ripley -- President and Chief Executive Officer

Look, we are big believers in scale in general, but very specifically in direct-to-consumer. And that -- in order to be successful in direct-to-consumer long-term, we think you need scale well beyond a team or just a league. And that's why a multisport offering makes a lot of sense. That's why we've always said this direct-to-consumer off -- extension that we'll -- we're planning on launching is just the start in terms of where we would go. And we're going to be a market leader in the US in direct-to-consumer sports thinking that you could do that with only one league, we think is -- doesn't make sense and certainly dovetails with everything I've said about wrapping in the other RSN content and ultimately other direct-to-consumer rights over time.

Lance Vitanza -- Cowen -- Analyst

Okay. Thanks. And then maybe just a quick follow-up. So, how much of Major League Baseball's concerns do you think center around the overleveraged balance sheet at Diamond? I mean, if the balance sheet were cleaned up, does that -- is it basically game on at that point? Or are there other issues that the league is concerned about?

Christopher S. Ripley -- President and Chief Executive Officer

Look, I think getting additional financing would be helpful for all parties. I mean, that's sort of undeniably true. So -- and I think you're spot on in that observation.

Lance Vitanza -- Cowen -- Analyst

Okay. Thanks, guys.

Operator

Thank you. There are no further questions in the queue. I will now hand the conference back to Chris Ripley, President and CEO, for closing remarks. Please go ahead.

Christopher S. Ripley -- President and Chief Executive Officer

Thank you all for joining us today. If you should need more information or have additional questions, please don't hesitate to give us a call.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

Lucy A. Rutishauser -- Executive Vice President and Chief Financial Officer

Billie Jo McIntire -- Director of Investor Relations

Christopher S. Ripley -- President and Chief Executive Officer

Dan Kurnos -- The Benchmark Company -- Analyst

Steven Cahall -- Wells Fargo -- Analyst

David Hamburger -- Morgan Stanley -- Analyst

Aaron Watts -- Deutsche Bank -- Analyst

Lance Vitanza -- Cowen -- Analyst

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