Key Points:

Sinclair is considering its strategic options for its broadcast operations, including mergers and alliances.

The company is also considering spinning off its Ventures unit covering assets like the Tennis Channel and Digital Remedy.

Q2 revenue fell 5% to $784 million but stock rose around 15% on the news.

Key Background :

Sinclair Broadcast Group, the country's second-largest television broadcaster, has 178 stations in 81 markets. In addition to its core business of broadcasting television, the company also maintains a portfolio investments pool called Ventures with real estate, private equity, sports media, and ad tech assets.

Although its diversified portfolio, Sinclair's bottom-line performance in general has been suffering. For the second quarter ended June 30, Sinclair reported revenue of $784 million, down 5% from a year ago. Decreasing advertising and shifting media usage patterns have put pressure on the broadcast segment, whereas Ventures added close to $11 million of returns on minority investments.

The strategic analysis will establish the best route to shareholder value maximization. For the broadcasting business, it may include creating mergers or strategic alliances that add scale and competitiveness in a rapidly evolving media world. In so doing, the company also contemplates spinning out its Ventures business as a stand-alone company. That would allow Sinclair to stay on its core broadcasting strategy but give the Ventures business opportunity its own growth path.

Industry observers point out the move is part of a broader trend of consolidation in the television broadcasting sector. As viewers move to digital and streaming, old-fashioned TV companies are resorting to mergers to reduce costs, drive leverage for negotiating with advertisers, and build market share. Sinclair's drive towards a two-pronged strategy of consolidating broadcasting and divesting non-core properties is symptomatic of adaptability in the adverse environment.

The upbeat investor reaction to the news, with shares rising some 15% in after-hours trading, indicates robust market confidence in Sinclair's leadership vision. The firm cautioned, however, that the review is in preliminary stages and no conclusion has been made.

If done correctly, Sinclair's reorganization is a lesson on how the old media conglomerates can maintain the core business even as they invest in diversified activities, poised for stability and growth in the face of a changing media landscape.

About the Author

Ryan Parker

Ryan Parker is a Managing Editor at Business Minds Media.