Disney Should Have Multiple Suitors for Fox's Regional Sports Networks

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Disney would need to sell 22 regional sports networks under its deal with Fox, and those interested in buying them might include tech champions like Amazon and YouTube, according to analysts who spoke with TheWrap.

“I think there’s a lot of interest out there in the marketplace,” Lee Berke, president and CEO of sports consultancy LHB Sports, told TheWrap. “The reality is that it’s very rare you have a group of sports networks you can combine.”

Last week, Disney gained approval from the Department of Justice in its $71.3 billion acquisition of Fox’s film and TV entertainment assets and agreed to divest Fox’s 22 regional sports networks, which it would gain in the acquisition. Disney will have at least 90 days from the date of closing of the transaction to complete this sale, with the possibility that the DOJ can grant extensions.

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Despite the rapid escalation of rights fees and the general downward trend of live TV ratings, analysts agree that regional sports networks are still a valuable commodity in the TV ecosystem. For starters, they carry with them a very loyal viewer base and still provide reliable revenue streams.

“It generates ratings and viewership on a regular basis. It’s not like another category of entertainment programming,” Berke said. “You’re putting out thousands of games per year and the audience keeps on coming back.”

The 22 regional sports networks collectively hold local TV rights for 44 professional sports teams across the NHL, NBA and Major League Baseball. The crown jewel is the YES Network, which airs New York Yankees and Brooklyn Nets games, while also owning RSNs in other major markets including Detroit, Southern California, Dallas, Cleveland and Miami.

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In December, Guggenheim Securities placed the value of the 22 RSNs at $22.4 billion, according to the Los Angeles Times. That’s almost one-third of Guggenheim’s $68-billion valuation for all of the assets that Disney is set to buy from Fox.

Streaming bundles, or so-called Virtual MVPDs (Multichannel Video Programming Distributors), “are going to bloom over the next few years,” says Alan Wolk, co-founder and lead analyst at media consulting firm TV[R]EV. “As they explode, the downside for the people who own them is it’s very easy for people to jump from one to the other.”

As DirecTV has no doubt learned with its NFL Sunday Ticket deal, having something your competitors don’t can tip the scales. Companies like AT&T, Dish Network, YouTube and even Amazon could make a play. “If you can put 22 networks across the country, than you establish a footprint for that kind of content,” said Berke. “The over-the-top companies and virtual MVPDs are picking up some of the slack for the shrinking pay TV universe.”

Also Read: Disney Wins Approval From Department of Justice for $71 Billion Fox Bid

Amazon in particular has been trying to make inroads into the live sports arena, as it seeks to pump its Prime Video service to compete with Netflix and Hulu. In the last few years, the retailer has grabbed rights in the U.K. for the Premier League and Tennis’ U.S. Open to go along with the NFL’s “Thursday Night Football,” which the company recently renewed for two more seasons.

“Amazon’s a really interesting possibility,” said Wolk. He said Amazon could use sports to boost its retail business by looking up what viewers are watching and then try to sell them sports merchandise.

“The flip of Amazon is that they don’t have a whole lot of viewers and they haven’t done a great job,” added Wolk.

Amazon did not immediately respond to a request for comment.

9 Biggest Billion-Dollar Entertainment and Media Deals in 2017 (Photos)

While all eyes were on AT&T's $85 billion acquisition of Time Warner, announced in late 2016 but facing an antitrust lawsuit from the Justice Department, there were plenty of other megadeals in media, tech and entertainment that kept investment bankers busy in 2017.

Here are some of the biggest deals of the year:
Getty Images
Disney to acquire most of 21st Century Fox for $52.4 billion

In a massive deal that could change the entertainment industry even more than AT&T-Time Warner, Disney announced plans to acquire Fox's film and TV studios and much of its non-broadcast television business, including regional sports networks and cable networks such as FX, FXX and Nat Geo. Disney would also pick up Fox’s stake in the European pay-TV giant Sky — and be better positioned to win regulatory approval to complete the acquisition of the 61 percent of the company it does not already own.
Discovery Communications agrees to buy Scripps Networks Interactive for $11.9 billion

The merger of two cable powerhouses brings together channels including Discovery, Science, Food Network and HGTV – and could give the combined company a stronger position as pay-TV continues to migrate to the internet.
Discovery/Scripps
Sinclair Broadcast Group agrees to buy Tribune Media for $3.8 billion

This deal, if approved, would give conservative-leaning Sinclair control of 223 stations in 108 markets, including 39 of the top 50, covering 72 percent of households in the country. And it's only possible under rule changes implemented by new FCC Chairman Ajit Pai.
Sinclair/Tribune
Cineworld offers to buy Regal Cinemas for more than $3 billion

After a string of movie theater mergers last year, the sector has quieted down -- along with the box office. And while this isn’t yet a done deal -- or even an accepted offer -- British chain Cineworld made a late November bid of $23 a share for the U.S.’s No. 2 cinema chain.
Cineworld/Regal
Meredith Corp. acquires Time Inc. for $2.8 billion

The magazine megadeal is a sign of changing times in the publishing industry, with the owner of esteemed brands like Time, Fortune and Sports Illustrated selling to the parent of Better Homes and Gardens and Country Life – backed by $650 million from big-time conservative donors the Koch brothers.
Meredith/Time
Verizon acquires Straight Path Communications for $2.3 billion

Straight Path may not be a household name, but it was the subject of a bidding war between AT&T and Verizon. The company is one of the largest owners of millimeter wave spectrum, seen as key to the buildout of 5G networks, which should power much faster mobile internet -- better for video -- in the near future.
Verizon/Straight Path
Disney buys the rest of BAMTech for $1.6 billion

The Mouse House jumped into internet TV in a major way in 2017, announcing upcoming Disney and ESPN-branded streaming services and acquiring the rest of streaming tech company BAMTech to power those products.
Disney/BAMTech
Entercom buys CBS Radio for $1.5 billion

CBS Radio was intended to be spun off from its broadcast parent in an IPO, but instead it was scooped up by a competitor. The combined company, now the second largest radio business in the country, owns and operates 244 stations in 47 markets.
Entercom/CBS Radio
MGM buys the rest of Epix for $1 billion

The independent studio went all in on the pay-TV business, buying the rest of the premium cable network from Viacom and Lionsgate. And that's paid immediate dividends, as MGM's media networks division propelled it to a strong third quarter.
MGM/Epix

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Rewind 2017: Media and content consolidation continued this year

While all eyes were on AT&T's $85 billion acquisition of Time Warner, announced in late 2016 but facing an antitrust lawsuit from the Justice Department, there were plenty of other megadeals in media, tech and entertainment that kept investment bankers busy in 2017.

Here are some of the biggest deals of the year:

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