Disney (DIS) announced that it is acquiring 21st Century Fox’s film and television assets, including; Sky Sports (U.K.), Star Sports (India) and 22 regional sports networks (valued at $20 billion to $23 billion) for $52.4 billion in stock (plus an additional $13.7 million in net debt assumed). The 22 RSNs are the cable television homes of 44 (out of 81) professional MLB, NBA & NHL franchises; producing more than 5,500 live game broadcasts each year. FOXA isn’t exiting sports all together; the company will retain the rights properties that air on the Fox broadcast network (NFL, World Series etc.). FS1, FS2 and FOXA’s stake in the Big 10 network are also not included in the transaction.
Howie Long-Short: This is a sports deal as much as it is entertainment play for DIS; with +/- 40% of the deal’s value tied up in the RSNs. Fans consider RSNs to be their most valuable cable channel and the 5th most important channel within their entire cable bundle (behind the 4 broadcast networks). They also command the 2nd highest monthly fees within a cable bundle (behind ESPN), so ESPN certainly acquired quality content. Murdoch, of course, isn’t nearly as high on RSN’s; he’s watched broadcasting rights rise at a faster rate than affiliate revenue can grow. Assuming the deal is approved by antitrust regulators, FOXA shareholders will receive 0.2745 DIS shares for each share they own. DIS shares closed at $110.57 on Thursday.
Fan Marino:DIS is launching its OTT service, ESPN+, in ’18. When the existing RSN contracts expire, look for the WWL to pursue streaming rights for those 5,500 local broadcasts. That’s the valuable content it needs to draw subscribers to the new platform. If you live in Detroit and can get Wings, Tigers and Pistons games on ESPN+, and Lions games on Yahoo! (all accessible on mobile); there is no longer a need to subscribe to a cable bundle.
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