Bankers at Allen & Co. received final-round bids for the 21 Fox RSNs – not named YES Network (sold separately to Yankees/Sinclair/Amazon for $3.47 billion) – from Sinclair Broadcast Group (SBGI), Liberty Media (LBTYA) and the Big3 basketball league. Fox Business reported that while SBGI submitted the auction’s highest bid – worth +/- $10 billion – they’ve yet to be declared the winner; the possibility remains that one of the other bidders could still put forth a more attractive offer as bankers continue to “work the deal.” While the Fox story suggested a decision could occur “in the coming days”, Walt Disney Company (DIS) has until mid-June; the company was given 90 days from their March 20th closing (on 21st Century Fox’s entertainment assets) to unload them.
Howie Long-Short: When Disney agreed to buy the Fox RSNs it presumed that on the open market the lot would command bids between $20 billion and $22 billion – they were valued at $20 billion based on what DIS paid – so, the house of mouse wasn’t planning on taking a +/- $6 billion loss in its efforts to comply with antitrust regulations. But with the TV bundle continuing to fray, the number of cord cutters growing and “sports leagues maintaining ownership (rather than the networks) of digital rights” many of the parties expected to submit bids (see: Comcast, Fox, Amazon) remained on the sidelines.
MLB was interested in taking control over the RSNs because they feared a private equity firm – focused solely at the bottom line – wouldn’t invest in the promotion and marketing of its small market teams, not because it wants to become a “big media house”; Octagon SVP Dan Cohen (Global Media Rights Consulting Division) said that the sale of BAMTech was a “clear indication they did not want to own and operate technology” (aside from MLB Network and MLB.tv). Ultimately the cost of acquisition got too high for the league to submit a solo bid and they opted to take a minority position alongside Liberty Media, but Cohen believes that MLB ends up in a limited partner capacity with whomever the declared winner is (with an investment post-close). “They are the content creators. If you’re going to invest $10 billion dollars amidst a rapidly changing landscape, you need to be aligned with them.”
If Cohen’s hunch is correct, Sinclair is going to be named the auction winner. While he admittedly doesn’t have any “inside information”, the company has “made it clear that the RSN business is important to them. They’ve partnered with the Cubs to launch Marquee Sports Network and they’re the lead investor in the group that has agreed to buy the YES Network. If you follow the money, it’s logical they would end up with the remaining 21 RSNs.”
MLB is riding the Liberty bid to the finish line, but Cohen says that it is Sinclair prime positioned to operate the collective of cable sports networks. “They understand the local market content business – they own a lot of local markets – and on a national level, they’ve proven to be deft negotiators; look what they’ve done with The Tennis Channel” (see: fastest growing TV network).
SBGI’s familiarity with local markets should prove beneficial, but the company is still going to need to find a way to “navigate changing consumption patterns and cord cutting” (see: AT&T lost 544K TV subs, 83K OTT subs in Q1). Dan believes the way to do that is to “retain more rights and to get creative – in collaboration with MLB and the states – to monetize the sports betting opportunity. All of these potential buyers are gambling that they’ll be able to retain viewers longer during a 9-0 blowout by serving up prop bets – and acting as the intermediary [assumes the RSNs eventually obtain the local mobile rights] to place those bets. That’s where the upside is within the RSN business.”
Fan Marino: The Big3 won’t be the winner – aside from lacking the infrastructure to operate, they lack the capital; Forbes reported their bid was “heavily leveraged – but credit Ice-Cube and Co. for “reimagining the content that could live on a regional sports network.” Aligned with stars like Snoop Dogg and Beyoncé “their plan was to make each RSN a cultural initiative across sports, music and entertainment. They were going to supplement their live sports programming with concerts and original programming – leveraging their celebrity networks to provide viewers with exclusive access and BTS action.”
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