“new Fox” Extends MLB Deal, No Longer Favorite to Re-Acquire RSNs

MLB 200x200

MLB has extended its media rights partnership with Fox Sports through the ’28 season, signing a new 7-year deal worth +39% more ($728.6 million/year) than they’re currently receiving ($525 million/year). The new pact ensures “new Fox” will continue to broadcast the World Series, the MLB All-Star Game, 2 Playoff Series (1 LDS, 1 LCS), Saturday Game(s) of the Week and Spanish-language broadcasts (on Fox Deportes) for the next decade; Rupert Murdoch’s company also picked up the rights to produce more games (think: for possible primetime, mid-week broadcast on Fox) and to air games on the social live streaming platform Caffeine. The new $5.1 billion new pact will take effect in ’22, following completion of the current 8-year agreement.

Howie Long-Short: Opting to extend the existing deal with 3 years remaining was logical on both sides. MLB got a substantial increase on the packages’ valuation, while “new Fox” retains cornerstone programming for its revamped broadcast strategy (sports/news focused).

Back on November 1st, it appeared (and we wrote) that “new Fox” was the “front-runner” to buy back the RSNs sold in their $71.3 billion deal with Disney, but that no longer appears to be the case. Comcast, another logical destination, has also said it would not be pursuing the highly-rated cable networks; but that doesn’t mean there’s a lack of interest, as of Nov. 8th more than 40 bids had been submitted.

Chris Lencheski is an experienced global sports, media, and private equity executive with c-suite stops at Comcast-Spectacor, TPG Specialty Lending, IRG Sports and Entertainment, SKI & Company and currently an adjunct professor at Columbia University. I asked Chris, name a couple of under the radar companies that would make sense as potential landing spots?

Chris: I understand that Liberty (Media) is looking at it and Guggenheim is lurking in the background, but Sinclair is uniquely positioned because of their owned and operated channels; (in fact the largest television station operator in the US by number of stations) – they could perform well, have invested in and have wanted to further acquire sports rights but on a truly scalable format – this one such opportunity.

Another company unreported in all of this is beIN Media Group, but their acquisition of the RSNs would enable the company to do something they haven’t been able to do date (i.e. move up on the dial) even though they’ve spent an enormous sum of money over the last several years. They have access to the capital needed to buy the lot and they have access to programming capital, plus some very smart aggressive executives that have the grit for a deal like this.

As a prospective buyer, what would give you hesitation about buying the lot of Fox RSNs?

Chris: Companies with less broadcast centric strategies (think: Amazon, Facebook, even a outlier like Weibo) are pushing down the value of RSNs, but the bigger concern depends on where you think regionalization is going in a macro on-demand world. Most of the viewing public can capture just about every single item in sports in either real-time or near real-time, so the RSN specific rights to develop the Detroit market are important, but it’s more important, almost exclusively, to just that market; and the re-licensing rights of the Detroit Tigers to a 3-hour baseball game are less important than a live cutaway or access when something happens (see: DAZN’s new deal with MLB).

Fox’s most valuable RSN, YES Network (+/- $4 billion), won’t be sold as part of the lot; it’s a “foregone conclusion” the Yankees will exercise their right to re-purchase the remaining 80% of the network. I asked Chris, would any other teams look to acquire/re-acquire their own broadcast rights?

Chris: “If the Yankees re-purchase theirs, I’m certain Ilitch (Detroit Tigers) may take a serious run at purchasing their market. It would also make sense for the Southern California teams (think: Dodgers, Angels) and I would suggest a Tampa Bay Rays organization would be better off selling thru their Rays rights and creating a network for everything Tampa Bay Regional sports (than selling only their local broadcast rights).”

Fan Marino: The reason Fox sought the rights to broadcast games on Caffeine, a platform best known for the its gaming, entertainment and creative arts (think: Live Nation music concerts) content, is because they’re investors. Back in September, “new Fox” made a $100 million investment into the company and the newly formed co-owned JV Caffeine Studios; a content studio that will “create exclusive esports, video game, sports and live entertainment” programming for Caffeine. I asked Chris, why would a company focused on broadcasting live sports (and news) on linear television invest in a social live streaming platform?

Chris: That’s (social live streaming is) going to become the new normal as consumer’s age out of watching sports in certain formats and even more potential consumers age into always having a secondary screen or multitasking while you’re watching. You can call it gamification, but fundamentally a platform like Caffeine puts pressure on all the partners to expand streaming with insights across fantasy and betting (see: games blacked out) and the total value of viewership (think: stats for fantasy, betting, plus a future of snapchat/amazon style “lens” merchandising sales).

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Next Generation Record Label to Provide Soundtrack to NBA’s Top Plays

UnitedMasters

UnitedMasters and the National Basketball Association have announced a deal that will give the league authorization to use the music published by UnitedMasters artists in highlight videos across all “digital properties and (its) social community of 1.5 billion”; the songs may also be used within in-arena highlights packages. The NBA’s partnership with the music distribution service will provide fans with “a new way to discover music”, as posts on social media will document the artist’s name and song title and provide a link back to the song and artist. UnitedMasters was founded by former Interscope EVP Steve Stoute, who envisioned the platform serving as the “next iteration of what a record label should be”; one that enables artists to connect more directly with their fans while maintaining ownership of their music.

Howie Long-Short: UnitedMasters, which offers up and coming artists a platform for distribution, wants their music placed on a variety of platforms (think: video games, influencer videos) that together will meet or exceed terrestrial radio’s reach; and this deal furthers that mission (even if the NBA isn’t paying for spins). The company’s standard business model entitles artists keep 90% of the revenue generated in royalties, while the company retains 10% as a distribution fee.

UnitedMasters’ up-and-coming independent artists are big winners in this deal (again, even if they’re not being paid each time their song is played). The league’s social channels offer “a global digital stage” (see: NBA highlights receive 19 billion impressions/year) that can be used to build a fan base; and once they do, they can begin to establish lucrative brand partnerships. They’ll also be able to sell both concert tickets and merchandise directly to their new fans.

As for the league, they’ll save on major label licensing rights. It would be reasonable to assume they’re also entitled to a portion of any sales originating through their channels, though no financial details were released.

There are 2 ways to play UnitedMasters; Alphabet (GOOGL) led the company’s $70 million Series A round back in November ’17 and 20th Century Fox (FOXA) invested alongside them.

Fan Marino: While we’re discussing NBA news, Golden State introduced a new monthly ticket offering that will provide fans with entry to all home games (and the right to team giveaways) for just $100. There’s just one catch, the ticket does not actually come with a view of the court. The Warriors “In the Building Pass” simply gives the holder the right to convene in one of the arena’s bars/restaurants, overpay for a few beers and catch the game on television; which is delayed relative to the crowd cheering/booing. Howie seems to think everyone won in the NBA’s deal with UnitedMasters, but there are going to be clear losers with this arrangement and they’re going to be Warriors fans.

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“New Fox” Front-Runner for “Old Fox” Regional Sports Networks

Fox

Earlier this month, The Walt Disney Company (DIS) sent out official bid books to potential buyers for the 22 regional sports networks they’ll acquire (and then sell-off) as part of the $71.3 billion deal for 21st Century Fox film and TV assets (to close H1 ’19). “New Fox”, focused on live sports and news programming, is believed to be the “front-runner” for the lot of “Old Fox” RSNs. A deal with Rupert Murdoch would allow Disney to unload the RSNs in a single transaction, as opposed to selling them off “piecemeal” (more timely, difficult), and would give “New Fox” the opportunity to reclaim the cable assets at a discount worth billions. Initial bids are due one week from today (Nov. 8).

Howie Long-Short: The Justice Department is requiring that DIS sell-off the RSNs to prevent the company from having too much control within the sports broadcasting space. With ESPN under its umbrella, DIS already owns the rights to more sports content than any other broadcaster.

Disney paid a premium to acquire the package of RSNs after a bidding war with Comcast drove the price tag up +/- $20 billion, but as stand-alone properties it appears the cable sports channels are worth less than the premium DIS paid. Why? “There is doubt about the long-term future of regional sports networks in their current form.” High carriage rates and declining ratings could eventually lead distributors to drop the channels. (see: DirectTV/SportsNetLA, Home of the Dodgers).

I asked Octagon SVP Global Media Rights Consulting, Dan Cohen if he thought RSNs were a risky acquisition given the current sports media landscape?

Dan: Yes, the traditional media business is under intense pressure and consumption habits have shifted and will continue to shift. However, live sports rights are still of high demand. In our current world of unbundling, I’m not sure you need as much linear distribution as once required. I can envision a world in which a RSN goes direct to consumer, technology now affords that option. The same goes for carving up multiple Virtual Multichannel Video Programming Distributor distribution deals; YouTube TV has already shown this with MLS and there’s more to come.  

Specific to RSNs, their benefit is their locality. Sports are incredibly tribal and community driven and such, local premium sports content will remain a highly valuable asset. The bigger challenge I’d pose to the new RSNs owner(s) is how will they push the envelope to connect with the next generation of consumers? What contractual obligations will they negotiate with their local teams (think: access and content exclusivity)?  What technologies will they invest in to increase interactivity with the content? How will they empower the consumer to customize their viewing options? How much will they invest to meet the demand of a consumer who now expects to be able to watch their content whenever, wherever, and across many platforms? There’s a lot of questions to be answered. 

Guggenheim valued the 22 RSNs (which collectively control broadcast rights to 44 MLB, NBA & NHL teams) at $25 billion, but expect the lot to draw offers between $16-$20 billion. Fox (FOXA) would offer DIS the cleanest transaction, but it’s been reported that P.E. firms (see: Apollo Global Management, Blackstone Group, KKR, Providence Equity Partners and Silver Lake Partners), tech companies (see: Google, Amazon, Facebook) and broadcasters (see: Sinclair Broadcast Group) are also all kicking tires on the cable networks.

Howie: Why is Guggenheim’s estimate so much higher than the projected winning bid? Who ultimately takes down the lot?

Dan: Initially, when news first broke and I expected Comcast to bid aggressively, I thought the valuation was between $23-$25 billion; with the potential to reach $28 billion if an aggressive bidding war broke out. However, with Comcast seemingly not bidding on the RSNs, I would lower my expectations and estimate that they’ll be valued between $18–$22 billion with a high watermark of $25 billion.

As for who takes the lot down, Fox is certainly the lead horse. That said, there’s still a few more laps to run and I expect Charter, Liberty and even Sinclair with PE backing to make a pitch. I also wouldn’t discount a surprise challenger bid from lesser widely publicized media co.

While it’s been surmised for some time, that the Yankees (which control 20%) would buy back the YES Network (they have first right to do so), prospective bidders have been asked to include YES in their offers; that’s because DIS is reportedly seeking $5-6 billion for YES, a significant premium to its $4 billion valuation. Of course, YES is the most valuable RSN among the group. It’s been estimated that collectively, the RSNs generate $2 billion/year in EBITDA; YES (2nd most expensive cable channel, ESPN 1st) is responsible for bringing in +/- 25% of that total.

Fan Marino: Sure, subscriptions (to RSNs) and ratings (to the games on the RSNs) are down, but RSNs continue to warrant high carriage prices and relative to the remainder of the networks in your cable package, they continue to perform well ratings wise. In fact, the 29 RSNs that own MLB rights saw ratings rise +2% YoY during the ’18 season, league games were the most watched programming in primetime on cable television in 28 of 29 markets (Miami is the exception) and 12 of the RSNs were tops in their market in primetime, amongst all programmers.

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Comcast Takes Control Sky PLC, to Challenge Netflix, Amazon Overseas

SKY

Comcast emerged triumphant in its effort to take over Sky PLC (Europe’s largest pay TV provider) after outbidding Twenty-First Century Fox (on behalf of Disney), by +/- $3.6 billion, in a rare settlement auction; Comcast’s bid valued the company at +/- $39 billion. Disney, which will take over most of Fox’s film and TV assets, subsequently announced it would sell Comcast Fox’s existing 39% stake in Sky at the auction-winning bid price of $22.54/share. The addition of Sky expands Comcast’s distribution outside of the U.S. (to UK, Ireland, Germany Austria, Italy, Spain and Switzerland) and increases their global footprint to +/- 53 million customers; existing infrastructure that puts the company in position to effectively compete with Netflix (+/- 29 million subscribers across Europe in 2017) and Amazon outside of North America.

Howie Long-Short: Selling its 39% stake in Sky PLC (SKYAY) at $22.54/share ($15.6 billion) must be considered a win for DIS considering it valued control in the company at just $20.44/share during the blind auction and Comcast didn’t need their stake (i.e. little leverage) to gain control over the British pay-TV group.

The +/- $15.6 billion price tag greatly reduces the financial leverage DIS needs to close the $71.3 billion Fox (FOXA) acquisition and when you consider the revenue that’s expected to be generated from the sale of FOXA’s 22 RSNs (valued at +/- $15 billion-22 billion), it’s feasible net acquisition costs could drop all the way down to +/- $35 billion. Significantly reducing the financial debt load is important to Disney with costly broadcast rights renewals on the horizon (see: NFL 2021, MLB 2021, NBA 2025) and the company undergoing the capital-intensive transition from legacy wholesale model to a direct-to-consumer business model (Disneyflix). Disney shareholders seem to be on board with the decision, shares are up +/- 6% from the morning of the tender announcement (9.26); they’ll open at $116.94 on Monday 10.1.

Fan Marino: While some might believe that Comcast’s acquisition of Sky (EPL’s most valued media partner in U.K.) would ensure NBC remains the Premier League’s U.S. broadcast partner beyond the ’21-’22 season, historically, the EPL has ignored affiliation between rights holders and taken the highest offer; back in ’16, Sky in Germany lost EPL rights to then-newcomer DAZN (unproven, yet deep pocketed), despite have the rights of 126/128 games in the U.K.

Across the pond, U.K. soccer fans must be wondering if there will be any changes coming to Sky’s broadcast coverage in the wake of the ownership change. English futbol fans aren’t going to want NBC’s “Americanized” version, so Comcast would be wise to let Sky run their EPL coverage autonomously; focusing on the distribution of non-sports entertainment assets instead (see: Universal Pictures).

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PBC Now Controls the Largest Annual Budget in Boxing

PBC

Premier Boxing Champions has signed a 4-year broadcast deal with Fox and extended its contract with Showtime (the networks will work in conjunction with each other) through 2021, agreements that will give Al Haymon’s promotion the largest annual budget in boxing; each deal is said to be worth more than $60 million/year. The deal with “new Fox” (live sports & news focused) calls for 10 “championship-level” fights to air on the 4th broadcast cable network and another 12 fights to be shown on FS1; Showtime will carry “a monthly series of events”. PBC’s new annual budget reportedly surpasses the $125 million/year Matchroom Boxing USA receives from DAZN. PBC cards will be held at the Barclays Center; the promotion has signed an exclusive deal with the Brooklyn arena to host 8 cards/year.

Howie Long-Short: PBC fights currently air on Fox and FS1, but PBC paid the network for that broadcast time. Times most certainly have changed! The first PBC card on Fox (under the new agreement) is scheduled for December.

There are 2 reasons why broadcast networks/streaming services (see: DAZN, ESPN/ESPN+, HBO) are pumping money into boxing; live sporting events are in demand (Murdoch called live sports “the most valuable content in our industry”) and broadcast rights to the NFL, NBA, MLB and NHL are tied up until at least 2022. Fox, in particular, is hungry for programming with up to 15 primetime hours/week to fill once the Disney deal closes; SmackDown Live will air on Friday nights, PBC boxing will take the Saturday night primetime slot.

To understand how PBC and Fox backed into the annual broadcast rights fee ($60 million+), it’s important to understand that broadcast rights fees are typically determined on a per fight basis and that a contest featuring 2 top-tier boxers draws upwards of $5 million. If each of the 12 FS1 fights featuring less decorated fighters were to draw $1 million on the open market, the math works. It’s worth noting that Fox holds PPV broadcast rights as part of this deal, so it’s possible the arrangement could end up being more lucrative than already assumed.

Twenty-First Century Fox (FOXA) reported fiscal Q4 earnings rose 58% YoY (to $.57/share) on August 8th. FOXA increased revenues +18% YoY (to $7.94 billion) with “strong double-digit growth across all operating segments”; the company’s Filmed Entertainment segment (see: Deadpool 2, The Greatest Showman), Cable Network Programming (see: Fox News, Fox Business) and Television segments were credited with driving the top line growth. Of course, most those FOXA’s film and television assets will be under Disney control moving forward; the company will not hold an earnings call during fiscal Q1 as it works through the transformation. Shares are +27% YTD. They’ll open at $44.88 on Friday morning.

Fan Marino: PBC’s deal with Fox will mark the first time in nearly 40 years that boxing appears weekly on broadcast television. That’s great news for boxing fans as it’s unreasonable to expect even the biggest of fans to subscribe to ESPN+ ($4.99/mo) and DAZN ($9.99 mo.), carry a premium cable subscription (for HBO & Showtime) and still pay for the occasional PPV fight. There is a limit to ones’ discretionary income.

Yes, the addition of new broadcast partners increases the number of fights taking place and boosts the sport’s exposure (it also increases the size of the purses for fighters), but it’s important to point that it also creates a fractured environment where network affiliation prevents some of the biggest fights from being scheduled (think: HBO vs. Showtime, now add a handful of other players).

PBC has an impressive stable of fighters. WBC heavyweight champion Deontay Wilder, welterweight champions Errol Spence Jr. and Keith Thurman and former welterweight champions Shawn Porter and Danny Garcia (fighting Sat night on Showtime) all signed with Al Haymon.

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Cubs Set to Launch TV Channel in 2020, Control Exclusive Local Broadcast Rights to Games

Cubs200x200

The Chicago Cubs are reportedly planning to launch their own television network (think: YES) at the completion of next season, as the Ricketts family wants to control the team’s exclusive local broadcast rights. While rumors that the Northsiders would leave NBC Sports Chicago for greener pastures (pun intended) have persisted for years, the club’s recent decision to hire Mike McCarthy (former President of MSG Network and CEO of St. Louis Blues, not the Packers coach) to execute the transition is the clearest indicator to date that the team is moving forward with the plan. President of Business Operations Crane Kennedy announced on Wednesday, in no uncertain terms, that “2019 is our last year with Comcast, so we’ll move over and launch our own channel in 2020”. It remains unclear if the team will “bring in a carrier to oversee the production or go at it alone by producing and selling their own product.”

Howie Long-Short: The Cubs own 20% of the RSN NBC Sports Chicago (as do NBC Sports Group, White Sox, Bulls and Blackhawks), but the club’s existing broadcast deal with the network (and with ABC, WGN) expires in October ’19 and there are no mandates requiring team games remain on the station. It’s the front-office’s belief that they can maximize revenues by maintaining a team-owned network, capital needed for the franchise to operate with a “big market” payroll. Of course, there’s no guarantee the move will be successful; “the carriage problems surrounding the Los Angeles Dodgers and their reported $8 billion deal with Time Warner Cable have fueled fears of a bubble.” It’s worth mentioning that should the Cubs decide to partner with an established carrier, NBC Sports and Disney are said to be interested.

Speaking of Disney, the company has 22 RSNs it must sell within 90 days as a condition of its acquisition of 21st Century Fox film and television assets. We’ve suggested several potential landing spots, but one we hadn’t mentioned was Fox (FOXA). It now appears as if that is a possibility, as The Information has reported Fox execs are considering buying back the channels. It’s been estimated the RSNs could sell for between $15-20 billion, which would be upwards of 10x EBITDA – if MoffettNathonson’s estimate that the stations earn a combined $2 billion in EBITDA is accurate.

Fan Marino: MLB attendance is down, but fans continue to watch on television. Nielsen Media reported that through the All-Star break, 11 RSNs with rights to broadcast MLB games ranked #1 in their market in primetime (amongst all channels) and 11 more finished in the Top 3 (if only comparing cable channels). RSNs that host MLB franchises were #1 in primetime in 24 (of 29) U.S. markets. It’s worth noting that 6 (Cards, Indians, Brewers, Royals, Yankees and Diamondbacks) of the 11 RSNs ranked #1 in the market in primetime (amongst all channels) are Fox Sports affiliates that Disney must unload.

FYI, the Cardinals draw the largest TV audience in MLB, averaging 86,000 fans/game on Fox Sports Midwest.

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Comcast Out of Fox Bidding War, Focused on Landing Sky

Comcast

Comcast has dropped out of a bidding war with The Walt Disney Company (DIS) for 21st Century Fox’s (FOXA) film and television assets to focus its efforts on acquiring Sky Plc (SKYAY), the “crown jewel” of the Fox portfolio. By pulling out of the competition for Fox’s entertainment assets, Comcast avoids bidding up the implied value of SKYAY; the consequence of an “arcane provision in U.K. takeover rules”. Back on July 11th, Comcast (CMCSA) improved its cash offer for the European cable provider by 18% (to +/- $19.50/share, $34 billion); a 5% premium to the latest FOXA offer. Disney has indicated in regulatory filings that it will determine if FOXA is to continue with its pursuit of SKYAY; no decision has been made and one is not expected prior to the DIS shareholder vote on July 27th (re: Fox acquisition).

Howie Long-Short: Comcast’s decision to drop out of the bidding all but ensures that The Walt Disney Company (DIS) will take down the Fox film and tv assets. Of course, DIS had always been considered the front-runner for those FOXA properties having submitted the highest offer ($71.3 billion vs. Comcast’s $65 billion) and maintaining the support of both Rupert Murdoch and President Trump. Comcast shares popped 3% on the news, but nearly all gains realized were lost by Friday’s close ($34.30).

CMCSA appears to be willing to split the spoils with DIS, taking SKYAY and leaving the balance of the Fox assets for Disney’s taking. Comcast is now well positioned financially to outbid Disney should they make an aggressive play for SKYAY. BTIG Analyst Rich Greenfield expects that to happen saying, “while it is certainly possible that Fox (and in turn, Disney) is going to walk away from Sky and not match/exceed Comcast’s offer, it does feel hard to believe.”

SKYAY is the asset that Comcast really wants. The British pay-TV service could bring both the original content and distribution (satellite & broadband) capabilities to make the alliance “a mini Comcast-NBCU”. Adding 23 million subscribers across 7 countries, also give CMCSA the international expansion it seeks as the company strives to keep up with Amazon and Netflix in the global streaming race. While Comcast seeks 100% of Sky (including FOXA’s 39% stake), the company appears willing to settle for majority ownership; it’s unclear if Disney intends on selling its stake.

I asked Dan Cohen, Octagon SVP, Global Media Rights Consulting Division which deal (SKYAY or Fox Film/TV assets) contains the most valuable sports media rights?

Dan: Sky is the stronger sports specific acquisition with a robust portfolio not only in the UK, but other significant European markets. The crown jewel is obviously Premier League, but F1, Cricket and Golf are significant as well. Sky Italia offers up premium content after just renewing Serie A rights in Italy and Sky is a player in Ireland Spain, Germany and Austria.

Editor Note: Fox assets include Star India and Fox International channels, but no domestic rights. Comcast (had they continued pursuit of Fox assets) also intended on divesting the 22 RSNs to avoid anti-trust concerns.

Fan Marino: As Dan notes, SKYAY’s portfolio of sports broadcast rights is impressive (particularly the EPL), but the control over and value of those rights remains tentative. Exclusive broadcast deals cannot be counted on to last and as MoffettNathanson analyst Craig Moffett astutely pointed out, “absent these exclusives, Sky is, well, just satellite TV.”

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IPL (Cricket) Generates More Sponsorship Money Than MLB

IPL

Indian Premier League (IPL), India’s most profitable sporting league, generates more sponsorship dollars annually than Major League Baseball; despite its season being just 47 days long. Last year, in just its 11th season, IPL took in $1 billion in sponsorship revenue; 12% more ($892 million) than its baseball counterparts (founded in 1903). It’s not just sponsorship dollars that are ballooning in cricket though, newly signed broadcast deals, the rising value of title sponsorship rights and the increasing brand value of the individual teams has sent the league’s valuation soaring +26% (to $5.3 billion) over the last year. As former General Manager of the BCCI (Board of Control for Cricket in India) Amrit Mather explained, “cricket has shown through the IPL that it defies normal economics. Investing in cricket is a no-brainer.”

Howie Long-Short: Rupert Murdoch is certainly on board with Mather’s assessment. Back in September ’17 Fox acquired (Facebook and Sony were also interested) global broadcast rights to the IPL; agreeing to a 5-year deal worth $2.5 billion. In April, subsidiary Star India bought the television and digital broadcast rights to Indian cricket for $944 million (5 years, through ‘23), a +51.2% increase over the terms of their expiring deal. On a per match basis, Fox is paying just slightly less for Indian cricket than for English Premier League rights and more than both the NBA and MLB command. It should be mentioned that Indian cricket and IPL rights are likely headed to Disney as part of their $71.3 billion acquisition of FOXA film and television assets.

Vivo, a Chinese phone manufacturer, is the title sponsor of the IPL. The company paid $340 million for the annual tournament to be known as the Vivo IPL until ’22, a +554% increase over the value of their previous deal. Vivo is a subsidiary of BBK Electronics Corporation, the largest smartphone seller in India and the 3rd largest in the world. BBK Electronics is a privately held entity, there are no ways to invest in the company.

Fan Marino: You know how they turned a game from the 1500s into a commercial success? They shortened the length of the matches! Games that once took days, have been streamlined (known as Twenty20) to 3 hour blocks (max). Baseball purists won’t be on board, but MLB should consider doing something similar; attendance is down 10% (lowest in 15 years), primetime TV ratings were down 6% in ’17 and the sport has an aging fan base (57 years old, up from 52 just 5 years ago). I propose the 27 rule (I just coined that name); 2 hours or 7 innings, whatever comes first. 

Fun Fact: Did you know? The longest cricket match in history (England v. South Africa, 1939) spanned 10 days.

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Comcast Positioned to Take Down Sky, Could Drop Pursuit of Fox Assets (including 22 RSNs)

SKY

21st Century Fox (FOXA) raised its bid 30% (to +/- $18.50/share) for Sky PLC (SKYAY) on Wednesday, before Comcast (CMCSA) improved its cash offer for the European cable provider by 18% (to +/- $19.50/share); a 5% premium to the latest FOXA offer. Comcast’s offer was reportedly “recommended by Sky’s independent directors” and the company is said to have “earmarked funds to fulfill the terms of the deal”; the company hopes to complete the acquisition by October, having already received regulatory approval (had been an issue with Fox’s Dec. ‘16 bid) from the EU, Austria, Germany, Italy, and Jersey. The WSJ indicated that if Comcast were to take down Sky, the company could drop its pursuit of Fox’s film and TV assets; FOXA’s existing 39% stake in SKYAY has been a target in that deal.

Howie Long-Short: The Walt Disney Company is considered the front-runner for the FOXA properties having submitted a $71.3 billion offer; obtaining full control of SKYAY is critical to completing that transaction, which explains FOXA’s interest in the British television group.

As for Comcast, SKYAY could bring them both the original content and distribution (satellite & broadband) capabilities that would make the alliance “a mini Comcast-NBCU” and give CMCSA the international expansion it seeks as the company looks to keep up with Amazon and Netflix.

I asked Dan Cohen, Octagon SVP, Global Media Rights Consulting Division which deal (Sky or Fox assets) would best position Comcast in the sports media sector?

Dan: Sky is the stronger sports specific acquisition with a robust portfolio not only in the UK but other significant European markets. The crown jewel is obviously Premier League, but F1, Cricket and Golf are significant as well. Sky Italia offer up premium content after just renewing Serie A rights in Italy and Sky is a player in Ireland Spain, Germany and Austria.

Editor Note: Fox assets include Star India and Fox International channels, but no domestic rights. Comcast would also be divesting the 22 RSNs to avoid anti-trust concerns.

Howie: What are the 22 RSNs worth?

Dan: I wouldn’t be surprised if they could fetch as much as $28 billion. Either winner (Comcast or Disney) will be well positioned to reap billions from the sale. The capital earned from the RSN divestiture can help offset the purchase price or be applied to aggressively pursuing even more premium sports content.

FOXA shareholders were less than pleased with Wednesday’s developments, shares declined -4% on the day closing at $47.79.

Fan Marino: Speaking of 21st Century Fox, it’s being reported that despite ad revenue increasing from 4 years ago, the company is going to lose money on the ’18 World Cup. Simply put, the company overestimated (by 7-10%) the number of viewers they expected to tune-in (and guaranteed in ad deals) and are now being forced to offer “make goods” (i.e. additional air time) to advertisers. Interestingly, Telemundo won’t post a profit either; that’s surprising if only because it set network ratings records (including 125 million live streams) throughout the tournament.

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Comcast Preparing to Divest 22 Fox RSNs, To Submit 2nd All-Cash Bid by July 27th  

Comcast

Comcast (CMCSA) is reportedly lining up buyers for 21st Century Fox’s (FOXA) regional sports networks to alleviate anti-trust concerns, as it prepares a bid that would be favorable to The Walt Disney Company’s (DIS) $71 billion dollar offer (cash and stock) for FOXA film & TV assets. CMCSA is open to divesting all 22 RSNs, but believes just 8 overlap with the existing Comcast sports footprint. Reuters is reporting that the company has held conversations with publicly-traded buyout firms Apollo Global Management (APO) and Blackstone Group (BX). Just 2 weeks ago, the U.S. Department of Justice approved DIS’ bid after reaching a settlement with the mouse house to rid itself of the regional sports networks.

Howie Long-Short: It’s been assumed that the RSNs will fetch $20 billion+ (Comcast’s first bid placed a $24 billion valuation on them), so selling them off will help Comcast coffers as the company prepares to submit a 2nd all-cash bid (no dollar amounts given). FOXA shareholders are scheduled to vote on the DIS bid on July 27th, Comcast will submit their bid prior.

Rumors of P.E. firms taking down the RSNs is relatively surprising as most of the discussions surrounding potential landing spots having focused on telecom and media companies. Everyone from Amazon (AMZN) and YouTube (GOOGL) to AT&T (T) and Dish Network (DISH) has been mentioned.

I asked T.K. Gore, sports media consultant, advisor and professor, for his thoughts on who lands the RSNs?

T.K.: The RSN world is a tricky business and experience — coupled with deep pockets — matters. Look for groups like Liberty Media and AT&T to get involved given their experiences.

MSG is among the companies that has been associated with having interest in the regional networks. James Dolan has said that he’d be interested in acquiring the assets “at the right price”, noting they’re highly profitable now but a “slow, declining revenue stream.”

Fan Marino: The 22 RSNs collectively control exclusive broadcast rights to 44 NFL, NBA, MLB & NHL franchises, including teams in Detroit, Southern California, Dallas, Cleveland and Miami. The YES Network is the most valuable of the lot, worth an estimated $4 billion; the Yankees are likely to re-acquire that network.

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