MLB, Liberty Media Last Bidders Standing for 21 Fox RSNs


Major League Baseball and Liberty Media (backed by Platinum Equity and Twins owner Jim Pohlad) have submitted non-binding tenders – prior to the yesterday’s deadline – to purchase the 21 regional sports networks that the DOJ has required the Walt Disney Company unload to complete their acquisition of 21st Century Fox’s entertainment assets. It was believed that the Sinclair Broadcast Group (with backing from Apollo Global Management) had also submitted an offer, but CNBC has since reported that the pair is out of the bidding – at least as a package; the story indicated that Sinclair could join another bid. Bloomberg reported that the bids submitted valued the lot between +/- 6-8x EBITDA, roughly half of what Disney had expected when it agreed to the $71.3 billion deal with Fox.

Howie Long-Short: 21st Century Fox sold Disney 22 RSNs, but the lot for sale only includes 21 as the Yankees intend on reclaiming control of the YES Network (currently own just 20%). YES, once thought to be worth $5 billion-6 billion, is now expected to fetch just $3 billion-4 billion.

At 6-8x EBITDA, the value of the RSNs is closer to $10 billion than the $22 billion analysts had initially projected. When the likes of Comcast, Discovery and Fox are out of the bidding – and the tech giants show minimal interest, as Dan Cohen, SVP Global Media Rights Consulting at Octagon explains, “you’re left with the next set of potential buyers; and there’s large gap between Sinclair and Fox or Verizon.”

Dan isn’t so sure that Disney (DIS) would be willing to take that kind of bath on the sports networks though. He suggested that if the bids came in sub $10 billion, DIS could approach the DOJ about taking the negotiations private again – as opposed to spinning off the RSNs and ceding operational control (another rumored potential solution). Disney could “claim that the DOJ forced a public sale to the detriment of the company, that they would be taking a massive loss on the deal and that they should now be allowed to run the sales process the way any private company normally would. Remember, DIS overpaid on the Fox acquisition – by a lot – thinking they would have a $20 billion asset to re-sell that would help to offset acquisition costs; they need to recover that premium.”

Fan Marino: MLB’s interest in acquiring the RSNs is to “take control of their own destiny with regards to content distribution (remember, they already control the streaming rights). Adding 21 RSNs makes MLB network more attractive from a content perspective and packaging the network with the lot of RSNs would give the league a lot of leverage in the marketplace when they go to negotiate carriage deals. Baseball is the life blood of these RSNs. They provide the most content, the most live programming.”

MLB has backing from the Canada Pension Plan and seeks a strategic partner to help with carriage distribution, but you won’t find them partnering with any of the cable distributors. That’s because “MLB wants to remain agnostic so they have leverage in the marketplace when they go to negotiate against Comcast, Verizon, Sinclair, Liberty and everyone else. If they tie themselves to one distributor, they’re kind of pegging themselves to a discounted carriage rate; that has the potential to negatively impact the carriage rates and carriage fees they’ll be able to drive out of the other MVPDs.”

Baseball fans in small markets (think: Minnesota) should hope MLB ultimately owns and operates the networks because the alternative is not pretty. “A private Equity firm (like Platinum Equity) will come in, streamline operations, strip the business down to its bare bones and then sell it. We are in an age where content is changing so rapidly and requires such a large investment to make it meaningful (think: upgrade to HD or 4K distribution, adding enhancements to graphics, interactivity, more shoulder programming). P.E. is not going to pump a ton of money into these channels and operate them as best in class. They’re going to put money in where they need to be strategic and cut costs where they don’t. The RSNs that don’t drive value are going to be ignored and their broadcasts will suffer accordingly. Private Equity is not going to try to grow small markets like they would New York or Los Angeles.”

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Formula One Coming to Miami in 2019


The Miami City Commission and Miami Dade County’s Economic Development and Tourism Committee voted 5-0 to “bring the Formula 1 Racing Circuit to the City of Miami for the Formula 1 Miami Grand Prix from 2019 to 2028”. The unanimous vote means Formula One will now draft a host city contact for review prior to July 1. Assuming the deal is consummated, the Miami Grand Prix will take place in October 2019 (between circuit stops in Austin and Mexico); with a 2.57-mile street track proposed to run through downtown Miami, by American Airlines Arena (home of the Heat) and over Biscayne Bay. Liberty Media Corp., which has spoken extensively about increasing its presence in the U.S., is also reportedly exploring the potential for races in Las Vegas and New York/New Jersey.

Howie Long-Short: Liberty Media Corp. (LMCA) reported Q1 ’18 earnings of $131 million on $1.5 billion in revenue (+9% YoY), but Formula One Group didn’t contribute to those profits; F1 reported an operating loss of $118 million during the first quarter.

The F1 TV Pro streaming service launched ahead of this past weekend’s Spanish Grand Prix, but unfortunately it made a less than stellar first impression. Subscribers of the $89.99 (annual) service complained of issues with audio, buffering and video display. F1 (FWONK) has since announced they will be refunding subscribers 2 weeks’ worth of subscription fees, but that’s unlikely to appease fans unhappy about missing the race. Of course, while that will hurt Q2 revenue, it’s not a reason to panic; you may recall Amazon’s NFL coverage got off to a rocky start and they managed to quickly resolve the issues.

Fan Marino: Formula One has applied for a trademark on the “shoey”, a traditional Aussie “celebration” (stemming from early 2000’s surf culture) where one drinks alcohol from a worn shoe (it looks as strange as it sounds, here’s video). While Daniel Ricciardo, an Australian driver who competes for Red Bull racing, has been credited with popularizing the tradition within the sport; it was Australian MotoGP rider Jack Miller to first do it on the podium back in June 2016.

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The Drone Racing League (DRL) has announced it will hold its 2018 Allianz World Championship in Saudi Arabia, next September. The 7th and final event of the DRL season will consist of 8 FPV (first person view) pilots racing custom-built drones, that travel more than 90 MPH, through a complex 3D racecourse; with the winner earning the title of “World’s Greatest Drone Pilot”. The race will be televised in 87 countries, on cable networks including; ESPN, OSN, Sky Sports and Fox Sports Asia.

Howie Long-Short: The DRL holds several dozen patents on the core technology that enables drone racing. They use the league to showcase the technology. The company is privately held, but has raised more than $32 million to date; including a $20 million series B round in June. Looking to play the DRL? SKYAY lead their Series B round and participated in both their seed and Series A rounds. Liberty Media Corporation (LMCA), Allianz (OTC: AZSEY), World Wrestling Entertainment (WWE) and MGM Television (OTC: MGMB) are all also invested in the company.

Fan Marino: The DRL consists of 16 professional pilots competing in 6 regular season races before a short postseason whittles it down to 8 qualifiers, competing for the World Championship. Think you can compete in the DRL? The league is holding annual open tryouts, beginning on November 15th, using their Steam simulator. All you need is a computer and an Xbox or drone controller to participate.  The Top 24 competitors will advance to a live racing simulator tournament with a chance to compete for $75,000 and 1 of 16 spots in the 2018 season.

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Liberty Media’s (LMCA) Formula One and Snap, Inc. (SNAP) have partnered, encouraging fans to shoot and upload video at upcoming F1 events, starting with this weekend’s British Grand Prix. F1, which would actively look to prevent race highlights from hitting social media prior to the Malone takeover, is now looking to grow interest in the circuit by building a social media presence and reaching a younger demographic. The companies will split all ad revenues generated, but no additional terms of the deal have been released.


Formula 1 and Snap Inc. announce new global partnership

Fan Marino says: My F1 knowledge goes 2 drivers deep. Michael Schumacher and Mario Andretti. That is in the HISTORY of the sport. Marketing their stars, has never been F1’s strength. This deal will help bring attention to, if not interest in, the circuit within the U.S.

Howie Long-Short opines: I can add Ayrton Senna to the list–but only because his documentary is on Netflix. I don’t know a single fan of F1. USA is a huge opportunity for F1 under Liberty’s control, but they have a long way to go.