Discovery Inc. Acquires International PGA Tour Broadcast Rights, To Spend $2 Billion Through ‘30

PGA

Discovery Inc. (formerly Discovery Communications, DISCA) has signed a 12-year deal with the PGA Tour for the rights to broadcast more than 140 tournaments per year – including about 40 PGA Tour events – outside the U.S. Discovery committed to spending $2 billion before the deal expires in 2030, with a portion of that capital allocated to building a “Netflix like” OTT platform that will become “the new global home of golf.” The pact encompasses both television and streaming rights, so effective 2019 international golf fans in 220 markets will also see the events air on existing DISCA-owned linear television stations. The company will sublease broadcast rights in some markets to help offset costs.

Howie Long-Short: This isn’t Discovery Inc.’s first foray into sports broadcasting, the company owns Eurosport (think: Pan-European ESPN, reaches 700 million people) and has committed $1.4 billion for the rights to broadcast the Olympics in Europe through ’24. They also hold a stake in Fubo TV (from their Scripps acquisition), a sports-centric streaming service.

DISCA is buying international sports rights because domestic sports are simply too rich for their tastes. For reference purposes, NBC has agreed to pay $7.65 billion for exclusive U.S. television and online broadcast rights through the ’32 Olympics. The PGA Tour’s existing U.S. broadcast distribution deals with NBC Sports, ABC Sports and The Golf Channel (including individual pacts for each of the 4 majors) expire in ’21.

Despite growing Q1 ’18 revenue +43% YoY (reported basis) to $2.31 billion (including international networks +28%), DISCA reported a Q1 ’18 loss. Net income dropped to an $8 million loss — after generating a $215 million profit in Q1 ’17 — due to “lower operating results, higher restructuring charges, other transaction costs associated with the acquisition of Scripps and a higher interest expense.” Company shares are down 10% (to $21.09) since the company reported on May 7.

Fan Marino: Discovery CEO David Zaslav isn’t worried about the price tag, calling the PGA Tour “the most compelling international sports IP in the world.” That’s not the case if you’re measuring by popularity (it’s closer to 10th) and it’s certainly not true when you consider that the deal excludes both the Masters and U.S. Open (next weekend at Shinnecock Hills), the Tour’s 2 most watched events (PGA Championship comes in 3rd).

Zaslav believes this deal works out in the end because “local matters” (i.e. fans root for their countrymen) and that the PGA tour is a particularly diverse organization. Did you know that 25 of the Top 50 golfers are from outside the U.S. and the Tour’s 85 players hail from 25 different countries?

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Author: John Wall Street

At the intersection of sports & finance.

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