New Fox Out of Bidding for RSNs, Sinclair the Front-Runner

Sinclair

New Fox has confirmed in an SEC filing that it will not be bidding on any of the 22 regional sports networks that were sold to Disney (see: $71.3 billion sale of entertainment assets), viewing the RSNs as slow-growth (or no-growth) assets. The perception that Disney has “overexposed” the RSNs has also tempered Fox’s interest. With countless teams and distributors privy to their detailed financials, there’s now a belief that future broadcast rights will become costlier and that carriage rate increases will be more difficult to come by (both of which would further slow growth). Sinclair Broadcast Group (with the financial assistance of a P.E. firm) is now widely considered to be the front-runner (and the last viable option) to take down the entire lot (vs. piecemeal) of cable networks – estimated to be worth between $15 billion and $20 billion. Final bids are due before the end of January.

Howie Long-Short: Remember, the Justice Department is requiring that Disney (DIS) sell-off the RSNs to prevent the company from maintaining a sports broadcasting monopoly. With ESPN under the company umbrella, DIS already owns the rights to more sports content than any other broadcaster.

Many assumed that Fox would buy back the RSNs because of their renewed focus on sports programming, but Chris Lencheski (an experienced global sports, media, and private equity executive; and an adjunct professor at Columbia University) first told you in our November 19th newsletter that not only was Murdoch’s company unlikely to re-acquire the regional sports networks, but Sinclair Broadcast Group (SBGI) was “uniquely positioned to take them down because of their owned and operated channels”; and that “they (SBGI) could perform well, have invested in and have wanted to further acquire sports rights but on a truly scalable format.”  You heard it here first, folks.

Sinclair’s ownership stake in Stadium – a 24/7 multi-platform sports network with the broadcast rights to several Group of 5 conferences – makes the RSNs more attractive to SBGI than they might be to other prospective bidders. As Chris told me, Stadium already has a name amongst “early adopters” and “cord nevers”, the technology and the existing agreements with OTT providers like Sling and Pluto; which makes the addition of the broadcast rights to the 44 pro sports teams “plug and play”.

Amazon is said to be participating in discussions surrounding the YES Network (estimated value: $5 billion – $6 billion), but it’s unlikely they (or any other tech giant) will pursue the entire lot; RSN coverage is restricted by the leagues to a defined local footprint (see: YES Network only available within metro NYC) which limits their value to a global enterprise. While 40+ companies were said to be involved in the first round of bidding, without the tech companies (+ Comcast, Charter and now Fox) DIS is unlikely to pull in offers anywhere near the $25 billion Guggenheim Securities originally pegged the RSNs at.

Fan Marino: The Sinclair sports portfolio includes the Tennis Channel, the “fastest growing” network in television; now in 61 million homes (+ 41% over last 2 years) after gaining 5 million subscribers (more than any other Nielsen-measured cable network, just 1/13 to add subscribers) in December ’18. If you’re a fan of the sport, you need the channel; it aired more live coverage than any single-sport network last year (2,300+ hours of matches).

ICYMI: It was recently revealed that the Cubs would be launching their own sports network come 2020 in partnership with SBGI. That’s a wise decision. Sinclair can offer widespread distribution and brings much-needed experience in both carriage negotiations and game production to the venture; issues that have plagued other start-up sports networks (see: Pac-12 Network).

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Author: John Wall Street

At the intersection of sports & finance.

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