Walt Disney Co. Bob Iger may not have clear plans, but his $71.3 billion deal with 21st Century Fox Inc. Entertainment, could reshape American sports and local broadcasting.
Shareholders approved the deal last month, and attention turned to the 22 Fox Sports channels that regulators forced Disney to sell. The sports channels own television rights to 44 professional basketball, baseball and hockey teams, including the Green Bay Packers and Atlanta Braves.
The assets are attracting media and technology companies including Sinclair Broadcast Group Inc., YouTube and Amazon.com Inc., as well as Blackstone Group (Blackstone Group LP), CVC Capital Partners and Apollo Global Management LLC, among others. Sinclair CEO Chris Ripley told analysts on Wednesday that the sports channels are "great options."
High Valuation
According to people familiar with the matter, although it will take at least three months for Disney to complete the acquisition of Fox assets, the sports channel acquisition plan can be launched within a few weeks. Due to high earnings and abundant cash flow, the bidding war may increase the value of these assets to $20 billion. People familiar with the matter requested anonymity due to the confidentiality of the acquisition.
People involved with Amazon, Blackstone, CVC, Apollo and Disney declined to comment. YouTube also did not respond to reporters’ questions.
While station owners may bid for the channels as a package or in separate pieces, private equity firms may take things a step further. The U.S. Federal Communications Commission is trying to loosen restrictions on one company owning multiple TV stations, and some buyout firms are looking at deals that would tie the owners of a TV station to a sports channel, according to people familiar with the matter.
Nexstar and Tegna
If the FCC repeals the rule that no broadcaster can have more than 39% of household television coverage, Sinclair Broadcast Group, Nexstar Media Group and Tegna Group will be even more affected by the convergence of online platforms. Multiple audiences become more competitive.
For example, a private equity firm could partner with a broadcaster to acquire a number of regional sports channels, or acquire a broadcaster to merge with a competitor, or both. Regional sports channels are not a new frontier for private equity - for example, Providence Equity Partners, a private equity fund, was a shareholder in , , home of the New York Yankees.
Paul Wissmann, KPMG’s country leader for media and telecoms, said: “Private equity typically wants to combine it with other businesses in the TV space to compete with cable and satellite TV offerings. Distributors including Comcast Corp. and AT&T Inc.'s Direct TV pay to carry regional channel signals. A company can ask for more money on the grounds that it is a local sports broadcaster that also provides current news and weather information.
Adding sports channels also allows the station to share costs with national networks (including NBC, CBS, Fox and ABC), giving the station greater reach.
According to people familiar with the situation in June, some teams, including the Yankees, are considering whether to buy back their own channels. Private equity firms play a role in such deals, people familiar with the matter said.
Media tycoon John Malone (ohn Malone) invested in a local sports channel with Fox founder Rupert Murdoch (Rupert Murdoch) in the mid-1990s, trying to shake ESPN's monopoly on sports. Expressed interest in local sports channels. The channels sold by Disney included some sports channels then owned by Fox/Liberty Networks.
RSNs enters the fast-paced media integration market.
Gray Television Inc. said in June it was acquiring Raycom Media Inc. for $365 million. Texas-based Nexstar Media has attracted attention from P2 Capital Partners and Apollo, while closely watched Cox Communications is selling TV stations. Tribune Media Co has terminated a $3.9 billion acquisition of Hinlein and the company will return to the bidding market, according to people familiar with the matter. Tegna is another company that may become a takeover target.
Comcast vs. Dish
But there are risks involved in buying local sports channels. These channels have long been considered "designated" channels for TV distributors, but Comcast and Dish decided to move them to less popular offerings or remove them altogether to limit service costs.
The deal could also be trickier for tech companies like Amazon or YouTube. Because they have to solve digital rights issues, making the acquisition more meaningful. NBA and MLB allow local sports channels to broadcast live broadcasts only in specific areas to ensure absolute service that they own the copyright. That could put the leagues at odds with video services operating across the country and around the world.
Still, whether two broadcasters team up or a broadcaster combines with a local sports channel, only economies of scale will help traditional providers beat digital content providers.
Sinclair CEO Ripley said this week that the company will continue to "find scale" in the broadcast industry. "There will be a lot of deals in the market," he said.
Extended reading:
The drama of Disney's acquisition of Fox has finally come to an end, but the plan to stimulate ESPN has failed.
The example of the World Cup shows that viewing outside the home is the broader future of broadcasters.
Statement: This article was compiled from Bloomberg by Lanxiong Sports , the original author is Nabila Ahmed and Gerry Smith.
