'This is a major event:' experts are anticipating that the biggest sports media bidding war in 30 years will commence if Disney successfully buys Fox
- If Disney acquires Fox, it must sell the regional sports networks that Fox owns to avoid anticompetitive conflicts.
- This means 22 regional sports networks will be up for auction if the Disney deal closes.
- Experts are predicting that businesses from private equity firms to Amazon will be potential buyers.
Disney appears poised to acquire assets from 21st Century Fox. Which indirectly means another media company is about to get its hands on a ton of valuable sports TV rights overnight.
Comcast dropped out of the battle for the company last week. And the US Department of Justice approved the proposed purchase with one big condition: that Disney sell the regional sports networks that Fox owns to avoid anticompetitive conflicts, given its majority ownership of ESPN.
Industry experts predict the probable sale of these RSNs - which offer local sports broadcasts for teams like the Atlanta Braves and Los Angeles Clippers - sets the stage for another bidding frenzy of some very attractive assets.
"This is a major event," Lee Berkhe, CEO of LHB Sports, Entertainment & Media, Inc., told Business Insider. "Trades and sales [of sports networks] are few and far between," Berkhe said, adding that he can't remember a sale of this magnitude in the past 30 years.
It's not just one, but 22 RSNs - like New York's YES Network - that will be up for auction in the next nine to 12 months if the Disney deal closes on schedule. Disney is required to sell the RSNs within 90 days of closing the deal.
Selling these networks will help defray the exorbitant cost Disney must pay to acquire Fox. The bidding war between Comcast and Disney pushed the sale price of Fox up above $70 billion.
"I think those networks are going to help in terms of providing some cushion to the overall value that Disney will pay," Tuna Amobi, a senior equity analyst at CFRA Research, told Business Insider. "The bid they put in was pretty high. They had to top Comcast challenge offer by almost 20 billion."
There will be multiple buyers vying to win these assets
"There will be multiple buyers" vying for these networks, said Joe Favorito, a sports communications strategist and and professor at Columbia University. "Live rights for sports are becoming more and more valuable."
RSNs are steady performers that throw off substantial cash. Disney won't be required to sell them as a block, and can break them apart to sell to the highest bidder.
Fox has a "fairly extensive portfolio and I've seen anywhere from $15 to even more than $20 billion potentially that could be generated from a potential divestiture of those networks,"Amobi said.
The sports media industry experts that Business Insider spoke with said to expect interest from the following groups of potential buyers:
- Cable telecoms like AT&T, Charter, Comcast
- Big media companies like CBS or Viacom
- Broadcast companies who already own sports networks, like Sinclair Broadcast Group
- Private equity firms which would look to monetize the RSN assets
- Foreign entities like the UK-based Eleven Sports
- Companies committed to investing in their OTT platforms, like Amazon and YouTube
- Discovery Communications
- Individual sports teams; MSG Networks is an example of a group of professional teams that already own a sports network
Still, some may be better positioned to handle an acquisition of these networks.
"It's a very unique business ... and when you think about businesses that could buy them, they are likely companies that are familiar in some respects with some of the underlying economics," Amobi said. "Discovery comes to mind. It is a pretty decent player in international sports programming."
Indeed, back in 2015, Discovery Communications took full control of Eurosport, a media company that is sometimes referred to as the "ESPN of Europe."
And some other media companies that would seem to be a natural fit for the sports nets, like Comcast, may face the same antitrust concerns that require Disney to sell the RSNs the first place, Amobi said.
So regulatory issues may end up dictating which companies can bid for the networks. Regardless, experts expect the competition for these assets to be fierce.
"Sports is the last bastion of live TV," Favorito said.