Disney must sell 22 regional sports networks if it buys Fox

Twenty-two
regional sports networks might be up for grabs
soon.

AP

• 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.

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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

Sports
media industry experts that Business Insider spoke with said to
expect interest from a wide array of potential
buyers.

AP
Photo/Brynn Anderson

Experts says it’s too early to predict where exactly these RSNs
will end up, but they agree that there will be a number of
potential acquirers for the 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.