With the close of Disney’s $71 billion acquisition of Fox’s entertainment assets one analyst believes Disney now has the ‘fuel in the engine’ to take on Netfilx once it starts its streaming service next year. (March 20)
Fox Sports has been part of the media landscape for more than two decades.
But Walt Disney Co.’s $71.3 billion purchase of Fox’s film and television assets, which became official on Wednesday and promises to reshape the country’s media landscape, has set off a series of dominoes that could impact who controls broadcasts of professional teams’ games.
As part of the sale, Disney must sell off the Fox Sports stations to satisfy anti-trust concerns, and several ownership groups are in the race to acquire the available assets.
Pistons owner Tom Gores’ California-based private equity firm, Platinum Equity, is part of an investment group bidding for Fox Sports Detroit and the 21 other regional sports networks under the Fox umbrella, according to a Bloomberg report.
Bloomberg reports Platinum, Minnesota Twins owner Jim Pohlad, and media company Liberty Media are spearheading the venture. Fox Business reports the bid could be $10 billion.
The sale has brought bids from other private equity firms, Major League Baseball, an investment group led by hip-hop pioneer Ice Cube and others.
Platinum Equity has interest in the transaction, multiple sources have confirmed, declining further comment. The sources cite the highly confidential process where the sharing of information is tightly controlled.
A source said this is a Platinum deal — not a Gores acquisition.
So why the interest from Gores, Pohlad and John C. Malone, chairman of Liberty Media and owner of the Atlanta Braves? All while the Ilitch family explores forming its own network to air Detroit Red Wings and Detroit Tigers games?
It’s all about control.
“It makes sense because you are bringing a lot of the properties under the same umbrella for efficiencies, but on the other hand there’s probably a reason why (Fox) is going in the opposite direction to get out of the production business,” Scott Tainsky, professor at Wayne State’s Mike Ilitch School of Business, said this week.
How we got here
Fox Sports Detroit has been part of the Detroit media landscape since the late 1990s, when the Pistons, Red Wings and Tigers left Pro-Am Sports System, which was owned at the time by Post Newsweek Stations.
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The catalyst for the latest movement was Fox’s decision to restructure and focus on its TV network, news and national sports assets.
The media company decided to sell 21st Century Fox, which houses its movie and television assets. The first reported negotiations were in November 2017.
Fox’s regional sports networks were part of the sale.
Disney won a bidding war against Comcast, and Disney coveted the content because of it’s expected launch of a video streaming network.
Disney, which owns ESPN, went into the deal knowing that from an anti-trust perspective, it won’t be able to own the Fox Sports channels.
The clock is running to complete the sale of the sports networks because the U.S. Department of Justice won’t allow the dominance of the sports broadcasting market. Bloomberg reports Disney will have three months to complete the sale.
Live sports content is among the most coveted assets in television from an advertising perspective because viewers watch live and don’t record to binge later.
This isn’t new.
Think of billionaire Ted Turner, who owned the Braves and Atlanta Hawks, airing games on TBS.
Sports fans of a certain age remember watching the Chicago Cubs on WGN when the Tribune Company owned both entities.
Bloomberg reports Platinum had initially expressed interest in the Detroit network, while Liberty wanted the Atlanta channel. But Disney is determined to engineer a lump sale. Reportedly, the New York Yankees are expected to buy back the YES Network, which Fox acquired 80 percent of back in 2014.
What are the pitfalls?
Bidders will determine the value.
The investment group would have to negotiate terms with cable and satellite providers. Big Ten fans recall the Big Ten Network’s limited carriage at its launch in 2007.
Then there are the viewing habits of millennials, who are cutting the cable cord and going away from traditional TV habits in droves.
As the consumer has more and more choices, TV ratings are falling.
Tainsky thinks those fears are overblown when it comes to sports rights. Along with awards shows, sports rank as the most viewed television programming.
“It’s the most time-dependent of any kind of viewership,” Tainsky said. “The only other kind of programming in the category is things like awards shows. … The outcome is so pivotal to the draw of the event that once the outcome is known a lot of the lure is gone.
“Even though that share is declining, it’s still important and there’s still a healthy amount of the population watching these kinds of shows.”
Even with a consortium of owners, every sports team in the represented markets aren’t part of the pursuit. A prime example being the Ilitches exploring their own TV network in the Detroit market.
That means other teams could be forced to negotiate deals with the Platinum-Liberty group.
“To the other owners, who aren’t getting a piece of that, if there’s a sweetheart deal, that’s where the dynamics could get a little bit thorny,” said Tainsky, who is the founding director of Wayne State’s sports and entertainment management concentration.
Broadcasting games are also an expensive proposition, Detroit Mercy marketing professor Mike Bernacchi notes. For that reason, he is skeptical the Ilitches will ever launch a stand-alone network for the Red Wings and Tigers. Such a venture would require an investment in television equipment, studios and talent.
That’s why buying an infrastructure already in place makes sense.
Viewers shouldn’t expect immediate changes.
Broadcast rights contracts remain in place until at least 2021, according to a source. Previous reports say the Pistons are paid $25 million annually for broadcasts; the Tigers receive $50 million.
“We’re talking about billionaires spending money to control the outcome and it makes good business sense,” Bernacchi said. “They sure as hell know what they’re doing and they’re unlikely to make a serious misstep.
“When you’re dealing with the money from the people we’re talking about, this is not chump change and they’re not chump spenders.”