It’s Primetime for Sale of Fox RSNs

Amazon joins bidding for 22 nets to be divested in Disney deal
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Suitors continue to line up for 21st Century Fox’s 22 regional sports networks, with reports that Amazon has submitted a bid for the channels which could carry a price tag as high as $20 billion.

Mike Trout of the Los Angeles Angels of Anaheim

The 22 Fox-owned RSNs include major-market offerings like Fox Sports West, home to Mike Trout and the Los Angeles Angels of Anaheim.

Amazon is just one of many potential buyers of all or some of the Fox RSNs and could be a partner in the biggest jewel in the crown — New York-based YES Network, according to CNBC. Amazon was said to be part of a group willing to team up with YES’s 20% owner, Major League Baseball’s New York Yankees, in buying out Fox’s 80% interest. The Yankees have the right of first refusal in any sale.

The first round of bids for the channels ended on Nov. 8 and were known as much for the parties that didn’t participate — Fox and NBC Sports Group — as those that did. According to reports, Fox sat out the first round of bidding but could come back in the later stages. NBC Sports did not make an offer and is not expected to after NBC Broadcasting and Sports chairman Mark Lazarus told an audience at the Fairfield County Sports Commission event in Stamford, Conn., that regulatory issues would prevent any bid.

“The government’s not going to let us buy any more where we are heavy in cable — we’ve already been informed of that,” Lazarus said at the event, according to Sports Business Journal.

Otherwise, the list of potential suitors includes the expected — private equity players like The Blackstone Group, KKR & Co. and Apollo Global and broadcasters Sinclair Broadcast Group and Tegna — and some unexpected, like rapper Ice Cube, reportedly making bids.

Fox made the RSNs part of its larger $71.3 billion sale of certain programming assets to The Walt Disney Co., mainly for tax reasons. The RSNs, a cash cow for Fox, are thought to be well-run and are expected to fetch a high price.

Will Amazon Get in the Game?

Amazon, which renewed its streaming rights for NFL Thursday Night Football in April for two years, has been interested in obtaining sports rights, but hasn’t been willing to part with much cash to do it. Its April renewal of the TNF deal reportedly cost about $65 million per year, but that’s miles away from the $20 billion price the RSNs are expected to attract.

While some analysts have always expected Amazon to be a player in the sports arena — BTIG media analyst Rich Greenfield has said the deep-pocketed online giant could pony up for everything from NFL Sunday regular-season packages to the YES Network — some see the company as playing more of a spoiler role.

“What’s the plan?” asked CNBC anchor David Faber after breaking the Amazon story on Nov. 20. “Keeping them on cable and collect a fee?”

While moving the networks to Amazon Prime would solve one problem for operators who have struggled with consumer complaints about having to pay for sports channels they don’t watch, it opens up another question for Amazon — can they offer the RSNs at an attractive price and justify the cost? Faber said maybe Amazon could use the RSNs to steer viewers to memorabilia or sportswear purchases, but they would have to sell a lot of jerseys to justify a $20 billion price tag.

RSNs have also come under fire for their high fees — YES, according to S&P Global Market Intelligence research arm Kagan, attracts a fee of $6.37 per subscriber, per month — which has had some analysts question their growth opportunities.

One potential upside is advertising, which is expected to grow with the advent of legalized sports betting. At the Bank of America Merrill Lynch Media, Communications and Entertainment Conference in September, Fox Sports CEO and executive producer Eric Shanks said YES Network was airing some sports gambling ads in New Jersey, but he said it was too early to tell what impact it will have on the market in general.

“I think it will take a little while for that tipping point to happen before you start to see a material amount of advertising revenue come through,” Shanks said at the BofA conference. “And how long will it last?”

Fox was expected to show interest, especially since after the Disney deal is complete, New Fox will be focused on live news and sports. But chief financial officer John Nallen played down the benefits of putting together the regionals with its FS1 and FS2 networks.

“I’m not sure that New Fox gets a real revenue kick for having bolted the RSNs with those other assets,” Nallen said at the Goldman Sachs Communacopia conference in September. “I think those other assets, unto themselves, do just fine in the affiliate world. And from a cost synergy standpoint, there’s very little overlap between Fox today and the RSNs. The RSN game is a complete local game.”

Shot Clock Is Ticking

Whatever Fox’s involvement, either as facilitator or buyer, the RSNs are expected to pick a new owner or owners in the next few months. According to its agreement with the Department of Justice, Disney has to sell the RSNs within 90 days of closing its Fox deal. With recent regulatory approvals from Europe and China, that timeline could compress from Fox’s conservative first half of 2019 to as early as the first quarter of next year. One person familiar with the company said Fox has told employees that any day after Jan. 1 could be closing day.

Disney also is under a bit of pressure to close a deal — according to the DOJ approval, if it can’t close a deal within the 90-day window, the agency will appoint its own trustee to engineer a deal.

“I don’t think Disney wants that to happen,” said one sports executive who asked not to be named.

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