“new Fox” Extends MLB Deal, No Longer Favorite to Re-Acquire RSNs
MLB has extended its media rights partnership with Fox Sports through the ’28 season, signing a new 7-year deal worth +39% more ($728.6 million/year) than they’re currently receiving ($525 million/year). The new pact ensures “new Fox” will continue to broadcast the World Series, the MLB All-Star Game, 2 Playoff Series (1 LDS, 1 LCS), Saturday Game(s) of the Week and Spanish-language broadcasts (on Fox Deportes) for the next decade; Rupert Murdoch’s company also picked up the rights to produce more games (think: for possible primetime, mid-week broadcast on Fox) and to air games on the social live streaming platform Caffeine. The new $5.1 billion new pact will take effect in ’22, following completion of the current 8-year agreement.
Howie Long-Short: Opting to extend the existing deal with 3 years remaining was logical on both sides. MLB got a substantial increase on the packages’ valuation, while “new Fox” retains cornerstone programming for its revamped broadcast strategy (sports/news focused).
Back on November 1st, it appeared (and we wrote) that “new Fox” was the “front-runner” to buy back the RSNs sold in their $71.3 billion deal with Disney, but that no longer appears to be the case. Comcast, another logical destination, has also said it would not be pursuing the highly-rated cable networks; but that doesn’t mean there’s a lack of interest, as of Nov. 8th more than 40 bids had been submitted.
Chris Lencheski is an experienced global sports, media, and private equity executive with c-suite stops at Comcast-Spectacor, TPG Specialty Lending, IRG Sports and Entertainment, SKI & Company and currently an adjunct professor at Columbia University. I asked Chris, name a couple of under the radar companies that would make sense as potential landing spots?
Chris: I understand that Liberty (Media) is looking at it and Guggenheim is lurking in the background, but Sinclair is uniquely positioned because of their owned and operated channels; (in fact the largest television station operator in the US by number of stations) - they could perform well, have invested in and have wanted to further acquire sports rights but on a truly scalable format - this one such opportunity.
Another company unreported in all of this is beIN Media Group, but their acquisition of the RSNs would enable the company to do something they haven’t been able to do date (i.e. move up on the dial) even though they’ve spent an enormous sum of money over the last several years. They have access to the capital needed to buy the lot and they have access to programming capital, plus some very smart aggressive executives that have the grit for a deal like this.
As a prospective buyer, what would give you hesitation about buying the lot of Fox RSNs?
Chris: Companies with less broadcast centric strategies (think: Amazon, Facebook, even a outlier like Weibo) are pushing down the value of RSNs, but the bigger concern depends on where you think regionalization is going in a macro on-demand world. Most of the viewing public can capture just about every single item in sports in either real-time or near real-time, so the RSN specific rights to develop the Detroit market are important, but it's more important, almost exclusively, to just that market; and the re-licensing rights of the Detroit Tigers to a 3-hour baseball game are less important than a live cutaway or access when something happens (see: DAZN’s new deal with MLB).
Fox’s most valuable RSN, YES Network (+/- $4 billion), won’t be sold as part of the lot; it’s a “foregone conclusion” the Yankees will exercise their right to re-purchase the remaining 80% of the network. I asked Chris, would any other teams look to acquire/re-acquire their own broadcast rights?
Chris: “If the Yankees re-purchase theirs, I’m certain Ilitch (Detroit Tigers) may take a serious run at purchasing their market. It would also make sense for the Southern California teams (think: Dodgers, Angels) and I would suggest a Tampa Bay Rays organization would be better off selling thru their Rays rights and creating a network for everything Tampa Bay Regional sports (than selling only their local broadcast rights).”
Fan Marino: The reason Fox sought the rights to broadcast games on Caffeine, a platform best known for the its gaming, entertainment and creative arts (think: Live Nation music concerts) content, is because they’re investors. Back in September, “new Fox” made a $100 million investment into the company and the newly formed co-owned JV Caffeine Studios; a content studio that will “create exclusive esports, video game, sports and live entertainment” programming for Caffeine. I asked Chris, why would a company focused on broadcasting live sports (and news) on linear television invest in a social live streaming platform?
Chris: That’s (social live streaming is) going to become the new normal as consumer’s age out of watching sports in certain formats and even more potential consumers age into always having a secondary screen or multitasking while you’re watching. You can call it gamification, but fundamentally a platform like Caffeine puts pressure on all the partners to expand streaming with insights across fantasy and betting (see: games blacked out) and the total value of viewership (think: stats for fantasy, betting, plus a future of snapchat/amazon style “lens” merchandising sales).
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