Happy Thanksgiving, Atlantic Coast Conference (ACC) sports fans. Hope you are doing well.
Back in June 2018, the United States Department of Justice approved Disney’s purchase of media conglomerate, 20th Century Fox. As part of the deal, Disney was required to divest of the 22 Fox-owned Regional Sports Networks (RSNs). The RSNs are basically the cable television channels that have exclusive rights to the professional sports teams in a specific media market. Together, these networks have programming rights for 44 Major League Baseball, National Basketball Association, and National Hockey League teams. These RSNs also covered many of the ACC football and men’s basketball games
Enter Jeff Bezos, Amazon’s chief executive officer (CEO): He strikes again. CNBC recently reported that Amazon placed a first-round bid on the 22 Fox-owned RSNs. According to the report:
The e-commerce giant’s bid includes the New York-based YES Network, sources familiar with the matter told CNBC. It is bidding for the New York network along with an unknown sovereign wealth fund and the Yankees, the sources said. YES may be sold separately from the other networks.
Ben Straus from the Washington Post states that this is a historic bid by Amazon:
“In the other cases, [Amazon has] been taking second dibs, airing content that is also on traditional TV,” said Alan Wolk, co-founder and lead analyst for the media consulting firm TVREV. “This is the first time when it’s like, ‘Yeah we want the whole thing.’ It’s a big deal.”
The thought here is that the Amazon bid could increase the value of an Amazon Prime membership – and having live sports could differentiate Amazon from its competitors like Apple.
Alex Sherman of CNBC wrote that this might be an early Christmas gift for Disney CEO Bob Iger. Specifically, Amazon might be escalating the bidding for the RSNs, however:
But if Iger accepts it, he could be paving the way for the demise of traditional cable TV networks, including Disney’s own ESPN. (emphasis mine)
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The threat of Amazon buying sports rights — even a declining business like regional sports networks — should scare traditional media companies that are banking on owning must-see live content to stay alive in an on-demand world.
In Disney’s case, Amazon’s interest is a double-edged sword.
On the plus side, a competitive bidding situation could push up the sale price, which could top $20 billion. Other first-round bidders include a bunch of private equity firms and two broadcast-TV companies, Tegna and Sinclair, CNBC reported.
But they don’t have the balance sheets to reasonably compete with a big traditional media player like Fox. The slimmer “New Fox” needs live TV, including sports, to stay relevant. That’s one reason why it’s the favorite to buy back the 22 networks, as sources familiar with the matter told CNBC last month. Fox CEO Lachlan Murdoch confirmed at the Dealbook conference earlier this month that his company has an interest in buying back the networks, even though sources told CNBC that Fox didn’t submit a first-round bid.
Amazon’s interest could drive the price for Fox up, helping Disney get the maximum value from the assets it has to divest.
Selling sports rights to a giant like Amazon, with a market capitalization of more than $700 billion, could spur other technology giants like Apple, Google and Facebook to bid on sports rights to stay competitive.
Sherman goes on to say that:
The sports rights for the big professional leagues are locked up through 2020. Traditional media players such as Disney, CBS, Comcast’s NBC and AT&T’s DirecTV and Time Warner dominate the landscape.
When current rights deals expire [In 2020], tech giants could conceivably outbid the traditional media players for exclusive or digital-only rights, assuming the leagues themselves are willing to abandon traditional partners.
Amazon almost certainly doesn’t want to be in the long-term business of running cable networks with declining programming fee growth. But Amazon could buy the networks and then simply phase them out over time, according to BTIG analyst Rich Greenfield. Amazon could then offer the games “exclusively available to Amazon Prime subscribers or offer it is an add-on Amazon Channel,” Greenfield wrote in a note to clients last month.
If packaged with Amazon Prime, broadcasting regional games exclusively could help persuade customers to keep subscribing to the service. Further, it increases digital advertising opportunities for Amazon, which is growing its market share against Facebook and Google. Perhaps most importantly, it brings even more people into the Amazon tent, exposing them to all of the products and services Amazon offers.
Disney’s best long-term strategic move could be to keep Amazon around as a bidder, only to use them as a threat to get more money for the networks. Amazon’s presence could be a weapon for Iger if Fox or others believe keeping tech giants out of the live sports business is crucial for survival.
Here’s thinking that Disney – the owner of ESPN – will use Amazon just to get more cash for these RSNs.
It is, however, exciting to see non-traditional media companies making large-scale attempts to get into live sports content.
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