“Regional sports network”, FOX/Disney deal, and beyond

Previously, the Fox/Disney deal was still awaiting for the results of the Fox Shareholders’ meeting and Comcast opted to pursue interest in BSkyB; since then, there has been some new developments that had been brought up in the last week that, as predicted, the deal may still be torpedoed by various government agencies within the US Government.  One of those developments concerning the future status to Fox Sports Network, and another was the Department of Justice has made yet another attempt to abort the AT&T/Time Warner merger by appealing the ruling that allowed that deal went through. On the surface, the MCU fandom starts rejoicing for the potential inclusions of Marvel properties that are held by Fox with titles such as Fantastic Four and the X-Men; however, the issue of the Fox Sports Network almost dented the prospect as Disney also owns ESPN and its affiliated network, something that the Justice Department has worried that Disney would monopolize the Regional Sports Network market. Thus I would dedicate his article to explain the history of RSNs, whom the players were prior to this deal, my prediction for whom might be benefited from the divestment of FSN and whom might be interested in it. In addition, I would also divulge something that I have left out in my previous article concerning which other regulatory across the Atlantic could make an impact in the bidding for BSkyB, as well as Asia.

The origins of Regional Sports Network dates back to the early days of cable television itself, with Cablevision launched the SportsChannel alongside ESPN during the late 1970s, and the terminology began to surface as other media outlets began to formulate plans to compete with ESPN. This trend began when ESPN2 was launched in 1993, months later though, a major shock to the broadcasting rights began to emerge as News Corporation obtained the broadcasting rights to the National Football League beginning in the 1995 season under the fledgling Fox Sports banner for $1.58 billion. What made that bidding so shocking has to do with the fact that the notion and concepts of Fox Sports was literally out of thin air; in fact, while Fox has had a few programs that were broadcasting in local channels, it had yet to establish itself as a major network up until that point in time. That shockwave continued in 1996 when Major League Baseball and National Hockey League followed suits. As such, competitive bids for broadcasting rights has intensified and caused a seismic shift in major sports network media from the domination of traditional “Big 3” (CBS, NBC, ABC before being purchased by Disney) to four. Amongst the acquisition of regional sports channels within the next few years that were challenging ESPN prior to the formation of Fox Sports included the original SportsChannel in New York City, Chicago, and Florida areas, Home Sports Entertainment in Dallas-Fort Worth and other South West area (later known as Fox Sports South West), and Turner Broadcasting System operated SportsSouth (later became Fox Sports South). Once News Corporation began making acquisitions to above-mentioned networks via joint agreements in the next few years, henceforth, Fox Sports Networks was born.

The first crack of FSN began when Viacom sold their interests in two local markets on July 11, 2000, Minneapolis- based Midwest Sports Channel and Baltimore-based Home Team Sports, which News Corp had minority ownership in both markets in wanting to acquire both outright to Comcast. In an attempt to block the sales, News Corp filed a lawsuit against Comcast on July 21, 2000, only to have the issue settled on September 7, 2000, by trading equity interests between them, Midwest Sports Channel (later became Fox Sports North) was sent to News Corp., with Comcast gained complete ownership of Home Team Sports, which later became the foundation of Comcast SportsNet as CSN Mid-Atlantic.   As News Corp slowly began moving its RSN assets to Fox Entertainment and had the latter spun off in the next few years other ownership changes in some of the major markets like San Francisco Bay Area and Sacramento, New England, New York, and Chicago, led to a major shift in sports television as those transactions became the launching point of Comcast SportsNet, thus also means that ESPN gained yet another competitor for regional sports broadcasting market. Part of the shifts are, at least in my opinion, perhaps related to how certain properties were presented, such as Fox Soccer’s presentation of the Premier League, FA Cup, UEFA Champions League, and FIFA World Cup, to which was universally panned for its pro-USMNT (United States men’s national team) throughout their coverage in both qualifying rounds and the 2018 tournament itself even though USMNT blew their chance in qualification after losing to Trinidad and Tobago, and series of problematic issues with the Fox News division that has caused major uproar over its political coverage and some of the opinions from multiple presenters (and one doesn’t need to be a rocket scientist to figure out who they are). Eventually, the over-investment of the World Cup by blindly betting all hopes on USMNT’s qualification before the final tournament, and the series of lawsuits and scandals in both sides of the Atlantic (which included the infamous “News of the World” wiretapping scandals, Roger Ailes and Bill O’Reilly sexual harassment lawsuits), and the additional competitive pressures from Comcast/NBC in the last few years have forced Rupert Murdoch & News Corp to reevaluate and refocus their business plans in focusing strictly the domestic national and certain international sport broadcasting properties by foregoing the rights of regional ones, hence it becomes part of the Disney/Fox merger.

So far, I have discussed the truncated history of the regional sports network, along with some speculations as of what led to part of the Disney/Fox merger. But one might be thinking about who would be able to invest these RSNs, and what role Comcast might play in relations to it. While it’s been obvious that I am nowhere near to be a financial or business expert who is specialized in business mergers, my love for sports and its broadcasting partners whom they are associated with, whether I have frequented or not, have always been fascinating and intriguing, never mind that I have been following the developments of other mergers for nearly three decades, it’s rather inevitable that a merger or two per year would’ve been propping up on the evening newscasts I was watching over the years, at the very least I have known the basis by following the news reports that were based upon press releases originated from.

Since both Comcast and Disney have already owned their RSNs, it’s rather obvious that there aren’t that many potential buyers would relish the chance of forming their own, at least to my knowledge anyway. CBS/Viacom/Paramount, Turner Broadcasting/AT&T (pending an appeal from the Trump Administration), Sinclair Broadcasting, and AXS TV, in my humble opinion, would be the forerunners for that deal, particularly with CBS as they have also established their own sports network called CBS Sports Network (CBSSN for short). However, CBSSN mostly focused on primarily collegiate sports and PGA/LPGA Golf coverages alongside mostly fledgling sports and lesser mentioned motorsports unlike the previously mentioned networks, and the potential additions of the RSNs from Fox Sports could provide additional coverages into those markets. Though Turner Sports may have been in the similar potentials as they share broadcasting rights for NCAA and PGA/LPGA, there is one difference between them as Turner Sports, much like NBC Sports, there are more than one channel that any of their sports properties to air, except there are only three English channels – TBS, TNT, and TruTV – outside of HBO, which have their own sports division could actually air. As such, the potential of obtaining the RSN-on-divestment from ESPN could also bring additional audience as well, giving that Turner Sports has obtained the broadcast rights to UEFA Champions League and Europa League beginning 2018-19 season. Two companies that are considered as an outside shot to bid on these RSNs are Sinclair Broadcasting Group, who owned Stadium (a joint venture with Silver Chalice) and Tennis Channel, as well as Ring of Honor Wrestling, and AXS TV, who once called HDNet and is owned by Mark Cuban and Todd Wagner via 2929 Entertainment, ironically partnered with CBS. For Sinclair to bid on the prospect of expanding the area of coverages with the RSNs would be a coup, as it’s for AXS TV as well. However, there are also some sorts of shortcomings on each of these prospective buyers, specifically involving the latter two, though we can also similarly state the former pairs. This particularly rings true with Sinclair as not only they, at least to my recollections, do not operate their own terrestrial television network, nor they have its own sports division, their own reputation regarding to their political views may ruffle the feathers towards most sports fans unless it’s to the likes of individuals who share their views. As for AXS TV, meanwhile, whether they have any intentions to establish their own sports network that would accompany its fights division (known as AXS TV Fights) is rather unclear, as such, I doubt they would risk their investment in a foreign environment. Therefore, it’s rather hard to predict who would take them out of Disney’s hands in the next few months.

Now comes the time that I divulge the issue that I somehow managed forget to mention in my previous article, and that would be which branches of federal government and international organizations would keep tabs on the proposed merger. First, it’s rather blatantly obvious as to what I have neglected to mention must be the United States Department of Justice. Above all else, their involvement in every aspect of each merger proposal over time means that no participants of each merger can make any advanced notice on properties from them, in addition to selling the “excess” that are results from the merger, or the deal would be deemed as null and void by DOJ. This isn’t limited to the USA as there is a similar process in the United Kingdom, and more importantly with much more stringent regulations, in the form of the European Union, which has been garnered from a reputation of levying fines against the likes of Microsoft and Google for what they described as “anti-competitive monopoly” against free market system, as such, why don’t we expect the same with this deal for the same reason? At least in my view, the critiques would be just as harsh, if not harsher by some standards, as Disney is a global juggernaut in the entertainment business with media and amusement parks, and since Rupert Murdoch and News Corporations, Microsoft, and Google have such scrutiny, same goes to Disney.

Editor’s Note: For those who have been expecting the continuation article some time ago, I sincerely apologize for the delays, however, since I’m doing more than one things for this site by myself, that would take some extra time to complete these articles.

Update: During my unscheduled extended break from blogging, a few other headlines have since brought into my attention.  First, with regards to the RSNs, the new Fox may actually be reclaiming the RSNs upon approval from DOJ according to Deadline; second, the bidding for BSkyB may have headed towards its conclusion as Comcast have emerged as the winning bid with $39 billion according to an article on Bloomberg, however, the cost associated with this acquisition, according to Craig Moffett, an analyst at MoffettNathanson LLC., Comcast, chaired by Brian L. Roberts, as “grossly overpaid”, as it propel Comcast’s debt to at least $100 billion, in addition to shareholders’ worried the cost was to much for Roberts’ vision of global expansion , which led to almost 8% drop on its share.  Amongst the questions that come up with this deal is whether Formula One could still be able to keep its US broadcasting rights with ESPN, or forced to be reverted to Comcast/NBC Sports within a few years time; third, a pushback form a group of Fox bondholders who felt wronged by the Fox/Disney merger were having a discussion with Disney and the banks who advised the deal, CitiGroup & J.P. Morgan Chase, according to Bloomberg’s report on October 12, 2018.  Like I said before, this saga might take a longer while to complete.  

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