The Disney-Fox sale has been officially announced, with Disney acquiring more than $50 billion in 21st Century Fox assets in an industry-shaking deal that only became public knowledge in the last month.
Under the massive, $52.4 billion sale, which was announced early Thursday, Disney will own the Fox Sports Regional Networks, the 20th Century Fox movie and television studios, FX Networks, National Geographic Partners, and Fox’s stakes in Hulu and Sky.
Outside of the sports media niche, properties such as The Simpsons and X-Men moving to Disney will probably generate the most headlines. Yet if under the radar for most observers, Disney’s acquisition of the Fox RSNs will have arguably the most significant impact. The RSNs are the most valuable property in the move, worth more than $20 billion, per multiple estimates. The suite of 22 channels, including YES Network, gives Disney rights to some of the nation’s most popular teams in their respective markets — including the Yankees, Cavaliers, Cardinals, Royals and Spurs.
It should be noted that in their most recent completed seasons, Major League Baseball, the NBA and NHL each posted ratings declines for their local RSN broadcasts. Even so, local pro broadcasts still rank among the highest rated programs in several markets.
Disney has never before operated a traditional regional sports network, though it does run SEC Network, ACC Network and Longhorn Network. At a time when ESPN is losing subscribers, the RSNs would serve as a new source of lucrative subscriber fees. On the other hand, at a time when ESPN is perceived to have severely overpaid for rights, the RSNs bring with them a slew of costs — $35-38 million per year for the Cavaliers on Fox Sports Ohio, for example.
Beyond the financial considerations, the RSNs add a wealth of game inventory to ESPN’s portfolio. In a given year, ESPN might air 15 of the Cavaliers’ 82 regular season games (a maximum of ten on ESPN and five on ABC). Now, between its national and local networks, it would get every single one — outside of the handful exclusively televised by TNT. It would also be able to stream those games via WatchESPN, though it is unlikely that the existing television deals include provisions for those games to be carried by an OTT service like the upcoming ESPN Plus.
As for 21st Century Fox, the company will keep FS1, FS2, Big Ten Network, and the FOX broadcast network, meaning the sale will not have a noticeable impact on Fox Sports’ national deals. It will also keep its cable news channels. According to multiple reports, the FOX broadcast network would lean heavily on sports and news content.
The sale is an about face for 21st Century Fox, which just three years ago tried to acquire all of Time Warner (which is now on the verge of being sold to AT&T). The remnants of Fox will amount to $22.7 million according to an estimate cited in Variety, about as much as the RSNs alone.
The AT&T-Time Warner deal, which U.S. Justice Department has filed suit to block, provides some pause. Under the current political and regulatory environment, which is strikingly unpredictable, factors such as personal pique and hurt feelings could make the path to federal approval uncertain. In addition, there are legitimate reasons for the government to scrutinize a deal of this size. Per Variety, Disney expects the regulatory review to take up to 18 months. Comcast’s acquisition of NBC Universal was announced in late 2009, but not approved until early 2011.
There are other considerations. How will this deal affect Disney’s recent cost-cutting? ESPN has axed 600 jobs in two years and now would take on a slew of local game and studio personnel.
Moreover, what does this say about the state of the industry? Massive mergers have been the rule for 21 years, but Disney acquiring nearly all of a fierce rival seems like a new rubicon has been crossed. Per Variety, the Disney-Fox sale is the second-biggest media merger of all time, behind the ill-fated $103 billion AOL-Time Warner deal in 2001. It dwarfs Disney’s $19 billion acquisition of Capital Cities in 1996, which brought ABC and ESPN under its control. Disney still has a handful of competitors, but this deal creates a media colossus unlike any that has been seen before.
[Sources: Variety 12.14a, Variety 12.14b, Washington Post 12.14, Disney PR 12.14, L.A. Times 12.14, Sports Business Journal 6.8.15]
