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SBJ/March 13 - 19, 2006/This Weeks News
Competition pumps up MLB rights in Europe
Published March 13, 2006
The emergence of two new players in the European sports market has helped Major League Baseball more than double the value of its cable television rights there, to nearly $20 million over five years.
One of the players is the North American Sports Network, a four-year-old startup based in Dublin, Ireland, that landed the exclusive MLB deal for between $18 million and $20 million, according to a person familiar with the agreement. NASN previously held U.K. rights to MLB through a series of one-year deals with nominal rights fees, but it has been on a rights acquisition binge since being recapitalized last May. NASN now has exclusive, multiyear deals with MLB, the NFL and NHL locked up across all of Europe.
The other player is ESPN, which made an unexpected bid for MLB’s European rights despite not owning any networks there other than versions of ESPN Classic.
The ESPN bid prompted NASN, which ESPN had come close to buying at one point last year, to increase its offer by several million dollars.
“For the same rights, it’s a significant increase,” said Paul Archey, MLB’s senior vice president of international business, comparing the new deal with the ones MLB had with NASN and about a dozen Europe-based cable networks.
NASN CEO Amory Schwartz acknowledged that ESPN’s pursuit of the same rights sent the fees skyward.
“We were aware ESPN was competing for the baseball deal,” he said. “It’s somewhat frustrating because we have to pay a little more, but at the same time it does validate we’re on the right track, that these rights are maybe more valuable than we thought.”
ESPN launched a version of ESPN Classic in England this month, reaching 8 million homes, and has an equal number of homes for ESPN Classic on the European mainland. Neither of those networks carry live games or U.S. events now but could if ESPN were to acquire such rights.
An ESPN spokeswoman said that, as policy, the company does not discuss specifics of negotiations, but that “ESPN consistently look[s] at new ways to serve sports fans around the world.”
By spending big on rights to U.S. sports leagues, NASN aims to create a one-stop destination for North American sports, while also boxing out ESPN and pulling rights away from European-based networks.
That process began in May when Benchmark Capital Europe bought out the controlling interest in NASN owned by Paul Allen’s Vulcan Ventures. NASN then hired industry veteran Mike Trager as a consultant to assist with rights negotiations and later committed about $45 million over four years to Pan-European rights to the NHL, outbidding Europe’s largest sports cable network Eurosport.
The aggressive posture conjures up memories of Pan-American Sports Network, the Hicks, Muse, Tate-backed Latin American sports network that launched in 2000 and spent hundreds of millions on sports rights in South America, only to declare bankruptcy two years later.
But Archey said NASN is different from PSN (which never had an MLB deal) because it has carried programming from all the major U.S. pro leagues for the last four years. He praised the network as having a “good business plan.”
NASN launched primarily as a service targeted at expatriate North Americans, but when company research found that 70 percent of its subscribers were native Britons, the company moved toward courting a broader audience.
Still small in terms of distribution, it has about 200,000 subscribers in the U.K., according to Schwartz, and fewer than 1 million in continental Europe. It is available primarily as part of a Setanta Sports subscription package of a half-dozen channels on the Sky Sports satellite platform in the U.K. European distribution includes digital cable systems in Germany, Switzerland, Belgium and the Netherlands. Schwartz said he expects deals in France, Italy and other countries to put the network in 7 million to 10 million homes by the end of this year.
Setanta Sports, a worldwide distributor of soccer and rugby telecasts that operates a pay channel in the United States on DirecTV, is the other main investor in NASN.
Sources say ESPN had advanced talks with Setanta last year about buying some of its assets, including NASN, but could not reach a deal. A person involved in those discussions said he thinks NASN is preparing for an initial public offering instead, and buying up as many rights as it can to make itself attractive to the public markets.
Benchmark Capital board member Jed Simmons, an adviser to NASN and son of former ESPN President Chet Simmons, said the network is not for sale, but acknowledged that Benchmark goes into every investment with an “exit strategy” in mind.