Fox' Willingness To Part With RSNs Suggests Different Direction For Future Business
The fact that Fox is "willing to part with its lucrative RSN business" as part of its talks with Disney indicates that the Murdoch family "foresees the day when the fundamentals of doing business in local sports markets will outweigh the concomitant financial advantages," according to Anthony Crupi of AD AGE. The "dynamics of cord-cutting/-shaving and younger viewers' ongoing exodus from traditional TV may very well make it impossible for Fox to continue to charge the dizzying carriage fees it currently extracts from cable and satellite operators, which in turn would only exacerbate the spiraling costs of procuring rights to top-tier sporting events." Should the proposed deal between Disney and Fox go through, ESPN's national cable networks would be "supplemented by a clutch of RSNs that serve sports-crazed markets" such as N.Y., L.A., Dallas, Cleveland, Detroit and K.C. While YES Network is "clearly the crown jewel of the Fox RSNs empire," the smaller channels "also pack a wallop." If Fox "presumably no longer believes that it can operate at the sort of scale that will allow it to continue to compete with the likes of Bristol, Disney is confident that the addition of the RSN suite will give ESPN a license to print (even more) money." Besides giving it a "virtual stranglehold over local sports (the Fox RSNs currently are home base for 44 MLB, NBA and NHL franchises), the acquisition of the rights to an additional 5,500 live events per year would sweeten the pot for fans who may be thinking of signing up for ESPN's upcoming direct-to-consumer streaming service" (ADAGE.com, 12/5). VARIETY's Cynthia Littleton noted while ESPN has not been in the RSN business, the "expansion with Fox RSNs might still prove a hurdle on the regulatory front" (VARIETY.com, 12/5).
OPPORTUNITY TO CASH IN: The WALL STREET JOURNAL's Sharma, Flint & Hagey note Fox is worth $60B in "stock-market value and is a global entertainment giant spanning movies, cable television and broadcasting." But sources said that the Murdochs are "questioning whether the company will be big enough in the years ahead to battle programming distributors" such as Netflix, Amazon and Comcast, as well as Google and Facebook. Fox Exec Chair Rupert Murdoch "sees an opportunity to capture a premium price for assets built over his career." He also is "embracing the chance to focus more on the news business, long his passion, and less on Hollywood" (WALL STREET JOURNAL, 12/6).
SEALING THE DEAL? In L.A., James & Faughnder wonder if 21st Century Fox CEO James Murdoch could "soon be in the running" to succeed Disney Chair & CEO Bob Iger. Sources said that it is one of "several intriguing scenarios that could be at play" as talks between Fox and Disney "gain momentum." Sources added that Rupert Murdoch's younger son has "long been heavily involved in Fox's management team and is eager to establish himself as a media mogul in his own right, rather than continue to jockey for power with his brother and famous father." A senior media exec said, "Maybe dangling a job for James might be what it takes to get a deal done" (L.A. TIMES, 12/6).
POTENTIAL HURDLES AHEAD: VARIETY's Todd Spangler noted Disney buying out Fox' Hulu stake "could prompt the U.S. government to block the move as anticompetitive or attach conditions on Disney's control over Hulu." Comcast, under the conditions of its acquisition of NBCUniversal, has been "prohibited from exercising management decisions regarding Hulu (a restriction that expires August 2018)." But unlike Comcast, Disney does "not also own pay-TV or broadband services." And Disney "could point to Netflix's billions in content spending as evidence of healthy competition" (VARIETY.com, 12/5).