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Disney-Fox Deal Wins Approval After Agreeing To Sell 22 RSNs

Disney, in a "major coup, secured U.S. Justice Department approval" for its proposed $71.3B purchase of 21st Century Fox’ entertainment assets after "agreeing to sell" the 22 RSNs that are part of the deal, according to James & Faughnder of the L.A. TIMES. The DOJ's "speedy approval" of Disney’s proposed takeover of much of Fox "deals a crushing blow to Comcast." It also brings Disney "much closer to winning its prize." The DOJ in its filing stated that Disney already "owns 80% of the national ESPN network" and owning the RSNs would "give the company too much clout in television sports." Analysts were "not surprised by the divestiture of the sports channels." Cornell Law School antitrust professor George Hay: "There's not a lot of sports out there, and ESPN has a lot of control." James & Faughnder note selling the RSNs probably will "create a new market as private equity firms or other media companies" --  such as Comcast, AT&T or Charter Communications -- attempt to "scoop up the channels" (L.A. TIMES, 6/28). 

STICKING POINT: The WALL STREET JOURNAL's Schwartzel & Hagey report the DOJ believed Disney’s purchase of the RSNs would "likely result in higher prices for sports programming on cable." Disney will have 90 days "following the closing of the Fox deal to sell the sports networks." Comcast had been "exploring partnerships with other companies and private equity partners in case it needs more cash for another round of bidding that takes the price even higher." Such a partnership could "offload some assets like the sports networks, potentially easing some of the regulatory hurdles that a Comcast-Fox deal would face." The RSNs were "expected to be a sticking point for regulators" (WALL STREET JOURNAL, 6/28). CNBC's David Faber noted there was not "that much of a conversation around" the decision to sell the RSNs. Faber: "They didn't try to keep some, so that did ahve the effect from the DOJ's perspective of saying, 'OK, that was going to be where our main objections might have been. If you're eliminating that, you've eliminated a lot of what we might have spent a lot of time reviewing and talking about'" ("Closing Bell," CNBC, 6/27). The WALL STREET JOURNAL's Sharma & Mattioli cite sources as saying that Comcast has "no immediate plans to tap such funding sources, but it may look to do so should the bidding reach extremely high levels" -- in the $90B range or so (WALL STREET JOURNAL, 6/28).

VALUED ASSETS: U.S. Assistant Attorney General Makan Delrahim said the decision on the RSNs will "ensure that sports programming competition is preserved in the local markets where Disney and Fox compete for cable and satellite distribution" (CLEVELAND.com, 6/27). In N.Y., Lee & Kang note the RSNs are one of Fox’ "most valuable businesses" and are expected to generate more than $2B in profit this year (N.Y. TIMES, 6/28). Also in N.Y., Alexandra Steigrad notes the RSNs have "61 million subscribers." Following the ruling Comcast now "mulls its next step." DC-based growth equity venture fund Revolution Growth Partner Todd Klein said that with Fox having yet to "set the date for its shareholders’ meeting -- where it would vote on Disney’s offer -- is telling because it gives Comcast time to come up with a counter" (N.Y. POST, 6/28). CABLEFAX DAILY notes interest in the RSNs is expected to be high, with live sports a "premium in an increasingly on demand world." One analyst put a $23B "value on the sports nets." Some of the likely candidates to purchase the RSNs include Comcast, AT&T, Charter, Liberty Media/Discovery and the Yankees, as YES Network is "viewed as the most valued asset in Fox's RSN portfolio." Candidates could also include "YouTube or other OTT players." Sinclair has also been an "eager purchaser of content over the years" (CABLEFAX.com, 6/28).

WANTING ANSWERS: In Philadelphia, Bob Fernandez noted Consumer Reports "launched the national 'What the Fee?!' campaign" yesterday by delivering to Comcast’s HQ a "petition with 110,000 signatures, asking that it be more transparent about buried fees in bills, such as monthly surcharges for broadcast television stations ($7.50), local sports broadcasts ($6.75), and DVRs ($10)" (PHILLY.com, 6/27).

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