Sports may be an even bigger star at the ‘new’ Fox after Disney deal
|The Walt Disney Co.’s Bob Iger and 21st Century Fox’s Rupert Murdoch
The high-powered Fox executives in the room — people such as Fox Sports President Eric Shanks and FX CEO John Landgraf — learned of the talks from breaking news alerts on their phones.
Despite the heavy nature of the news, the mood in the room stayed light, as Rice joked about the pending deal.
A deal that Bob Iger and Rupert Murdoch first discussed over the summer and ultimately signed last week had stayed quiet up until that day. Nobody saw it coming.
Last week, as the massive $52.4 billion deal was announced formally, the same sense of disbelief from Rice’s meeting trickled down to Fox staffers on both coasts.
Rice spent last Thursday, the day the deal was announced, hosting three town hall-style meetings on the Fox lot in Los Angeles. There was so much interest in his talks that the first one at 10 a.m. PT filled up a 1,000-seat theater so quickly that many staffers were turned away at the door. Everyone seemed nervous about a deal that they didn’t see coming.
Rice’s main message in the meetings was one of calm — that changes will create opportunities for Fox employees. He emphasized that there would be two Fox companies — a Disney Fox (Fox shareholders would own 25 percent of Disney) and a new Fox. Disney Fox will be a media behemoth. The new Fox would be a nimbler, profitable and innovative company.
Rice took questions from worried staffers but did not offer much detail beyond what was in the press release, sources said.
Though each of the town halls lasted for more than an hour, the company’s plans for Fox Sports were not a large part of the talks. Shanks also spoke during the town hall meetings, reiterating that Fox Sports would continue to innovate and invest in sports programming.
The general mood in Fox’s offices in New York and Los Angeles in the immediate aftermath of the deal was one of angst mixed with hope. The angst came from uncertainty. Nobody knows how aggressive the new Fox will be in the sports arena or how nimble the new company will be.
The hope came from the idea that the new Fox company will make an even bigger bet on sports.
The deal still is so new that Fox executives have no strategy for how it will grow once the acquisition gains regulatory approval.
With its Disney deal, it’s clear that Fox is making a big bet on live content — news and sports — as the future of TV, as opposed to scripted shows. Fox kept its sports and news divisions, while it shed its movie studio and entertainment networks. That means the Fox broadcast channel would have to license scripted prime-time shows, not own them.
Some Fox Sports staffers hope the move means sports programming will be even more vital to the new Fox network and will take a bigger prime-time position on the Fox broadcast network. The idea is that Fox, which has two hours of prime time per night from 8 to 10 p.m., would use live rights such as sports, news and talent shows for prime time. After the transaction, the new Fox will be debt-free, which could give it the luxury to be in acquisition mode. Think less investment in “Empire” and more in Red Sox-Yankees.
“My hope is that we’ll be a stripped down and more focused company that will be out there trying to acquire more rights,” one Fox Sports employee said.
As far as FS1 and FS2, no changes are planned, sources said. Other than its UFC deal, which ends next year, the channels’ rights deals — largely NASCAR, MLB and the Big Ten — run into the next decade.
Executives with pro sports leagues remain cautiously optimistic that Fox will remain committed to sports, even after shedding its lucrative regional sports network business. Like everyone else, league executives are in the dark about what a new Fox will look like. With most of its rights deals running long-term, these executives say they have the luxury of time to see how aggressive the new Fox will be with sports rights.
“I see Fox as being more selective with the sports rights they are going to get,” said Daniel Cohen, Octagon’s senior vice president of media rights consulting. “I see Fox hunkering down and focusing on big properties that produce known results.”
Meanwhile, Fox is parting with the most profitable part of its business — the regional sports networks. Fox’s RSNs bring in annual EBITDA of $2.3 billion, according to estimates from MoffettNathanson.
But it’s not just a financial loss. Much of Fox’s identity is intertwined with the RSN business — which is deeply integrated into the sports group. Fox Sports Regional Networks President Jeff Krolik shares an office suite with Shanks. Their assistants sit next to each other. How that gets untied will be delicate.
While waiting on regulatory approvals, the RSNs still have to conduct business. Fox RSN executives are in the middle of intense rights negotiations with several teams, including the Tampa Bay Rays, Miami Marlins, Milwaukee Bucks, Kansas City Royals, Charlotte Hornets and Detroit’s professional teams. Teams will surely be concerned that these talks are now delayed or even put on hold pending the approval process, which could have a major impact on their budget and spending plans.
These deals — like the Fox executives — are seemingly in limbo until a sense of clarity emerges.
|While Fox Sports remains, Disney is buying Fox's 22 regional sports networks.|