The two big stories in sports media that I’m watching most closely and why:
DISNEY’S RSN DISTRIBUTION: Keep your eye on Disney’s planned sale of the 22 Fox RSNs as a condition of its acquisition of 21st Century Fox. The sales process comes amid questions about whether digital power players like Facebook, Amazon, Netflix or Google will invest seriously in sports programming. The sale also comes during an unsettled landscape for the future of the traditional RSN model. Who is going to make a run at these networks and what are they going to do with them? How would it shift the landscape if Amazon or another digital player became a strategic investor in a specific network or a set of networks? What would an RSN under their control look like?
YouTube is already in the local streaming business, doing deals with three MLS teams, including LAFC. Could it build off those deals by actually buying a network? The valuations and dollars behind these networks are big enough that the financial players like Goldman Sachs or Providence Equity have to be considering a deal. But the marketplace and time horizon is different than in 2001, when Goldman invested in YES Network.
The media market has matured enough — particularly with RSNs — that private equity investors in 2018 do not have as long a runway to get a return on those investments. Other bidders make sense: The new AT&T already controls four RSNs; Fox Sports President Eric Shanks has been open about how much he likes the RSN business and could be at the table to bring them back; Sinclair is flush with cash since its Tribune acquisition hit the skids and could use the RSNs to further its local broadcast strategy.
Outside of the New York Yankees, who appear likely to take over ownership of YES, I don’t anticipate teams being in interested in buying their channels. Most teams are content with the current rights fee model and don’t have the operational or financial bandwidth to own a network. The most recent deals for the Tampa Bay Rays and Milwaukee Bucks resulted in healthy revenue gains from their previous deals, which suggests that the rights fee model is not going away any time soon.
But as one very astute source firmly told me: Don’t think of this portfolio as simply a group of “networks.” Rather, it should be seen as exclusive ownership of the rights to 44 major league teams consisting of over 5,000 hours of live sports programming a year. How that programming is distributed and monetized may change over time, but it has enormous value considering the strength of live sports programming. This is the deal all insiders are talking about and it is likely to close in the first quarter of next year.
WILL THE CUBS GO ALL THE WAY? While we’re talking about the big deals of 2019, watch the Chicago Cubs. The team has a big decision to make on whether it will move on from its partnership with NBC Sports Chicago when its rights are up at the end of next year. The team has been part of an equity partnership with the White Sox, Bulls and Blackhawks since 2004, but the allure of forging its own media path must be intoxicating.
There are so many reasons this is intriguing: The Cubs check all the boxes for any media property looking at sports; they are a major entity in a big market — a successful team with a global fan base; led by Tom Ricketts and Crane Kenney, the Cubs are aggressive and think long term; plus they have several options, including staying with NBC Sports Chicago, as the two sides are still talking.
The Cubs could follow the NESN and YES model and develop their own media platform. But they don’t have to go the traditional RSN route. The team could follow the path Ted Leonsis is forging with his Monumental Sports Network or the model Steve Ballmer laid out with Prime Ticket by testing a digital delivery. The Cubs could sell a package of games to NBC Sports Chicago and experiment with the others. Remember, they have 45 games on WGN and 25 for WLS-ABC, and were one of the most aggressive teams in testing the viability of Facebook, as they’ve had 10 geo-fenced simulcasts on Facebook of the WLS-ABC games. Or the team could tie its fortunes to one of the bigger OTT providers like ESPN+ or B/R Live.
Distribution is the issue. If the team spurns NBC Sports Chicago, it will face challenges. Comcast, which is the dominant cable system in the market, is used to big public carriage battles and would be a tough negotiation for any new Cubs network that it is not part of. Many close to this issue believe it’s too soon for the Cubs to go solely for digital distribution. But the Cubs have been very aggressive and progressive under the Ricketts family ownership, and have learned a lot from John Henry, Tom Werner and Fenway Sports Group. So I’m watching just how far the team will be willing to go when it comes to its media strategy.
Abraham Madkour can be reached at firstname.lastname@example.org.