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Volume 23 No. 8
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Fox RSN sale reveals pessimistic market

It’s hard to stay optimistic about the future of linear TV when you look at Disney’s sale of the 21 Fox Sports-branded regional sports networks. It’s become clear that the market sees slow growth — at best — for these RSNs, a stark contrast to just a few years ago when media companies, teams and venture capital firms were bidding up their value.

I asked financial analyst Craig Moffett why the RSN market is so tepid this year. He pointed to cord cutters, cord shavers and cord nevers as the main reason.

“Even if RSNs secure a deal that gives them 100% distribution on the basic tier for all of their traditional distribution partners, it’s not hard to imagine that they’ll get to a place within a couple of years where the universe of traditional distribution could be falling by 5-10% a year,” he said. “Even in the best possible worlds, you’re looking at a business where distribution could be cut in half over the next couple of years.”

Moffett also referenced comments Discovery’s David Zaslav made in this column recently when he suggested that RSNs have a battle on their hands to remain on basic tiers.

“The best scenario is that RSNs are carried on the basic tier and they lose half their distribution,” he said. “Their worst scenario is that they become a premium tier and they lose 75% of their distribution. It’s really hard to see any good outcome for an RSN.”

Moffett said he is not alone in his pessimism. He pointed to the lack of big media companies in the bidding process — even as prices were dropping — as evidence that the market for RSNs isn’t what it used to be.

“The market has voted,” he said. “It is just as interesting to see who didn’t show up for the auction. Charter was not there. Liberty was not willing to bid enough, not withstanding John Malone having expressed some interest in the assets. You get the sense that the pool just isn’t very deep right now.”