Media companies swing big bats for regional sports networks
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News Corp's investment in the New York Yankees baseball channel YES Network illustrates the new normal in media: multibillion dollar deals, once reserved for rights to carry the Olympics or NFL football, now apply to regional sports channels as well.
Rupert Murdoch's Fox Sports said on Tuesday that it will buy a 49 percent stake in YES, valuing the local sports network around $3 billion. That is 50 percent more than the $2 billion paid for the Los Angeles Dodgers baseball franchise by a group led by private equity firm Guggenheim Partners six months ago.
While Walt Disney Co's ESPN remains the giant in the marketplace, with cable rights for many major sporting events sewn up for years, other media conglomerates are building regional sports channels that show games from local colleges and professional teams that ESPN or other national channels do not carry.
Disney's rivals are eyeing the lucrative $5.15 monthly subscription fee that ESPN can command for each customer, according to media consultant SNL Kagan, the highest among cable channels. Fox Sports North, the most lucrative of the 12 Fox regional sports channels tracked by SNL, collects $3.68 a month for each subscriber.
The problem is that there just aren't many more high-profile sports (rights) out there, said former NBA Television and New Media Ventures President Ed Desser, whose Los Angeles-based consultancy advises on sports rights deals. Most of them are spoken for, so when one comes up, there's the possibility of an overheated bidding market.
The YES deal follows Time Warner Cable Inc's acquisition last year of the rights to carry the Los Angeles Lakers basketball games for the next 20 years for $3 billion.
Time Warner's LA-based SportsNet said it intends to bid on a contract to carry Los Angeles Dodgers' games if Fox Sports cannot reach an agreement to extend its contract during an exclusive negotiating period that ends in a few weeks. That TV deal is expected to cost $3 billion or more, industry experts said.
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