Wednesday, December 6, 2017

Fox Regional Sports Nets Could Be Game-Changer For ESPN

While investors may be riveted by the implications of the Walt Disney Co.'s impending bid to snap up 21st Century Fox's entertainment assets, the most transformative element of the proposed $60 billion deal could very well be the transfer of Fox's regional sports networks, according to AdAge.

According to CNBC's Michael Faber, Disney and Fox could close on a revised deal, including the sale of the regional sports networks, as early as next week.

Fox's flagship broadcast network and the cable sports nets FS1 and FS2 are not included in the latest offer.

Should the deal go through, ESPN's national cable networks would be supplemented by a clutch of RSNs that serve sports-crazed markets such as New York, Los Angeles, Dallas, Cleveland, Detroit and Kansas City. While the Yankees' YES Network is clearly the crown jewel of the Fox RSN empire (this past season, the Baby Bombers averaged a 3.6 household rating on their home network, which works out to just shy of 255,000 in-market viewers per game), the smaller channels also pack a wallop.

Fox's Ohio-based RSN in 2017 averaged an MLB-high 8.3 rating during its coverage of live Cleveland Indians games, and the same outlet delivered the second-highest local NBA ratings thanks to LeBron James and the Cavaliers.

Fox holds a controlling 80 percent stake in YES Network, the remainder of which is owned by the New York Yankees.

That Fox is willing to part with its lucrative RSN business -- according to SNL Kagan, YES Network alone commands a princely $6.50 per sub per month affiliate fee, quite a premium when compared to the cable industry average of 30¢ a pop -- suggests that the Murdoch family foresees the day when the fundamentals of doing business in local sports markets will outweigh the concomitant financial advantages.

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