Disney Offloads 21 Fox Regional Sports Networks to Sinclair

The Walt Disney Co. and Sinclair Broadcast Group have entered into a definitive agreement under which Sinclair is paying $9.6 billion to acquire equity stakes in 21 regional sports networks and “Fox College Sports,” which were acquired by Disney in its $71.3 billion acquisition of select 21stCentury Fox assets.

Completion of the transaction is subject to the approval of the U.S. Department of Justice, which had mandated Disney sell the RSNs.

The RSN portfolio, which excludes the New York Yankees’ YES Network, is the largest collection of RSNs, with a footprint that includes exclusive local rights to 42 professional teams consisting of 14 Major League Baseball teams, 16 National Basketball Association teams, and 12 National Hockey League teams.

In 2018, the RSNs generated a combined $3.8 billion in revenue across 74 million subscribers.

The RSNs will be managed under wholly-owned subsidiary of Sinclair, Diamond Sports Group LLC.

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Byron Allen, CEO of Entertainment Studios and owner of The Weather Channel, is an equity and content partner in Diamond Sports Group.

Byron Allen

Sinclair’s existing sports business consists of Marquee Sports Network (a joint venture with the Chicago Cubs), Tennis Channel and Tennis Media Company (dedicated to live tennis events and tennis lifestyle), Stadium (a joint venture focused on college sports and professional highlights), Ring of Honor Wrestling (professional wrestling), and high school sports programming (with Friday Night Rivals and Thursday Night Lights).

“While consumer viewing habits have shifted, the tradition of watching live sports and news remains ingrained in our culture,” Chris Ripley, CEO of Sinclair, said in a statement. “This acquisition is an extraordinary opportunity to diversify Sinclair’s content sources and revenue streams with high-quality assets that are driving live viewing. We also see this as an opportunity to realize cross-promotional collaboration, and synergistic benefits related to programming and production.”

“We are pleased to have reached this agreement with Sinclair for the sale of these 21 RSNs, subject to the conditions of the consent decree with the U.S. Department of Justice,” said Disney CFO Christine McCarthy.

The RSNs include Fox Sports Arizona, Fox Sports Detroit, Fox Sports Florida, Fox Sports Sun, Fox Sports North, Fox Sports Wisconsin, Fox Sports Ohio, SportsTime Ohio, Fox Sports South, Fox Sports Carolina, Fox Sports Tennessee, Fox Sports Southeast, Fox Sports Southwest, Fox Sports Oklahoma, Fox Sports New Orleans, Fox Sports Midwest, Fox Sports Kansas City, Fox Sports Indiana, Fox Sports San Diego, Fox Sports West, and Prime Ticket.

Disney to Close 20th Century Fox Acquisition on March 20

The Walt Disney Co. March 12 said it expects to close its $71.3 billion acquisition of 20th Century Fox Film Corp. and related businesses on March 20.

In a filing, Disney said 21st Century Fox shareholders have until March 14 to decide how they wish to receive their share/cash-based compensation. Disney said it would calculate the amount of cash and/or shares of new Disney common stock to be distributed to each 21st Century Fox stockholder based on all valid elections received and in accordance with the merger agreement.

About half ($35.7 billion) of the acquisition price is in cash.

Consummation of the mega merger makes Disney the largest Hollywood studio, in addition to majority owner of Hulu and online TV subsidiary Hulu with Live TV.

In its most-recent fiscal period, 20th Century Fox Studios reported operating income of $193 million, a 47% increase over the $131 million reported in the previous-year quarter.

Quarterly segment revenue decreased 4% to $2.16 billion, from $2.24 billion, primarily reflecting lower home entertainment revenue at the film studio and lower syndication revenue at the television production studio.

Through half the fiscal year (ended Dec. 31, 2018), revenue dropped less than 6% at $3.97 billion, compared with $4.2 billion in the previous-year period.

Disney Forgoing $150 Million in License Revenue Withholding ‘Captain Marvel’ From Output Deals for Pending SVOD Service

The Walt Disney Co. offered some insight on the financial impact its pending Disney+ SVOD service will have on existing distribution models.

Speaking on the Feb. 5 fiscal call, CFO Christine McCarthy said the company would forgo about $150 million in third-party license revenue in fiscal 2019 for the Q4 launch of the subscription streaming video service.

McCarthy added that the pending theatrical release Captain Marvel, with Brie Larson starring as Disney/Marvel’s first female superhero solo lead, would be excluded from traditional output deals in favor of Disney+.

“So that’s where you can see the forgone licensing revenue begin,” she said.

Disney plans to showcase the Disney+ service on its annual investor day on April 11.

“We’ll also take that opportunity to provide detailed insight into our overall DTC business,” said CEO Bob Iger.

Separately, Iger said he expects to expand Hulu into foreign markets once acquisition of select 21stCentury Fox assets (including Fox’s 30% stake in Hulu) is completed.

“We’ll own 60% when the [Fox] deal closes, and we’ll be prepared to talk more, perhaps, about Hulu’s strategy at that point,” he said.

“Having already designed much of the integration process, we are prepared to start effectively combining our businesses as soon as we obtain regulatory approval from the last few remaining markets,” added Iger. “We look forward to working with the tremendous teams at 21st Century Fox to create the world’s premier global entertainment company.”

 

Report: Amazon in Talks to Buy Majority Stake in Yankees’ YES Sports TV Network

Amazon and Sinclair Broadcast Group are reportedly in early discussions about a joint bid to acquire the New York Yankees’ YES regional sports TV network.

The Wall Street Journal, citing sources familiar with the situation, said Amazon and Sinclair would be acquiring the 80% stake currently owned by The Walt Disney Co. – and valued from $5 billion to $6 billion. The Yankees own the other 20%.

Other possible YES suitors include pay-TV operator Altice USA and investor group RedBird Capital.

Amazon, unlike Netflix, is no stranger to live sports. It currently streams NFL Thursday Night Football on Prime Video, in addition to other sports internationally.

The talks are in the preliminary stage and face several challenges, including Major League Baseball’s streaming video platform, MLB.tv, and existing pay-TV distribution deals between the Yankees and Comcast, Altice and Charter Communications.

Disney assumed control of Yankees Entertainment and Sports Network LLC following its $71 billion acquisition of select 21stCentury Fox assets. In addition to carrying Yankees baseball, YES airs the NBA’s Brooklyn Nets basketball games, among other content.

Fox owns 21 another regional TV sports networks across the country, valued at around $15 billion.

Fox Chief Communications Officer Henderson Joining Snap

Social media platform Snap Dec. 10 announced the hiring of Julie Henderson as chief communications officer. Henderson replaces Mary Ritti, VP of communications, who left Snap last summer after five years.

Henderson, who reports to CEO Evan Spiegel, will lead communications globally as Snap continues to redefine the cellphone camera.

Henderson is currently EVP and CCO for 21st Century Fox. She will assume her position at Snap following the completion of the sale of certain 21st Century Fox assets to The Walt Disney Company.

“Julie will be an outstanding addition to our team,” Spiegel said in a statement. “She brings incredible experience, talent, and integrity, as well as the respect of the tech, media and finance communities.

Prior to her current post at Fox, Henderson was the company’s SVP of communications and corporate strategy, where she led communications and developed company-wide marketing and distribution strategies.

 

 

‘Fox Nation’ SVOD Service Goes Live

Fox Nation, the $5.99 subscription streaming video service, officially launches today (Nov. 27) offering “Fox & Friends”-style conservative commentary, opinions, documentaries and related content (“Cooking with Steve Doocy,” a Fox News host) for streamers who like their entertainment red-state.

New programs include “First Thoughts” and “Final Thoughts” featuring online siren Tomi Lahren, and “Un-PC” talk show, co-hosted by Britt McHenry, the former ESPN reporter infamously suspended in 2015 after an ugly video of her dressing down a towing-lot attendant went viral.

John Finley, SVP of development and production at Fox News, characterizes Fox Nation as a mixture of Netflix and Facebook Live, featuring similar content options — but geared toward the Fox News demographic that helped put Donald Trump in the White House.

“We have fans, other news organizations simply have viewers,” Finley told The New York Times.

Fox News has become basic cable’s most-watched network averaging 1.4 million viewers during the day; 2.4 million during 8-11 p.m. prime time hours, according to Nielsen — a ratings reality the network has championed for more than two years.

“It’s another way to service and provide content to our most dedicated fans,” Finley said. “We can give them an infinite amount of content.”

But not 24/7.

Fox Nation, which will feature many Fox News on-air talent, including Sean Hannity, Tucker Carlson and Laura Ingraham (but reportedly not Chris Wallace and Shepard Smith), will cease all live programming at 7 p.m. — the time when Fox News begins its prime-time lineup.

Indeed, Fox News remains a revenue machine for corporate parent 21st Century Fox, generating more than $1 billion annually in ad-sales. The unit was not part of Fox’s $71 billion 20th Century Film Corp.’s sale to The Walt Disney Co.

 

Fox Ups Q1 Hulu Equity Loss 84%

Twenty-First Century Fox Nov. 7 disclosed a first-quarter (ended Sept. 30) equity loss of $114 million regarding its 30% ownership stake in Hulu. The loss represented an 84% increase from an equity loss of $62 million during the previous-year period.

Hulu, which is co-owned by Disney, Comcast and WarnerMedia, continues to generate significant losses on paper to its corporate owners, who license hundreds of millions of dollars in content to the 20+ million subscriber over-the-top video service.

While Hulu is nominally losing several billion dollars per year, its “losses” essentially amount to the excess it pays to its four sponsors over the revenues it generates, according to Wedbush Securities media analyst Michael Pachter.

“If the four [corporate] sponsors find a way to grow Hulu’s subscriber base, it should be able to achieve breakeven, and it should manage to gain market share from Netflix,” Pachter wrote in a recent note.

The analyst expects content from Disney, Fox, Universal, and Warner to be largely unavailable to Netflix going forward, leaving the SVOD pioneer trying to buy content from Sony, Paramount, Lionsgate, MGM, and smaller studios.

“Ultimately, we expect Hulu to become a formidable competitor to Netflix, particularly should Disney and Warner Bros. layer their own streaming offerings as premium additions to a basic Hulu subscription,” Pachter wrote.

Meanwhile, 20thCentury Fox Film (which includes 20thCentury Fox Home Entertainment) reported operating income of $277 million, an 8% increase from the $256 million reported in the prior-year quarter. The increase reflected higher contributions from the television production studio led by higher SVOD licensing of animated product.

Quarterly revenue decreased 7% to $1.82 billion, primarily reflecting lower theatrical revenue from a lower volume and mix of films released in the current quarter partially offset by higher SVOD revenue at the television production studio.

“We continue to deliver against our growth plan even as we make important strides toward completing our Disney transaction and launching Fox in the first half of 2019,” executive chairmen Rupert Murdoch and his son Lachlan said in a statement.

Separately, Fox posted a $147 million equity gain from its 39% stake in British satellite TV operator Sky – up 34% from an equity gain of $110 million last year. Fox recently sold much of its Sky stake to Comcast.

Finally, the European Commission approved Disney’s acquisition of 20thCentury Fox provided it sells its stake in A&E channels (History, H2, Blaze, Lifetime, Crime + Investigation) distributed overseas.

“The commission’s decision is conditional upon full compliance with the commitments,” the EC said in a statement.

 

Sky Boss Jeremy Darroch Says He’s ‘Sticking Around’ Euro Pay-TV Operator Following Comcast’s Acquisition

Jeremy Darroch, chief executive of Comcast Corp.’s newly-owned Sky subsidiary, said he plans on remaining at the U.K. satellite TV operator following Comcast’s $40 billion acquisition.

Speaking Oct. 25 on Comcast’s fiscal call, Darroch said he looked forward to leading Sky, which has more than 15 million subscribers, including subsidiaries Sky Deutschland and Sky Italia.

“We’re all energized by the next phase of growth and the additional opportunities that being part of Comcast will bring, on top of delivering our existing plans,” he said.

The news seemed to please Comcast chairman/CEO Brian Roberts, who introduced Darroch on the fiscal call. Indeed, for Darroch – who received a $47.4 million golden parachute following the close of the acquisition – not remaining at Sky could have proved a challenge to Comcast’s nascent international strategies.

“We’re really excited and pleased with the [Sky] management team” said Roberts. “We are delighted that Jeremy and many of the team, the senior team, we hope and believe are going to stay with the company.”

With Roberts agreeing to pay more than twice what 21stCentury Fox offered for outstanding interest in Sky, media analysts in the United States have questioned how the deal will be accretive for Comcast shareholders going forward.

“It seems as though they would like investors to forget that Sky is also a satellite TV provider, and satellite video distribution is increasingly becoming obsolete,” Craig Moffett, with MoffettNathanson Research, wrote in a note last month.

 

 

DOJ Upping Comcast Scrutiny Over Hulu

When Comcast acquired NBC Universal in 2011, federal regulators required the Philadelphia-based media conglomerate to step away from management issues regarding Hulu — the subscription streaming video service it co-owns with the Walt Disney Co., 21st Century Fox and AT&T’s WarnerMedia.

With those and other regulatory restrictions lifted this year, Comcast, which owns 30% of Hulu, now has more of input into how Hulu — and online TV service Hulu Live — operate. The cable operator announced last month the appointment of three members to Hulu’s board of directors, who include NBC Universal executives Jeff Shell, Linda Yaccarino and Matt Bond.

Now the U.S. Depart of Justice’s antitrust unit plans to up its oversight into how Comcast its renewed leverage on how Hulu operates in the pay-TV ecosystem, according to Assistant Attorney General Makan Delrahim.

Speaking Oct. 3 to Senators in Washington, D.C., Delrahim was asked if Comcast increased oversight of Hulu posed a threat to consumers.

“Certainly, Hulu could be a competitor to the cable business,” Delrahim told Senator Richard Blumenthal (D-Conn.), according to Bloomberg. “And it’s one that we will examine carefully to see if they might take any conduct that would harm its ability to compete.”

Indeed, in a letter to Comcast prior to restrictions being lifted, Delrahim reminded the company that government oversight was not in the past tense.

“The department retains jurisdiction to enforce the antitrust laws and takes its obligations seriously,” he wrote on Aug. 14.“We would appreciate your cooperation in keeping us informed by providing the department with any plans you may have to change your policies or practices involving video programming and distribution.”

Interestingly, the DOJ could forward the letter to Disney, which will own 60% Hulu following its $71 billion acquisition of select Fox assets, including Hulu. That deal, whose price tag was significantly reduced following Comcast’s separate purchase of British satellite TV operator Sky, is still under regulatory approval.

Disney plans to launch a branded OTT video service next year – as it did this year with ESPN+.

 

Comcast Acquires 30% of Sky Stock Following Weekend Auction Win

Comcast Corp. Sept. 25 disclosed it has acquired 30% of British satellite TV operator Sky Plc., shares following a weekend takeover auction win over 21st Century Fox.

Fox, which owns 39% of Sky, is selling its stake, in addition to 20thCentury Fox Film, to The Walt Disney Co.

Comcast said it would continue to acquire Sky shares from investors for the £17.28 ($22.60) per share price hammered out in the special auction for controlling interest in the pay-TV operator. The share price values Sky at more than $40 billion. Fox had offered £15.67 per share.

“Comcast Bidco will continue to acquire Sky Shares in the market from eligible shareholders outside the United States at up to and including £17.28 in cash for each Sky Share,” Comcast said in a statement first reported by CNBC, which is owned by Comcast’s NBC Universal subsidiary.

Indeed, Comcast needs to acquire 50% of Sky’s stock plus one additional share to complete the takeover. Sky’s board approved Comcast’s offer, calling it “materially superior” to Fox’s bid and called on Sky investors to “immediately” accept it.

Notably, when Fox first bid on Sky’s remaining stock in late 2016, its offer totaled £10.75 per share.

Meanwhile, Comcast shares continue to decline following the auction, with some analysts contending the media giant overpaid for a waning distribution model (satellite TV).

Not so for Liberty Global CEO Michael Fries, who called Comcast’s purchase price a “great outcome” for Sky shareholders. The executive said it values the European pay-TV market, an ecosystem he claims is often overlooked.

Fries called on Comcast CEO Brian Roberts to remain “rationale” on the deal and to give it time to playout.

“I think the purchase price is terrific,” he told Bloomberg.