Amazon Bid for Fox Networks May Escalate Sports Rights Arms Race

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Amazon mogul Jeff Bezos (left) and MLB commissioner Rob Manfred (right) are said to be among those vying for Rupert Murdoch’s 22 Fox regional sports networks.

Murdoch's 22 regional stations, valued at $25 billion, draw interest from Amazon, MLB, the Yankees and others as streaming deals heat up.

Live sports rights may be headed to a new frontier as streaming becomes an increasingly significant component of deals. While Fox recently inked a 10-year extension with Major League Baseball (worth north of $525 million annually) that includes expanded digital rights, Amazon's bid for Fox Sports' 22 regional sports networks could signal an escalation.

The Seattle-based digital giant already has committed millions to nonexclusive streaming rights, including $65 million annually for Thursday Night Football, which is included in subscribers' Amazon Prime membership, and a three-year pact in the U.K. to show Premier League matches on Dec. 26 (Boxing Day), among that circuit's biggest match days of the year.

But Amazon's bid for RSNs marks a first for exclusive linear sports content. (Like TNF, Premier League matches are shown on linear TV.) "There's more competition, but there's a limited amount of assets and content. You've seen it in everything from cricket to the Premier League to MMA," says Dan Ives, managing director and equity analyst at Wedbush.

The collection of 22 regional channels — which includes many networks in the Midwest as well as crown jewel YES, which is part-owned by the New York Yankees — is valued at up to $25 billion, according to research firm Guggenheim Securities. However, Disney's $71.3 billion purchase of most of 21st Century Fox has triggered a clause in the YES contract that lets the Yankees buy back the remaining 80 percent of the network they do not own. And the team has reportedly lined up investors to do so.

An obscure tax law stipulates that the RSNs be included in the Disney acquisition. But because of its ownership of sports behemoth ESPN, it must unload the networks in order to clear regulatory approval for its Fox purchase. Many observers expected NBC Sports to be a player in the auction, but regulations against anti-competitive conduct also preclude Comcast's NBC Sports from bidding.

The RSN package includes rights to more than 40 pro teams in baseball, the NBA and NHL, but not the NFL. And that's even without YES, which also broadcasts the Brooklyn Nets' NBA games. In fact, MLB is a major driver of RSNs; two dozen networks hosting its clubs rank No. 1 in primetime cable in their markets.

Bidders include David Smith's Sinclair Broadcast Group, Tegna Inc. and private equity firms Blackstone and Apollo, according to CNBC. Rupert Murdoch's slimmed-down Fox empire also could buy back the RSNs. Also interested is MLB, led by commissioner Rob Manfred. The sale, which is being handled by Allen & Co. and JP Morgan Chase, would not include digital MLB rights.

"We’re very interested in the RSN sale process and have preferences in terms of who the owners are going to be," Manfred told the business blog JohnWallStreet in an interview on Nov. 28. "Candidly, we’re looking at the RSNs ourselves."

The league has been an outlier when it comes to live streaming. It was the first to stream games when it launched MLB.tv during the 2002-03 season via its tech startup MLB Advanced Media (dubbed BAM). Current Commissioner Rob Manfred – who was VP of league affairs and economics under longtime commissioner Bud Selig – was intimately involved launching the league’s digital business.

In 2015, Manfred and NHL commissioner Gary Betman announced a six-year, $600 million digital distribution deal.(BAM was spun off in 2016 as BAM Tech – with Disney plunking down $2.58 billion for a 75 percent stake – and continues to operate a collection of OTT services including HBO Now. Major League Baseball owns 58 percent and the NHL 9 percent.) 

Amazon can afford to use sports rights as a loss leader to drive Prime subscriptions. But if it prevails in the RSN auction, it would mark a big expansion into a legacy business. Says Ives, "As more consumers stream content, you'll see exclusive streaming rights and capabilities going to these technology players. And that's the paradigm shift."

This story appears in the Dec. 5 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.