Disney is selling the RSNs as part of its acquisition of certain 21st Century Fox Inc.’s entertainment assets. Originally, it was anticipated that the total acquisition price could top $20 billion, but since the bidding began the asset situation has changed. The New York Yankees have decided to exercise an option to buy back the YES Network, reportedly with Amazon as a partner, diminishing the worth of a package.
And an anticipated bidding war failed to materialize, according to reports. MLB did follow through with a second-round bid, as did Sinclair Broadcast Group (the largest operator of television stations in the United States, controlling 193 stations in over 100 markets) and Apollo Global Management, a private equity firm known more for bidding on distressed properties. (Sinclair is reported partnering with the Chicago Cub on a new RSN, Marquee, launching in 2020.) But other broadcast giants like Comcast and Fox decided to skip a second round of bidding. From Bloomberg:
Disney did attract second-round offers by Thursday’s deadline from potential buyers including Sinclair Broadcast Group Inc., Apollo Global Management and Major League Baseball, according to people familiar with the sale process. But the proposals valued the remaining networks at roughly six to eight times earnings before interest, taxes, depreciation and amortization, the people said.
Major League Baseball is seen as a long-shot acquirer. It’s still looking for a partner that could bolster its bid, according to people familiar with its thinking. The organization declined to comment, as did Apollo. Disney and Fox also didn’t have an immediate comment on the process. A representative for Sinclair didn’t immediately respond to a request for comment.
MLB has support from the Canada Pension Plan Investment Board, but the league has been seeking the kind of strategic partner that could ensure the networks get good distribution from pay-TV companies, according to one of the people. The New York Post previously reported on the Canadian Pension Plan’s involvement.
The big issue that is certainly driving down the value of the RSNs: the uncertain future of cable networks at a time when streaming technology is changing the economic landscape. According to AP, cable giant Comcast lost 29,000 U.S. cable customers in the fourth quarter but added 351,000 Internet subscribers. MLB is positioned to capitalize on direct-to-consumer streaming, and adding the RSNs could allow teams to offer a unique mix of access that could also include season tickets and more. But there’s no guarantee that as cable giants shrink, RSNs could lose a preferred place on basic cable and be relegated to a plus-fee sports tier. Right now MLB teams are beholden to RSNs, and buying the 22 Disney RSNs would give them a level of control and an instant spot in the marketplace, instead of building a service from scratch as the Cubs are doing. As we wrote in December:
It doesn’t sound like MLB is looking to scrap game distribution on the traditional RSN model—far from it. But by centralizing rights and giving teams to set up their own streaming services, MLB foresees a rights model with one foot in the established present while also looking toward an all-digital future where all content is streaming.