U.S. Markets open in 3 hrs 1 min

Why MLB buying Fox regional sports networks would make sense

Daniel Roberts
Senior Writer

Ever since Disney got provisional approval in June from the U.S. Department of Justice to acquire most of 21st Century Fox’s entertainment assets for $71.3 billion, the fate of 22 regional sports networks has been up in the air.

The DOJ told Disney it could not keep the RSNs, and would have to sell them off within 90 days of the Disney-Fox deal closing. That restriction launched a parlor game for sports media folks: Who will buy the RSNs?

Comcast, AT&T, Verizon, and Discovery all looked like potential bidders. There were also reports that Fox could end up buying the networks back. Then, last week, CNBC reported that Amazon was bidding in the first round, along with less surprising names including Sinclair, Apollo Global Management, Blackstone, and KKR.

And now Major League Baseball may be in the mix.

MLB Commissioner Rob Manfred, speaking with Corey Leff of the sports business blog JohnWallStreet on Tuesday after the annual March of Dimes sports luncheon in New York City, gave an eyebrow-raising answer when asked about the RSNs: “We’re very interested in the RSN sale process and have preferences in terms of who the owners are going to be. Candidly, we’re looking at the RSNs ourselves.”

Major League Baseball declined to comment any further to Yahoo Finance.

Rob Manfred, commissioner of Major League Baseball, speaks at the Yahoo Finance All Markets Summit in New York on Feb. 8, 2017. REUTERS/Lucas Jackson

The Fox RSN portfolio includes 22 local sports channels spread across the country, concentrated in the Midwest, with names like Fox Sports Kansas City, Fox Sports Oklahoma, and SportsTime Ohio—names that will obviously change once the channels change hands. The gem of the portfolio is YES Network, a joint venture between Fox and the New York Yankees. (The Yankees own 20% of YES but are reportedly in talks to buy the rest from Disney, so it’s likely the eventual buyer of the RSNs will only be buying 21 channels.) These channels have the rights to 44 pro teams in MLB, NBA, and NHL (no NFL). Guggenheim has valued the RSN portfolio at $25 billion.

Either Amazon or MLB buying the networks would represent a complete changing of the guard.

As intriguing as Amazon’s interest is to media onlookers, it doesn’t make much clear sense. Amazon obviously has its toes in an eye-popping breadth of industries, but it has zero experience in operating linear cable channels. In live sports, it has bought up some rights here and there, including streaming 10 NFL games for the past two seasons. But that is a far cry from owning television channels.

MLB, on the other hand, makes a little more sense as a buyer, even if at first glance it looks like a buyer out of left field. The league (and particularly Manfred, as an attorney and the longtime MLB VP of economics and league affairs under Bud Selig) has experience with negotiating broadcast rights packages; it has intimate understanding of which teams bring the biggest local ratings, which are unhappy with their current deals, and other granular nuances of the local-market cable landscape.

And MLB has a proven track record with creating sophisticated streaming options for its fans. MLB was the first league to start showing all its games live on the internet (for a fee) with MLB.tv. The league’s in-house video arm, MLBAM Tech (or “BAM Tech”) became so successful and widely-respected that MLB spun it off last year and Disney quickly acquired a majority stake.

MLB already owns the exclusive digital rights to the NHL’s content. (That’s how respected MLB’s digital video operation is: a rival sports league handed MLB the keys to its digital strategy.) That makes it less bizarre that, by owning the channels, MLB would become a broadcaster of some NBA and NHL games.

For baseball fans, the excitement would be if MLB bought the RSNs and added some kind of innovative, a la carte option for fans to stream individual games for a fee, with no restrictions.

For MLB, the league would gain new revenue streams from subscriber fees and local ad sales. It would also have pricing power over the channels, though revenue-sharing between the clubs and the channels would get extremely complicated, as the Chicago Cubs blog Bleacher Nation points out.

To be sure, both Amazon and MLB could just be interesting red herrings, and the channels could all end up going the most obvious, less exciting route: private equity.

Daniel Roberts is the sports business writer at Yahoo Finance and hosts the Sportsbook podcast. Follow him on Twitter at @readDanwrite.

Read more:

Major League Baseball and Amazon get tighter

Amazon Prime, YouTube TV are in a sports streaming race

Former ESPN president John Skipper: Why DAZN can compete with ESPN

Sports media VC George Pyne: ‘There’s going to be a Rupert Murdoch of digital’

ESPN’s new streaming service is aimed at a very specific sports fan