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MSGN Stock Heats Up on Sale Rumors: Who Should Buy the Knicks' TV Partner?

Benjamin Rains

New York area regional cable television network, MSG Networks Inc. MSGN is currently being shopped by ownership, and its stock price is heating up based on the reports.

TheNew York Post first reported the possible sale of MSG Networks, a spin-off of The Madison Square Garden Company MSG and the New York Knicks local television home, late Monday night. Since then, MSG Networks’ stock has been heating up from the field.

MSG Networks’ stock was up 6.32% to $24.40 per share on Tuesday. MSGN is currently a Zacks Rank #3 (Hold).

The executive chairman of MSG James Dolan, who also runs MSGN, began to look into selling the regional sports network that owns the TV rights for the NBA’ Knicks. The company also owns the rights to the NHL’s New York Rangers, New Jersey Devils, New York Islanders, Buffalo Sabers, Major League Soccer’s New York Red Bulls and others.

MSGN collects roughly $5 per subscriber per month, which is among the highest in the country, according the report. The Post noted that Dolan asked friends at the New York investment bank Guggenheim Partners to begin to gauge the market, as the firm has experience selling media assets.

MSG, the company that owns historic Madison Square Garden, the Knicks, the Rangers and other assets, spun-off MSGN into a separate publicly traded company in Fall 2015. Since the spin-off just over two years ago, reports indicated that the move was simply made to eventually sell the new stand-alone media company to the highest bidder.

MSGN reaches roughly 7 million homes in the New York area. The company’s current market cap is $1.84 billion, but it is unclear exactly what the company would be worth in the open market. MSGN is the only stand-alone, publicly traded regional sports network in the country.

Knicks fans have watched their team turn into a circus act under Dolan’s watch. However, with massive television rights deals for live sports still drawing billion of dollars, is MSGN worth what will likely be its at-least $1 billion asking price? And what company would want it?

Who Might Want to Buy MSGN?

Verizon Communications Inc. VZ, AT&T Inc. T, and Twenty-First Century Fox, Inc FOXA have all been named as possible MSGN suitors. According to Nielsen, New York has the biggest Designated Market Area in the country, owning roughly 6.407% of all the country’s TVs.

AT&T already owns five RSNs, and the company might not want to buy up any more assets since doing so could hurt its potential takeover of Time Warner Cable Inc TWC. Fox, which owns regional TV power Fox Sports, might want to gain more control in New York.

Verizon could also prove to be a big-time player, as it tries to stay competitive in the new age of internet-based television. The company recently announced its plans to introduce a new over-the-top internet television service.

Another potential buyer could be Comcast Corporation CMCSA, which owns NBCUniversal. The Walt Disney Company DIS, which owns both ABC and ESPN, could also be interested in MSGN.

NBC recently invested nearly $1 billion to cover the English Premier League, recommitting to one of the world’s most popular soccer leagues through the 2021-22 season. But NBC is not really in the local sports business, and there seems to be no reason for them to start now. ESPN isn’t either, and seems highly unlikely to commit to MSGN, especially as the “World Wide Leader in Sports” ratings suffer.  

Initial reports suggested that Fox wants more local sports content, but that it wouldn’t be interested in MSGN because it already owns New York’s Yankees Entertainment and Sports Network (YES). However, if Fox bought MSGN, it would dominate local sports coverage in the biggest television market in the country.

As cable subscription costs keep increasing, less-traditional outlets could move in on MSGN.

Out of The Box Possibilities

As the cord-cutting revolution rages on, television watchers continue to flock to Netflix Inc. NFLX, Hulu, and Amazon. But live sports are still viable commodities because advertisers know that they are one of the only things people still watch live.

Netflix, which is spending massive amounts of money on new original content, could easily decide to make a game-changing move and purchase MSGN. Amazon could do the same.

The NBA recently signed a nine-year, $24 billion national television rights that will see ESPN, ABC and TNT cover the league through the 2024-25 season. MSGN paid $100 million to broadcast the Knicks in the first season of its new TV rights deal.

Don’t be surprised if an out of the box suitor like the struggling Twitter Inc. TWTR, which recently bought the rights to stream some of the NFL’s Thursday Night Football games, put its name in the hat.

The Knicks have had three winning seasons since the turn of the century. But live sports will always garner money, even if it is with a new streaming service.

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