On Thursday CNBC reported that Amazon was amid the bidders for the 22 regional Fox Sports Networks that Disney is being forced to sell as part of its acquisition of 21st Century Fox assets.
We don’t know what Amazon bid or how serious they are as potential acquirers of these assets, but CNBC reported that Apollo Global Management, KKR, The Blackstone Group, Sinclair Broadcast Group, and Tegna also made first round bids for the assets.
(The New Fox Company, the assets left behind in the wake of the Disney purchase, may also bid for the regional networks in a future round).
Why it matters:
Sports programming-one of the most highly sought after due to its popularity in the United States. Adding big name sports leagues such as the NBA and MLB increases the value for Amazon Prime Video and could make Prime subscriptions much more compelling.
Earlier this year, Disney completed a massive $71.3 billion acquisition of 21st Century Fox that included the 22 Fox Sports channels. Because Disney already owns ESPN, the Department of Justice forced Disney to sell off the Fox Sports channels to complete the buy. Amazon may be the one buying those channels according to CNBC.
The channels themselves broadcast games for 44 teams in major sports leagues like the MLB, NBA, and NHL. This would expand Amazon‘s reach into sports who already has a deal with the NFL to broadcast Thursday Night Football games. Amazon also cemented a deal with the Premier League in Europe to stream 20 soccer games for three seasons starting in 2019.
Market Capitalization from Fox:
Amazon, with a market capitalization of $731.2 billion even after the recent tech sell off, is larger than CBS, Fox, Disney, and Comcast — the four current NFL rights holders — combined. (Those four companies are worth a combined $443.5 billion at Thursday’s market close.)
Amazon, through its subscription Amazon Prime service, produces a bevy of original shows but has not yet purchased original sports content in America on an exclusive basis.
This could be a huge move into the exclusive sports marketplace.
Why would Amazon do this?
The first thing you need to consider is the business angle. Sports rights are a narrow margin business, by and large. That is, the media companies don’t typically reap massive profits over what they pay for the sports programming. In fact, sometimes they lose money on the sports deals.
Right now sports rights are purchased by media companies, who make money off those sports rights in two ways:
- by selling advertisements.
- through monthly carriage costs in the case of cable companies like ESPN, FS1, CBS Sports Network, and NBC Sports Network or through retransmission fees in the case of the major broadcast networks.
The simple way to think about this for a broadcast or cable network is that whether you are CBS, NBC, Disney/ESPN/ABC, or Fox, you make money through subscription fees and advertising.
(Significantly, the pot of gold that has been subscription fees as part of the cable and satellite bundle is under significant strain).
Ultimately when you consider all of these factors, while the 22 sports regional networks may not make immediate sense from a business perspective, they offer a tantalizing possibility for Amazon when it comes to investing in a streaming future.
And if Amazon has shown us anything, it’s a willingness to invest not for now, but for ten or twenty years in the future. Indeed, that’s the entire foundation of their business, to do now what everyone will want to do in twenty years.
So here’s the big question: will Amazon leap into the sports business now and will Disney allow them to do so?
It appears we may be about to find out the answer to both of those questions.