Amazon’s speculated bid for Fox’s 22 regional sports networks has more than what meets the eye
As per several press reports, Amazon is bidding for Fox’s 22 regional sports assets in an attempt to bolster up its live sports presence. As such it serves as a meaningful statement of intent from Amazon as it tries to cement its content portfolio further especially on Prime video platform.
Fox’s sports assets are up for sale largely resulting from the regulatory nuances associated with the momentous $71.3bn Disney-Fox merger earlier in the year. The Disney-Fox transaction was cleared by the US Justice Department conditional on Disney agreeing to offload Fox’s 22 regional sports networks. The reason being, Disney which already owns ESPN and its family of sports networks, if acquired Fox’s 22 regional sports networks “would likely result in higher prices for cable sports programming” for pay-TV operators and subsequently for consumers.
In that context, Disney ought to sell Fox’s 22 regional sports networks paving the way for the likes of Amazon and other private equity firms to pick these assets up. Apollo Global Management, KKR, and Blackstone along with Sinclair Broadcast Group, and Tegna are also speculated to be involved in the bidding process.
The regional sports networks up for grabs carry live games from a wide-range of professional leagues including Major League Baseball, the National Basketball Association and the National Hockey League and can be viewed as rather meaningful strategic assets.
However, Amazon’s interest in the aforementioned assets, in my view, is directly aimed at enhancing the value proposition embedded in its Prime Membership and is perhaps central to Amazon’s entire growth strategy. As Amazon continues to use content as a pull to strengthen its entire ecosystem whilst also trying to deflect customers towards the more sizeable e-commerce business, live sports could be yet another key growth driver with the possibility of meaningful long-term traction.
Amazon not entirely new to the world of sports…
Amazon has already ventured into live sports through a streaming partnership with US-based National Football League (NFL) for Thursday Night Football. The deal was initially penned in for 10 games for the 2017 season and got renewed in 2018 for 2018-2019 season for 11 games underlining Amazon’s sporting intentions.
Furthermore, inroads into distributing select games from the highly watched English Premier League (EPL) further substantiates Amazon's ambitions within the sporting arena.
Notable Strategic Differentiator?
Live sports form a clear contrast between Amazon and Netflix’s video platforms and their growth strategy. In that context, Amazon’s latest push hardly comes as a surprise. Netflix on the other hand appears to be maintaining its focus on scripted content and is reportedly closing in on purchasing ABQ studios in New Mexico which would be its first purchase of a studio complex.
Furthermore, Apple’s recent multi-year deal with independent production studio A24 underlines Apple’s push into original content. With several Tech and Media players fighting for eye balls, we are perhaps amidst one of the most dynamic and robust Media landscapes in recent times where live sports could probably step up as a notable strategic differentiator.
‘New Fox’ also perhaps in the running to buy back the 22 regional sports networks to enhance its new value proposition and cement its competitive positioning
Fox News, Fox Sports and its TV stations were not part of the Disney-Fox transaction. In that context, the ‘New Fox’ potentially also views these sports assets as key to uplift the value proposition that it has to offer.
Consequently, one would expect 'New Fox' to enter into the bidding game to buy-back the networks, albeit up against bidders with deep coffers. Thereby, Amazon’s interest in these networks (along with other financial investors) could drive a meaningful uptick in purchase price if it turns into an elaborate competitive bidding game. From Disney’s perspective while a competitive bidding environment bodes well in order to fetch lofty valuations, it is also a case of strengthening Amazon’s sporting presence which could potentially drive an upswing in the overall pricing environment surrounding sports rights, especially given that other tech giants such as Google, Facebook, Twitter, Apple also appear to be hovering around the media sector largely trying to leverage synergies in global distribution.
In the Indian context, Hotstar, appears to be well ahead in its live-sports offering and its Disney ownership adds an interesting angle; However, Amazon’s deeper push into sports poses key questions.
With a wide-ranging portfolio of sporting assets at play, Hotstar appears to be well ahead in terms of positioning itself as a sports-centric over-the-top distribution platform in India. Given its Disney/Fox ownership, there are clearly some ESPN-Hotstar synergies to exploit which might be worthwhile to keep track of.
However, given Hotstar’s meaningful reliance on Star India’s ownership of sports content rights, Amazon’s deeper push into live-sports further heightens Hotstar’s risk-profile, in my view.
This is because:
i) If Amazon pushes forward with bidding for IPL rights after 2022 or for that matter chases any sporting rights that Hotstar has built its value proposition on, there could be a material dilution in Hotstar’s value proposition. At the very least, more competitive bidding environment could at least hike up the cost of programming for Hotstar or Star India.
ii) If other tech players, such as Facebook, Twitter, Apple, Google etc also penetrate further into the Indian live sports streaming marketplace, Hotstar could quickly find itself fighting for sports rights against well-resourced behemoths. This paints an optically somewhat obscure picture on Hotstar’s risk profile, exacerbated by Hotstar's lofty reliance on third-party content.
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