AT&T Time Warner Merger OK Sends Disney & Comcast To War For Fox Assets

Today’s ruling that the AT&T purchase of Time Warner did not violate anti-trust law — a ruling I agree with wholeheartedly after following the case closely — sets up a wild merger season in media and beyond. I suspect that either later today or tomorrow Comcast will officially make a higher bid for the Fox assets that Rupert Murdoch had previously agreed to sell to Disney.

That will require Disney to make a larger counteroffer in order to win these assets.

How high will the price go for the Fox assets Rupert Murdoch is selling? Who knows. But Fox stock surged 5% in after hours trading and Disney and Comcast stock both fell, suggesting Wall Street is expecting a pitched battle for control of the assets Murdoch’s selling. Remember, whoever loses this battle for the assets would like to drive up the cost to their competitor as high as possible. I honestly calls this an even fight right now.

I’ve got five more big thoughts on the impact of this ruling that will be discussed below.

In the meantime, I held off on doing Outkick the Show today so I could react to this news coming down and contextualize why it was so important for you in real time this afternoon.

You can watch my thoughts here.

FYI, we will be talking about this quite a bit tomorrow morning on Outkick the Coverage from 6-9 am eastern.

But here are my five additional big thoughts.

1. Turner Sports will be a big buyer on the sports rights front in the years ahead.

AT&T is now a $300 billion company and they have DirecTV, which owns the NFL Sunday ticket exclusive rights, they have the NCAA Tournament in partnership with CBS which airs on TNT, TBS, and Tru TV and they have half the NBA on TNT.

It would not stun me if Turner ends up making a major run at substantial NFL rights, including Monday Night Football, in the years ahead.

This also makes Bleacher Report even more valuable in the years ahead. I’d expect additional investment to pour in from Turner to make Bleacher a viable competitor with ESPN.com in the audience metrics.

The leagues and owners have to be happy here because this decision creates a viable buyer with extremely deep pockets.

2. ESPN will have trouble keeping Monday Night Football when this deal is up in 2021.

Right now ESPN pays $2 billion a year for Monday Night Football and one NFL playoff game. Can ESPN afford to pay $2.5 billion or $3 billion a year for this asset package? It’s hard to believe the NFL would take less money for Monday Night Football than they receive now. But it’s also simultaneously hard to understand how ESPN is going to be able to afford to pay more than they do now given the rapid decline in their subscriber numbers.

This is particularly messy for two reasons: a. can you imagine what ESPN would look like without any NFL games at all? Especially because the NFL can put ESPN over the barrel and make them pay dearly just for NFL highlights and rights packages that allow them to do television shows. b. so can ESPN really not have any NFL programming at all and maintain their high programming costs? I think the answer is no.

But the NFL still might be able to force ESPN to pay them nearly a billion a year without giving them any games at all.

This negotiation will be incredibly fascinating to see play out.

3. The SEC is set for a windfall when its deal with CBS expires.

Right now the NFL’s Monday Night Football package is $2 billion a year on ESPN and the SEC game of the week on CBS, plus the SEC title game, is $55 million a year on CBS.

Holy. Cow.

Every Monday Night Football game effectively costs over $100 million each while every SEC game costs about $3 million each. And that includes the SEC title game which is a default playoff game in many years.

I think there’s a strong argument the SEC game of the week could be worth $300 million a year. Maybe more. There will be a ton of big bidders interested in this game when that property goes to market in a few years.

I’d suspect Turner, Fox and ESPN will all be at the bidding table. But the wild card to watch here is could Apple CEO Tim Cook, a huge Auburn fan, finally decide that he wants to step into the original sports rights game by buying up an asset like this? Don’t underestimate the value of personal connections in a story like this. Effectively the SEC game of the week is a piece of artwork.

$300 million a year is a rounding error for Cook and Apple.

Here’s the other question, could the SEC go direct to consumer and sell their game of the week? Don’t you think there are millions of SEC fans who’d be happy to pay, let’s say, $50 a year for an SEC game of the week telecast that didn’t have a single commercial break?

Then the SEC could sell their title game off as a single game to the highest bidder, and potentially get $100 million just for that game.

This one will be a fascinating rights package to watch.

4. CBS is a dangling asset waiting to be acquired by someone. 

The company is valued at just shy of $20 billion and has a ton of major assets right now.

I know, I know the legacy TV business is not a great value play, but someone is going to swoop in and buy the company at some point in the next couple of years just for their library of assets and for the promotional value of the network.

Hell, imagine if, say, Amazon just decided to buy CBS to advertise all the businesses and new programs it has.

The challenge here is that due to the Viacom entanglement you might have to end up buying all of Viacom in the process too.

I honestly think CBS and Viacom should do what Rupert Murdoch did with Fox and put all their assets on the open market and see who the bidders are.

Regardless it wouldn’t shock me to see someone like Verizon or Amazon make a play for all of the Viacom and CBS assets.

5. What will happen with Facebook, Amazon, Netflix, and Apple?

Will any of these companies end up making a run at major sports rights or not? Amazon just got a decent chunk of the EPL rights to air exclusively in England so they’re definitely sitting down at the sports rights table.

But right now the profit margins of sports are thin and the profit margins of Facebook, Amazon and Apple are extraordinarily high. (Netflix so far has a small profit margin and hasn’t been interested in live rights).

So will these companies decide that with sports gambling, for instance, becoming legal across the country that the play here is to grab up all the sports rights and figure out how to make them more profitable?

Or decide, as the TV networks did before them, that the audiences produced by live sports will allow them to promote their new TV shows during that programming and that the eyeballs make the deal worthwhile? Stay tuned, because with this ruling I think we ain’t seen nothing yet.

I can’t wait.

Comments