The Implications Of Amazon’s Bid For Fox’s Regional Sports Networks

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by Tim Mulligan

Hot on the heels of 21CF (21stCentury Fox) securing a renewal of its multi-year distribution deal with the leading US pay TV operator AT&T; 21CF’s regional US Sports networks are now in play. According to CNBC, tech major Amazon is bidding for all 21CF’s 22 regional sports TV networks. This comes on the back of the ramifications of the Disney acquisition of the 21CF’s non-sports assets back in December 2017. The approval of the acquisition by the US Department of Justice is contingent on Disney off-loading the 22 regional sports networks due to its existing ownership of the ESPN network. 21CF’s securing of multi-year nationwide distribution with AT&T has reinvigorated the attractiveness of the assets, which have been valued at between $19-20 billion on EBITDA earnings of $2 billion.

What Amazon Can Do With 22 Regional Sports Networks

For Amazon, the opportunity to acquire the 22 Regional sports networks represents much more than the ability to acquire a tier 1 set of sporting assets and associated inventory. Amazon’s TV content is solely being delivered through its streaming platform via Amazon Prime Video and through its home entertainment functionality on its ecommerce platform.  The current set of rights deals around the regional sports networks will preclude the blanket ability to switch the sports coverage onto Amazon Prime to complement its existing streaming sports coverage in the US. However, Amazon has a much greater prize in store if it secures these 22 networks.

With the multi-year AT&T deal in place for distributing the regional sports networks on DirecTV, U-Verse and AT&T’s streaming app DirecTV Now, Amazon could effectively replicate its Whole Foods Market strategy - buy up a proven non-digital market leader, run it as a separate standalone business, and use it for both incremental revenue growth and key market learnings. The market learnings will be how to accelerate and incorporate Amazon Marketing Services (Amazon’s rapidly growing advertising business, which is projected to generate $3.7 billion in revenues in 2018) into video and specifically into the sports video space.

Although the duration of the multi-year distribution deal with AT&T has yet to be disclosed, when the terms expire, Amazon will have effectively run a profitable data-gathering exercise, and will have acquired a talent pool of ex-Fox video ad integration specialists to its video offering, which means it will be optimally placed to integrate an ad-supported sports offering into its digital content proposition in the next 3-5 years, which is the typical lifetime of a TV distribution deal.

Amazon’s move therefore, could have huge ramifications for pay-TV currently in both satellite and telco ,and in the future through streaming. And for Disney… well they get $20 billion to pump into their direct-to-consumer offerings ESPN+ and Disney+.

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