Disney Sale of Fox RSNs Seen Logical, Given Combined Company's Sports Power
DOJ's requirement that Disney sell 22 Fox regional sports networks to buy Fox's other nonbroadcast assets (see 1806270016) was logical, given the power New Disney would wield in sports programming otherwise, experts said Wednesday. Sports Fan Coalition (SFC) Chairman David Goodfriend said such conditions would be even more likely in a Comcast/Fox, given what would be New Comcast's ability to use sports programming as a club against MVPD competition. Comcast didn't comment. Fox approved a Disney deal (see 1806260038), though a shareholder vote hasn't been scheduled.
Disney was expecting to make a concession on the Fox sports networks to get clearance, emailed Erik Gordon, clinical assistant professor at University of Michigan's Ross School of Business. He said Comcast is the loser in the consent decree because the clearance gives Fox more support in its preference for Disney.
Disney's ESPN married to Fox's RSN portfolio would kill "the substantial head-to-head competition" between Disney and Fox and mean higher cable sports programming prices in those 22 designated market areas, DOJ said in its complaint Wednesday in U.S. District Court in Manhattan, accompanying its consent decree allowing the transaction with RSN divestiture. The RSNs include various state and regional Fox Sports, Prime Ticket and the YES Network. Justice said the RSNs collectively have about 61 million subscribers and have live telecast rights to about half of the U.S. teams in the MLB, NBA and NHL. Disney has 90 days after the close of the deal to sell the networks, with an extension of another 90 days possible, according to the consent decree. Fox referred questions about possible buyers to Disney; Disney didn't comment on that.
Not being sold are trademarks and trade names containing "Fox," DOJ said. It said New Disney will offer any buyers of a Fox RSN a nonexclusive royalty-free license for use of the Fox trademark for at least 18 months. It said the consent decree has the court appointing a trustee to handle a divestiture not completed before the deadline.
The American Cable Association had raised concerns with DOJ that Disney/Fox "would give Disney control of these critical programming networks that could be bundled with its other national and local programming assets to harm consumers in many markets." It said it suggested a divestiture of the RSNs would mitigate the harm. It said the consent decree "should convince Comcast to abandon its own pursuit of the Fox programming assets [since Comcast] already has too much market power by virtue of being both the nation's largest cable operator and a significant owner of national, regional and local programming. And its ability to harm rivals has only increased with the recent expiration of FCC conditions that were put in place in 2011 to address this concern."
Goodfriend said the consent decree proves SFC's big concern about a sizable overlap between the audiences for national sports network ESPN and RSNs, and the group was "prepared to go to battle" if Disney/Fox was approved without RSN divestitures. He said the next big question is who buys the RSNs, hoping DOJ pays as much attention to the purchaser issue as it did to RSN divestiture. A cable executive said Disney, though launching an ESPN streaming service, likely wasn't interested in the RSNs since its focus is on competing with Netflix, and Disney never articulated how RSNs would be important to that.
Disney ties some of lesser content to must-have ESPN, forcing distributors to take both if they want ESPN, and ESPN tied to RSN content would have magnified the anticompetitive danger, a former DOJ antitrust lawyer told us, saying RSN divestiture would be a savvy move for either Disney or Comcast in a Fox deal. While Disney/Fox would be movie studio consolidation, the market share for studios is lumpy and can change year to year, so that weakens the argument (see 1806190014) New Disney would mean anticompetitive dangers in Hollywood, the lawyer said.