Tuesday, February 22, 2005

History of The Regional Sports Business Part 2

In a strategic move to bail out of the sinking ship that has become the RPP partnership with Cablevision, Fox announced this morning a breakup of the partnership. (Press Release)

This elegant, tax-free solution gives Cablevision 100% ownership of MSG, FSN Chicago, and a 50% stake in FSN New England. Fox will take control of FSN Florida and FSN Ohio as well as NSP (the Fox Sports Net programming arm) and National Advertising Partners (NAP) which sells advertising on the FSN network.

The parties will continue the current ownership structure of FSN Bay Area (for the time being), which is controlled by CVC with Fox having a 40% stake.

This move enables Fox to escape from the disasters of MSG/FSNNY and FSN Chicago, both facing mass team defections. See my previous posts on these markets (NY & Chicago). It also frees Cablevision to explore options for its 50% ownership in FSN New England.

Fox appears to be getting the better end of the deal. An analyst from UBS Warburg calculates that the assets Fox will take away are worth $700 million, while CVC's are only worth $450 million. The deal will also enable Fox to take greater advantage of team rights in the Florida and Ohio - more on this later.

Kaiser Prediction: Cablevision will eventually sell its 50% stake in FSN New England to Comcast, the dominant MSO in the Boston area.

The change in control of FSN Ohio to Fox is interesting. Larry Dolan, brother of CVC's Charles Dolan, owns the Cleveland Indians and thus it was a family affair with CVC's ownership of FSN Ohio.

It also remains to be seen what will become of FSN Chicago. With Comcast taking over the major local sports rights, it seems that FSN Chicago is doomed to be shut down when the Comcast (AT&T) affiliate agreement ends if not sooner.

Kaiser Prediction: Cablevision will also sell what remains of FSN Chicago to Comcast. Comcast will then implement a two channel strategy, carrying the Cubs and Blackhawks on FSN together with the FSN national programming feed. It will distribute White Sox and Bulls games on Comcast SportsNet Chicago with its own Comcast national and regional programming.

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