Amazon threat to buy sports rights should freak out media companies

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Robert Iger, chief executive officer of the Walt Disney Co., arrives for a morning session at the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, U.S., on Thursday, July 12, 2018. 

David Paul Morris | Bloomberg | Getty Images

Robert Iger, chief executive officer of the Walt Disney Co., arrives for a morning session at the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, U.S., on Thursday, July 12, 2018. 

Amazon CEO Jeff Bezos may have given Disney CEO Bob Iger an early Christmas present this year. But if Iger accepts it, he could be paving the way for the demise of traditional cable TV networks, including Disney’s own ESPN.

Amazon has placed a first-round bid for Disney’s 22 regional sports networks, sources familiar with the matter told CNBC’s David Faber on Tuesday.

Disney is being forced to divest the 22 networks as part of its larger $71.3 billion deal for Fox assets. They include the YES Network, which broadcasts New York Yankees games, plus other networks that show live regional games from a variety of professional leagues, including Major League Baseball, the National Basketball Association and the National Hockey League

The threat of Amazon buying sports rights — even a declining business like regional sports networks — should scare traditional media companies that are banking on owning must-see live content to stay alive in an on-demand world.

In Disney’s case, Amazon’s interest is a double-edged sword.

On the plus side, a competitive bidding situation could push up the sale price, which could top $20 billion. Other first-round bidders include a bunch of private equity firms and two broadcast-TV companies, Tegna and Sinclair, CNBC reported.

But they don’t have the balance sheets to reasonably compete with a big traditional media player like Fox. The slimmer “New Fox” needs live TV, including sports, to stay relevant. That’s one reason why it’s the favorite to buy back the 22 networks, as sources familiar with the matter told CNBC last month. Fox CEO Lachlan Murdoch confirmed at the Dealbook conference earlier this month that his company has an interest in buying back the networks, even though sources told CNBC that Fox didn’t submit a first-round bid.

Amazon’s interest could drive the price for Fox up, helping Disney get the maximum value from the assets it has to divest.

On the other hand, despite all the chatter around Disney+, Disney is still very much a traditional media company, and its largest media asset by revenue is ESPN. Owning sports rights is critical to ESPN’s long-term success.

Selling sports rights to a giant like Amazon, with a market capitalization of more than $700 billion, could spur other technology giants like Apple, Google and Facebook to bid on sports rights to stay competitive.



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