Wall Street investors and many media observers had already been looking at the RSNs as a potential sticking point in the $71.3 billion deal, so the news was not a total shocker. The OK from Justice is also not the ultimate green light for Disney, as several other regulatory bodies will still need to weigh in.
The news still puts pressure on Comcast to respond to Disney’s offer, which sources have indicated it is trying to do. The two companies have been competing for the Fox studio and network assets, with Comcast reportedly trying to line up outside funding sources with the sense that the bidding could reach the $90 billion range.
With Fox already having accepted Disney’s initial offer of $52.4 billion last December, rebuffing a previous Comcast proposal, the regulatory clock has already been running for seven months even as the bidding has recently escalated.
Both Comcast and Fox declined requests for comment on the news.
In granting the provisional approval, the DOJ made an AT&T-Time Warner move, filing a civil antitrust lawsuit in U.S. District Court seeking to block the merger. But a legal showdown a la AT&T — something some trial watchers mused about last spring, before Judge Richard J. Leon’s rejection of the DOJ’s complaint — does not appear at all likely. Instead, the suit was a formal framework enabling the parties to agree to a 90-day window after the close of the transaction during which which the divestiture of the RSNs can occur. With that condition agreed to by Disney, the matter is considered to be settled.
“American consumers have benefitted from head-to-head competition between Disney and Fox’s cable sports programming that ultimately has prevented cable television subscription prices from rising even higher,” said Assistant Attorney General Makan Delrahim of the DOJ’s Antitrust Division. “Today’s settlement will ensure that sports programming competition is preserved in the local markets where Disney and Fox compete for cable and satellite distribution.”
In an SEC filing last week, Disney said it would be willing to divest of the RSNs in order to gain regulatory approval. If it hadn’t, Disney would operate a sports colossus, which antitrust experts and analysts indicated would have the clout to raise prices for cable operators or internet distributors.
ESPN is already the leading sports power, with 88 million U.S. subscribers and a stack of pro and college rights. In recent years, ESPN has also invested in region-flavored ventures like the SEC Network, which carries sports from the southern collegiate power conference. Fox’s regional sports channels have amassed some 61 million subscribers, and broadcast 44 out of 81 professional basketball, baseball and hockey teams.
Disney has proactively offered to take the issue off the table, saying it would be willing to divest assets that generated up to $1 billion in earnings. It had previously offered to shed assets producing up to $500 million in revenue.