The YES Network, the most prominent of the 22 regional sports networks being unloaded by Disney as a condition of closing its 21st Century Fox acquisition, has been sold for $3.5 billion, according to multiple media reports.
The buyers of the 80% of YES controlled by Fox are said to be a group that includes the New York Yankees, which had the right of first refusal as the divestiture unfolded. Also aboard are Amazon, Sinclair Broadcast Group and a collection of private equity investors including Blackstone. Amazon and Sinclair had been mentioned as suitors months ago, with both companies looking to occupy more sports real estate. Fox declared it was not planning to re-acquire any of the networks, with insiders suggesting it would invite scrutiny by regulators.
Forbes, the New York Post and Fox Business have all reported the deal has been struck, with an announcement expected as early as today.
Sinclair owns the Tennis Channel and just announced a partnership with the Chicago Cubs on a new RSN launching in 2020. After its $3.9 billion purchase of Tribune Media was spiked by regulators last July, the No. 1 owner of local TV stations is sitting on a lot of cash and in its quarterly earnings report last month reported the lowest debt level in company history. Amazon has been streaming NFL Thursday Night Football games as well as Premier League soccer and U.S. Open tennis outside the U.S. and has made no secret of its interest in continuing to add live sports to its Prime Video mix. Certainly the financial bar is not too high given the tech giant’s war chest.
Steven Cahall, an analyst with RBC Capital Markets, pointed to the Amazon factor in saying the transaction will be a closely tracked one in the media sector. “While the total cash back to Disney from this RSN sale would not be especially material to its long-term strategy, it is potentially a litmus test for linear sports media assets,” Cahall wrote in a note to clients. “Investors are concerned about what they perceive as limited demand. While YES is probably the most attractive RSN, arguably it should be sold at a decent valuation as Amazon’s involvement is likely to be considered a seal of approval for the longer-term value of sports media. We expect investors to immediately wonder what other sports ambitions Amazon might have.”
YES, which was formed by the Yankees and shows their games as well as those of the Brooklyn Nets and Major League Soccer’s New York City FC, is the linchpin of the RSN portfolio built by Fox. Disney agreed to unload it as part of a settlement with the U.S. Department of Justice and other global regulators assessing its $71.3 billion acquisition of most of Fox.
It wasn’t initially clear when the networks hit the auction block last year whether they would move as a single group or in piecemeal deals. YES was always a special case, given the size of the New York market and the role of the Yankees. Sinclair has indicated it remains interested in the remaining RSNs. Other bidders for the broader portfolio include Liberty Media, Major League Baseball and Ice Cube’s 3-on-3 basketball league Big3.
While RSNs threw off huge amounts of cash for their owners in the 1990s and 2000s, this decade has seen major disruptions to the traditional business model as the TV bundle frays and technology drives changes in viewer habit.
RSNs in some major markets have encountered major turbulence when pay-TV operators refused to meet their demands for steep carriage fees. Having locked up exclusive broadcast rights, networks like SportsNet LA, a joint venture between Charter and the Los Angeles Dodgers, have left a large chunk of their teams’ fan base unable to watch games due to carriage issues. One cautionary tale is Comcast SportsNet Houston, which shut down in 2014.