Disney wants Fox's regional sports networks to boost ESPN

Walt Disney Co.’s potential takeover of much of 21st Century Fox could provide an enormous boost to Disney’s ESPN sports empire.

Disney would like to buy Fox’s 22 regional sports networks — including Prime Ticket, Fox Sports West and YES, the network that carries the New York Yankees — as part of any deal, according to two people familiar with the discussions who were not authorized to comment.

Regional channels have become highly lucrative because they draw ardent sports fans who want to connect with their local teams. Fox’s local sports networks carry the games of 44 professional teams in three leagues: Major League Baseball, the National Basketball Assn. and the National Hockey League. That includes the NBA Los Angeles Clippers and the NHL Kings and Ducks.

Regional sports networks often rank among the most popular cable channels, which increases their value. Viewers tend to watch games live — rather than recording them — which makes the commercial time available in sports particularly worthwhile to advertisers.

Fox’s regional sports networks are valued at $22.4 billion, according to an analysis Wednesday by Guggenheim Securities. Fox’s entertainment cable channels, FX and National Geographic, are worth about $8.7 billion.

Guggenheim’s analysis placed a $68-billion valuation for all of the assets that Disney is hoping to buy. The 20th Century Fox movie and television studio was valued at $13.3 billion. Fox’s international television operations are worth about $13.7 billion, the firm said.

The Guggenheim analysis estimated that Fox's 39% stake in European pay-TV giant Sky was worth $8.8 billion and that its 30% stake in Hulu was worth $1.75 billion.

Disney’s ESPN has been grappling with subscriber losses and lower ratings. Seven years ago, ESPN was available in about 99 million homes in the U.S., but now it is found in about 87 million homes, according to Nielsen data. Those losses have significantly reduced the fees that Disney receives from pay-TV operators for the rights to carry ESPN, which is the most expensive basic cable channel.

The Bristol, Conn., sports giant has been trying to find its footing in the fast-moving television landscape and has shed hundreds of employees. Viewers no longer wait to watch “Sports Center” because sports scores and video clips of game highlights are ubiquitous on the internet and smartphones.

ESPN could use Fox’s regional sports channels as a source for additional content, particularly live games. That content might also be made available on the proposed ESPN streaming service that Disney is expected to launch next year.

Disney attempted more than 15 years ago to launch regional sports networks — but the Burbank giant retreated because Fox was more aggressive in establishing local cable channels dedicated to sports. Rupert Murdoch's Fox Entertainment Group bought the Los Angeles Dodgers from the O'Malley family in 1998 amid Fox's high-stakes campaign to control the regional sports market. Fox sold the Dodgers to Frank McCourt in 2004.

Comcast Corp. and Sony Pictures Entertainment also have expressed interest in Fox’s regional sports networks, but Disney has emerged as the front-runner in the bidding war for Fox’s entertainment assets.

Losing the regional networks would leave Fox with a skimpy sports portfolio. The Fox broadcast network that airs NFL games and other sports, including Major League Baseball’s World Series, and its national cable channels Fox Sports 1 and Fox Sports 2. Guggenheim valued Fox’s two national sports channels, which have been slow to gain traction, at $1.8 billion.

Fox News Channel, meanwhile, was valued at $14.6 billion by Guggenheim.

meg.james@latimes.com

Twitter: @MegJamesLAT


UPDATES:

3:30 p.m.: This article was updated with new information.

This article was originally published at 2:10 p.m.

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