Sports Network Will Need Big Bucks : Television: But industry experts say the spending power behind News Corp. and TCI cannot be discounted.
The global sports programming venture formed Tuesday by News Corp. and Tele-Communications Inc. will have to spend heavily for several years before it can even begin to make a dent in the formidable sports cable franchise established by ESPN, industry executives and analysts said. But few underestimate the will and spending power of News Corp. Chairman Rupert Murdoch and TCI chief John Malone.
Under the agreement announced Tuesday, Fox Broadcasting Co. will put an undisclosed amount of cash--estimated by sources at about $200 million--as well as its fledgling fX cable network into the joint venture. fX, which is now in about 25 million homes, will begin to carry some sports programming, as do such multipurpose cable networks as TNT and USA Network.
For its part, Liberty Media, the programming division of TCI, will contribute the programming assets of its 15 regional Prime Sports networks, which will be relaunched under the Fox Sports banner. The joint venture will have its own board of directors but will be run by current Fox Sports President David Hill.
Taking on ESPN will be no easy feat. The ABC-owned network reaches 70% of American television households and boasts a loyal following, a well-developed international operation and long-term cable rights to many of the highest-profile games in America, including professional football and college basketball.
But the new joint venture has a lot of leverage of its own. News Corp., which owns Fox, controls a global satellite distribution system that is unparalleled in the media business, and it proved its willingness to spend freely in building a fourth television network at Fox.
At TCI, Malone has used his company’s position as the largest U.S. cable operator--TCI boasts about 12 million subscribers--to establish himself as the nation’s gatekeeper for cable programming. Sources say he has routinely dropped services from his systems that compete with the collection of programming assets he holds through Liberty, and he could use the same strong-arm tactics to bolster the new sports venture.
“Malone and Murdoch are both 500-pound gorillas,” said a source at ESPN. “When those two enter your business, you better have both hands on your wallet and both eyes on the road.”
Neither partner could say when fX will begin airing sports programming or how much of the mix sports will account for. But they stressed that the cable network will draw on the combined strength of the partners for programming and will be especially focused on fast-growing international markets. Liberty already provides sports programming for News Corp.'s Asian satellite network.
Some analysts said the alliance makes sense. “It’s a great way for them to share programming costs and achieve economies, essentially by not bidding against each other for sports rights,” said Jessica Reif, an analyst at Merrill Lynch & Co.
For instance, sources said, Fox could conceivably parlay the broadcast rights to National Football League games to include cable coverage when those rights come available in two years. And sources speculate that the package Fox and NBC are negotiating with Major League Baseball might include cable rights for the new partnership, although sports sources doubted that baseball was the best vehicle for launching an international sports channel.
“They’ll try to build using baseball as their leverage,” an ESPN source said. “But baseball does not travel well internationally and is no longer the American past time at home. Murdoch is most interested in the international market, but he’ll have a hard time getting local events overseas and at home because rights are sewn up long-term.”
Indeed, Reif doubted the new partnership will be a formidable competitor to ESPN, at least for now: “ESPN has the brand name and the experience.”