In Time Warner bid, Fox betting on sports

According to a report by MoffettNathanson analyst Michael Nathanson, networks owned by 21st Century Fox would claim 40 percent of all carriage fees currently paid by U.S. pay-TV distributors to rights owners if Fox were to succeed in acquiring Time Warner, more than doubling the House of Murdoch’s current share.
That kind of heft would give Fox plenty of negotiating leverage against the combined Comcast-Time Warner Cable (no relation), which would serve approximately 30 percent of U.S. cable-TV households if their proposed merger goes through, and the combined DirecTV-AT&T, should that deal be approved, which would serve about 23% of all pay-TV households (cable, satellite, telco inclusive).
Yet the most important numbers to understanding Fox’s $80 billion (so far) bid for Time Warner are these:

  • The 2014 FIFA World Cup final between Germany and Argentina averaged 26.5 million viewers in the U.S., including ABC (17.3 million) and Univision (9.2 million);
  • The opening round game between the U.S. and Portugal drew 24.7 million viewers, including ESPN (18.2 million) and Univision (6.5 million)
  • Overall, ABC/ESPN’s coverage of the 64 games of the World Cup averaged 4.6 million viewer (final figures for Univision are not yet available).

And these:

  • logged roughly 13 million unique visitors and saw 12 million video starts daily during the World Cup period, up 40 percent and 161 percent, respectively, from the 2010 South African games;
  • The U.S. team’s first-round match against Germany peaked at 1.7 million concurrent streams on WatchESPN;
  • Overall, the WatchESPN live-streaming app averaged 892,000 viewers per match;
  • Univision Digital reported more than 27.5 million uniques during the tournament and had 25 of its highest trafficked days during the games, reaching a peak of 10.3 million visits on June 23.
  • Overall, Univision reported more than 73 million live streams during the games.

The point is not the popularity of the World Cup per se, which neither Fox nor Time Warner had rights to in any case (Fox does have rights to the next two men’s World Cup, in 2018 and 2022). It’s that the numbers underscore the growing importance of live programming, and in particular live sports, in an increasingly fragmented market.
Compare the World Cup numbers, for instance, with Fox Broadcasting’s primetime ratings, made up largely of scripted content. According to Nielsen, the network averaged 7.3 million daily primetime viewers last season, less than a third of those who tuned in for the World Cup final, to say nothing of events like the Super Bowl, which this year drew 111 million viewers.
Fox is hardly alone. All the broadcast networks today face growing pressure on ratings and profits as audiences spend more of their time watching shows on demand or on their DVRs rather than in real time. Without live sports the situation would be critical.
In an effort to bolster its sports portfolio, Fox last year launched Fox Sports 1 to take on Disney’s ESPN, the undisputed leader in 24 hour sports programming. So far, however, the new network hasn’t given ESPN much reason to break a sweat. According to Horizon Media, Fox Sports 1 has averaged 88,000 male viewers 18 to 49 years old in primetime, and 122,000 people of both sexes, compared with ESPN’s 762,000 and 1,070,000, respectively
The challenge for Fox (and other broadcasters) in building up their portfolio of sports content, however, is that so much of it is already tied up in long-term deals.
Here’s a run down, compiled by Fox Sports, of the properties controlled by the major TV sports outlets, including its own:

ESPN: Monday Night Football, half of the NBA, the ACC, every SEC game except for the CBS national broadcast, the Big Ten, half of the Big 12 and Pac 12, the college football playoff, some Major League baseball, the Australian Open, Wimbledon, the French Open and the U.S. Open, the British Open, and half of the MLS.

Fox: The NFL’s NFC package, Major League baseball, the Big East basketball, the World Cup and FIFA soccer events except the EPL, half of the MLS, the US Open golf, half of the Big 12 and the Pac 12, half of the Big Ten Network, NASCAR and the UFC.

NBC: The NFL’s Sunday Night Football package, the NHL, the Olympics, the Triple Crown horseracing events, French Open finals, English Premier League soccer, seven or eight Notre Dame games, and NASCAR.

CBS: The NFL’s AFC package plus the Thursday night NFL game, the SEC game of the week, U.S. Open tennis, the NCAA tournament in conjunction with Turner Sports, final rounds of the PGA Championship and the Masters.

Turner: Half of the NBA package, the NCAA Tournament in conjunction with CBS, some Major League Baseball, most of the PGA Championship.

Turner, of course, is currently owned by Time Warner. And it’s the only one of the major sports rights holders that Fox could conceivably buy. Acquiring ESPN (ABC), NBC or CBS, even if Fox could plausibly structure a deal, is off the table due to regulatory concerns. That leaves only Turner, which can’t be had without buying the whole enchilada.
The fact that the enchilada also comes with HBO and HBO GO only makes it more appetitizing.