MLB bid for Fox regional sports networks imminent

Major League Baseball is looking to expand into the cable TV business.

Continue Reading Below

In an unprecedented move, MLB is expected to be among the handful of parties placing a formal bid for the nearly two dozen Fox regional sports networks, as bankers complete the second round of the troubled auction, FOX Business has learned.

The other bidders include Sinclair Broadcast Group and private equity firm Apollo Global Management, according to people with direct knowledge of the matter. Final bids are due to investment bankers by Thursday, these people say.

FOX Business was first to report interest from entrepreneur and rapper Ice Cube in buying the regional sports networks, but sources say he is not one of the bidders. A spokesman had no comment.

The price of the bids could not be determined but one person with knowledge of the matter says it’s far below the original asking price of around $20 billion.

Regional sports networks, also known as RSNs, are a group of cable networks that provide a variety of sports broadcasting throughout the country. They must be sold to meet regulatory requirements as part of Disney's $71 billion deal to purchase 21st Century Fox's entertainment assets. Disney already owns the giant sports network ESPN.

Allen & Company and JPMorgan are the investment bankers conducting the auction, which will likely conclude in the coming weeks.

The bidding process, which began in November, has been hampered by lackluster interest, low-ball offers and confusion over whether buyers would ultimately own the rights to broadcast various sports programming. One problem facing the auction is that cable subscriptions are declining as customers "cut-the-cord" and ditch their cable boxes and view programming on their computers or mobile devices.

As FOX Business was first to report, Major League Baseball had to alert bankers that some potential bidders wrongly believed they would eventually own the digital rights to MLB games even though those rights are the property of the league and its teams.

Bankers had originally hoped that the process would have concluded by the second week of January, amid the initial interest from possible bidders like online retailer Amazon, which has been slowly moving into streaming sports programming. But Amazon did not bid in the first round and is not expected to make an official bid in the second round as it focuses on cutting a deal to buy a portion of just one of the RSNs, the Yankees Entertainment and Sports Network, or YES Network.

The YES deal is being conducted under a separate negotiation between management of the New York Yankees, Amazon and its CEO Jeff Bezos, FOX Business has learned. YES is considered the crown jewel of the RSNs, and prior to the Disney deal, Fox retained an 80 percent ownership in the network. But the Yankees chose to buy back the portion of YES that was transferred to Disney after the Fox deal and seek new partners.

Amazon, meanwhile, has expressed interest in possibly placing a formal bid for the other RSNs later in the process.

Spokesmen for Sinclair, Apollo and MLB declined to comment. Spokesmen for Amazon, Allen & Co., and JPMorgan didn't return calls for comment.

If MLB is successful, it would mark a significant change to the league’s business model. MLB, like other major sports leagues, has its own national cable TV network, and it streams some games on its web service MLB.com. subject to regional blackouts based on cable arrangements with various teams.

CLICK HERE TO GET THE FOX BUSINESS APP

But purchasing the RSNs would be the first time a major sports league has owned regional cable television networks, and its interest in the properties underscores the dicey nature of the bidding process.

In November, MLB Commissioner Rob Manfred publicly stated, "We’re very interested in the RSN sale process and have preferences in terms of who the owners are going to be,” but it was unclear whether the league was ready to make a formal bid. That changed in recent weeks as top MLB officials feared a highly leveraged buyer, such as a private equity firm, would swoop in and win the bidding contest, and what that would mean for smaller-market teams in terms of marketing and promotion on the networks, people with knowledge of the matter tell FOX Business.

"The Boston Red Sox are a national brand so they don't need promotion, but some of these other teams do, and if the buyer is levered up, that promotion might go away," said one person with knowledge of the MLB's thinking.

"That's why the league is interested."