MLSE deal protects Rogers, Bell in online competition for sports rights: Analysts

A $1.32-billion joint deal to buy Maple Leafs Sports and Entertainment (MLSE) will mean a significant boost for the broadcasting platforms of Rogers Communications Inc. and BCE Inc., analysts say. Over the longer-term, the acquisition may be just as important to prevent potential online competitors from seeking the coveted sports content rights, they add. In the acquisition, announced Friday morning, Rogers and Bell will spend $533 million each to acquire a joint 75 per cent ownership stake in sports giant MLSE. Controlled by majority shareholders the Ontario Teachers’ Pension Fund until the deal closes, MLSE owns the Toronto Maple Leafs and its minor-league affiliate the Toronto Marlies, as well as the Toronto Raptors, Major League Soccer's Toronto FC and a host of other properties. MLSE also controls the increasingly lucrative broadcasting rights to many of those franchises’ games. The deal will help protect each company’s TV distribution businesses, Greg MacDonald, an analyst with Macquarie Capital Markets, said. “The thing that people aren’t talking about is the sleeper benefit,” MacDonald told The Wire Report in an interview. “It’s an insurance policy to protect cash flow in their distribution businesses because protecting the rights for this stuff ensures that a Netflix or one of these never gets preferential distribution rights .” Broadcasting experts say over-the-top services could also erode broadcast distributors’ advertising revenues by jumping into the world of live sports streaming. Live sports broadcasts are an increasingly important form of content for broadcast distributors faced with increased competition from free, online, on-demand video sources and streaming services. “You don’t tape Leaf games, you watch them live,” MacDonald said. Competition from over-the-top services is expected to encourage “cord-cutting” from traditional, subscription TV services, particularly if sports fans no longer have a reason to pay for linear television. “Who is a more rabid subscriber that an ardent sports fans? And who will pay for that privilege to see the games and experience them more than the sports fan will?” Carmi Levy, an independent technology analyst, said in an interview. “This is the most lucrative slice of the business right now, and Rogers and Bell are going to hold onto it until it’s pried from their cold dead hands.” Levy said Rogers and Bell will still see sports fans looking for more content online instead of on their TVs. The acquisition will also help ensure that Rogers and Bell have the ability to capitalize on cord-cutting sports fans, he said. “As consumer interest shifts away from conventional broadcast and towards Internet-delivered content, they’re simply now going to use that scale to shift those revenue streams over to the Internet,” Levy said. The Wire Report reported last year that Bell has the live mobile streaming rights to more than 1,000 NHL games, giving its customers exclusive access to much of the content broadcast on the NHL Centre Ice hockey package. The CRTC’s new vertical integration rules restrict either Bell or Rogers from making made-for-TV content available exclusively to their own customers online, but they can give their customers exclusive online access to content that is limited to the new media space. “If Rogers and Bell choose to create additional, Internet-based content only, what they can do is add value to their subscribers that other carriers cannot have access to,” he said. Bell and Rogers could offer their own mobile or Internet customers exclusive perks like team statistics, different camera angles of live games, or additional video footage of practices and interviews, Levy said. “I see that being very core to what Bell and Rogers are going to do over the next few years,” he said. “At the end of the day, they’re just hoping that more people will be consuming more sports content over more platforms.” During a morning news conference to announce the deal, CEOs of both companies stressed the importance of offering additional content across multiple platforms. “This is a perfect fit for Bell from a strategic perspective. It delivers on our goal of providing content on every screen in the new four-screen world we live in,” George Cope, Bell’s president and CEO, said. Bell spokesman Jason Laszlo noted in an email to The Wire Report that the partnership ensures Bell's access to MLSE sports content "at half the cost compared with going it alone." Levy and MacDonald said that each company will continue to focus on the highly lucrative traditional sports broadcasting business. While the NHL still holds the rights to 31 regular season Maple Leafs games, Bell and Rogers own the rest of the games, 51, “for perpetuity,” MacDonald said. CBC/Radio-Canada holds the rights to most of those 31 games for its Hockey Night in Canada program on Saturday nights until the end of the 2013-2014 NHL season. Under a previous agreement, Rogers also holds the rights to many of the team’s mid-week games for another three seasons, giving them a slight advantage over partner/rival Bell in the Maple Leafs broadcasting domain, Brian Cooper, a former MLSE executive and current president and CEO of marketing firm S&E Sponsorship Group Inc., said in an interview with the Business News Network on Friday. “I think when this deal ends in 2015, it then becomes a 50-50 split,” he said of the rights to the 51 games not controlled by the NHL. “It then pulls Bell up right evenly with .” The deal must pass a pair of regulatory hurdles before it can be finalized. MLSE owns and operates four specialty channels (Leafs TV, Raptors NBA TV, Gol TV Canada, and Live Music Channel), making the change in ownership a broadcasting transaction which the CRTC must approve. The federal Competition Bureau also confirmed that it will review the sale. “The Competition Bureau will be investigating the transaction to see if it results in a lessening or prevention of competition,” Melanie Aitken, a bureau spokeswoman, told the Toronto Star. nkyonka@thewirereport.ca

MLSE deal protects Rogers, Bell in online competition for sports rights: Analysts

Broadcast | December 9, 2011

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