ESPN-StarSports Splits: NewsCorp Will Buy ESPN’s 50% Stake

[Chief]

It’s been rumored for a while, and now it’s official: the 16 year old ESPN-StarSports joint venture is splitting, with News Corporation buying ESPN’s 50% equity stake in ESPN STAR Sports (ESS). The amount that NewsCorp is paying for the stake has not been disclosed, and the transaction is subject to regulatory approvals. Following the transaction, NewsCorp will own all of ESS businesses, which primarily broadcast sports in Asia, including India. The Lowdown:

- Manu Sawhney, Managing Director of ESS, is moving on. He will hand over to Peter Hutton, currently SVP of Sports for FOX International Channels (FIC), by August 31st 2010. Hutton will report to the ESS Board.
- Until the transaction is complete, ESS will be jointly managed both companies. The ESS JV also was responsible for webstreaming Cricket matches in India, and the JV had just renewed its multi-platform deal with the England and Wales Cricket Board.
- ESPN To Focus On Digital: ESPN will operate independently, with Disney’s support. ESPN owns popular Cricket site ESPNCricinfo (rather, Cricinfo), which has been operating independently, and in a statement, John Skipper, President of ESPN and Co-Chairman, Disney Media Networks says that the business will continue to “serve Asian sports fans through ESPN-branded digital businesses like ESPNCricinfo, the leading digital cricket brand in the world, ESPNFC and ESPN Mobile.”

Quick Take

It’s strange that the statement from John Skipper mentions only digital properties, and makes no mention of any broadcast businesses or plans. ESPN also has its channel running in India, albeit managed by ESS: what happens to that? Will there be three sports channels from the STAR stable – Star Sports, Star Cricket and the channel currently branded as ESPN? We’re wondering if there a non-compete agreement between News Corp and Disney.

The other side to this deal is that given that ESS will have only one master, it will have far more flexibility in terms of bidding for rights, but whether Peter Hutton will be able to operate in the complicated Indian market at the same speed remains to be seen.

Also note that Disney has expanded its presence in India by acquiring UTV, and UTV has a fairly comprehensive broadcast business in place. So will we see UTV launch ESPN in India?

ESPN-StarSports Splits: NewsCorp Will Buy ESPN’s 50% Stake - MediaNama

 

[Chief]

News Corp buys out Disney’s stake in ESPN Star Sports


The Walt Disney Company and News Corporation have decided to call off their Asian sports broadcasting joint venture ESPN Star Sports 16 years after it was formed on the premise of exploiting opportunities together in a market that was in its infancy.

The two companies have entered into a definitive agreement under which a unit of News Corp will buy ESPN’s 50 per cent equity interest in ESS, which operates 25 television networks and three broadband networks covering 24 markets in Asia, gaining full control of the sports broadcasting entity. Disney, a powerful sports powerhouse in the US, will exit from sports in Asia.

The transaction will allow News Corp units to own and operate all of the ESS businesses while providing ESPN more independence and flexibility in future support of The Walt Disney Company’s overall efforts in Asia, the statement said.

ESS will continue to be jointly managed by two companies till the transaction, which is subject to customary regulatory approvals, closes.

The buyout will also see the exit of ESS MD Manu Sawhney, who will be replaced by Peter Hutton, senior vice-president Sports of Fox International Channels.

Hutton, who has spent 20 years in the international sports television business, will report to the ESS Board.

Sawhney, who joined ESS in 1996, will be staying with the company until 31 August to work with Hutton on a smooth transition.

News Corporation Deputy COO James Murdoch said the buyout of ESPN’s stake was in line with the company’s strategy of consolidating affiliate businesses across the globe.

“News Corporation's acquisition of the interest of ESS that we did not already own continues the program of simplifying our operating model, consolidating our affiliate ownership structures, and furthers our commitment to delivering incredible sports programming to consumers across the globe, and particularly enhancing our position in sports programming in emerging markets,” Jr Murdoch stated.
ESPN President of and Disney Media Networks Co-Chairman John Skipper said the company will continue to be invested in Asia through its digital business which includes ESPNCricinfo, ESPNFC and ESPN Mobile.

“After 16 years jointly managing ESS, we have decided to independently pursue future opportunities in Asia. We are extremely proud of our role in building ESS into what it is today, and now with the growing digital landscape in Asia, we look forward to continuing to serve Asian sports fans through ESPN-branded digital businesses like ESPNCricinfo, the leading digital cricket brand in the world, ESPNFC and ESPN Mobile,” Skipper said.

They added, “Peter is a very talented sports media executive, and we believe his extensive experience in sports rights and production will serve ESS well as the business enters into a new phase of development.”

The disbandment of JV has been on the cards as the two media conglomerates have been competing against each other outside Asia. In UK, ESPN is in direct competition with News Corp-owned pay TV broadcaster BSkyB while News Corp is planning to launch a national sports network in US to take on dominant player ESPN.

Will ad rates go up for sports?

By consolidating the sports broadcasting business, Star will strive to up ad and subscription revenues to keep in line with the high acquisition prices for cricketing properties. The network strength will come into play as it inks deals with media buying agencies, cable networks and DTH service providers.

Says Vivaki Exchange VP Sejal Shah, "The ad rates for sports will surely rise."

Lodestar UN CEO Shashi Sinha feels that the move augurs well for the sports broadcasting genre.

Says Sinha, "It will help their P&L and puts Star in a comfortable position. It makes sense to bring everything under one roof. Distribution revenues will improve. At the same time, in terms of ad sales buying is done on a series to series basis regardless of how many properties a channel has. The key for me is whether Star has a common ad sales force or a separate sales force that looks at the sports business."

Mindshare's Ravi Rao says that Star could try a clever marketing ploy by using the strength of its network. "At the same time, there will always be a demand and supply equation. The ad industry is growing at a regular rate and clients' budgets are limited. They will continue to evaluate if a property makes sense. They will see if there is a brand fit. The price of a spot will depend on the event."

Nimbus chairman Harish Thawani, however, feels that the Star-ESPN deal will not change the market dynamics as it is not a consolidation in true sense.

“It is not a consolidation as one stakeholder in a JV has bought out another. Consolidation happens when two rivals merge. Then only the benefits follow. Of course, negative consolidation can happen when a channel shuts shop like Imagine."

Platinum Media CEO Basab Datta Chowdhury feels Star will become a much more powerful network from a distribution standpoint. However, it’s not going to be easy to command a premium through consolidation as entry barrier in sports for advertisers is high.

"The price of advertisement, however, will go up if there is increase in viewership," he avers.

No matter what the media buyers may say, Star will weigh options to make gains in ad revenues from sports broadcasting.