Future of MLSE specialty channels uncertain under Rogers-Bell ownership: Analysts

The future of three sports specialty channels is up in the air after rivals BCE Inc. and Rogers Communications Inc. last week joined forces to acquire the channels’ parent company Maple Leaf Sports and Entertainment (MLSE), analysts say. Competitors Bell and Rogers announced Friday they will spend $533 million each to acquire a joint 75 per cent ownership stake in MLSE, which owns the Toronto Maple Leafs, the Toronto Marlies, the Toronto Raptors, Major League Soccer’s Toronto FC and other sports properties. MLSE chief executive Larry Tanenbaum will also increase his stake in the company from 20 to 25 per cent as part of the total $1.32-billion deal. The companies did not disclose any details about their plans for MLSE’s three specialty channels, Leafs TV, Raptors TV and Gol TV Canada. Several analysts contacted by The Wire Report agreed the channels could face diminished importance under new owners that operate their own sports specialty services. Bell operates leading sports channes TSN and RDS and Rogers owns the popular channel Sportsnet. “TSN and Sportsnet are both very profitable,” Brian Schecter, a media analyst with Puddle Duck Productions Inc., told The Wire Report by email. This, he said, could cause problems for the MLSE specialty channels over the long term. “I think for now they will leave the acquired channel management teams in place to do their thing with an arms length approach to day to day operations,” Schecter noted. “n the overall scheme of things the TV licences are a very small of the entire corporate enterprise.” Roberta Fox, head of Fox Group Consulting, said that the different business practices of the new parent broadcasters could also impact the specialty channels’ operations—the details for which probably have not yet been worked out. “It’s fine at the president level to say, ‘Let’s make a deal,’ but making it work is different,” Fox said in an interview. “I think that’ll be the biggest challenge,” she said. “How do you get the two companies to work together? What does that mean tactically and operationally?” Fox said she does not expect the newly acquired specialty channels to be eliminated but “morphed” into different arms of MLSE. She said specialty channels have value because they can offer broadcast replays. “For some of the people, that’s a good thing … because if you didn’t get to watch something when it airs live, then you can watch it ,” Fox said. For now, at least, Raptors TV and Gol TV are likely to continue offering content and services similar to those they offered before the deal, Schecter said. “s minor players on the sports TV scene, neither sports or programming has a better home,” Schecter wrote of Raptors TV and Gol TV. Fox agreed, saying it would take a few years for Bell and Rogers to work out the new relationship and that she does not expect any of the three channels to be phased out, at least immediately. “I don’t think it’ll be short term,” she said, “but three to five years out, it might have an impact.” Independent technology analyst Carmi Levy said in an interview that profits will determine the fate of the MLSE specialty channels. Deals of this magnitude are not completed without some rationalization or a degree of “bottom line cuts,” he said. “These are both publicly traded companies and they are pushing this for profit more than anything else,” Levy said. “Profit motive trumps all.” He speculated that if channel consolidation or dropping properties such as Raptors TV or Gol TV helps to reduce costs and boost revenues, Bell and Rogers will not hesitate to take action. “There are no sacred cows here and no asset is ever 100 per cent safe from either consolidation or shut down,” Levy said. Jay Switzer, the co-founder and chair of Hollywood Suite Inc., said in an interview that competitive battles between Bell and Rogers could also impact the management of MLSE products. He told The Wire Report that it is in the companies’ “very DNA” to compete. “Big, red cable wire fights in the trenches and hates big blue wireless,” Switzer said, alluding to Rogers versus Bell. “It’s just in their nature.” But he said the companies will find a way to put their differences aside when it serves a specific purpose or when it’s beneficial. “It’s in their best interest as sports channel operators and vertically integrated media companies to see these businesses, or the business of MLSE, is strong,” he said. Switzer noted that Bell and Rogers have worked together before, doing an “exceptional job” on joint bids and coverage for the 2010 and 2012 Olympic Games. “If it works half as well as the Olympics in terms of a management team serving two competing owners, then it’ll be good,” he added. Rogers now holds a 20 per cent stake in the Olympic broadcast media consortium with the other 80 per cent controlled by BCE-owned broadcaser CTV. In September, Rogers announced it would not pursue a bid for the Canadian broadcast rights for the 2014 and 2016 Olympics due to scheduling conflicts and financial priorities. The Bell and Rogers purchase of MLSE must be approved by the Competition Bureau, and because it involves broadcasting properties, the CRTC. Analysts speculated that Bell Media will lead the management of the MLSE channels due to the broadcaster's size and established infrastructure. “Bell obviously has a bigger plant, a bigger infrastructure and a bigger office, so it just makes sense for some of these channels to be run out of the Bell empire,” Switzer said. “I’m not saying that Rogers won’t do a good job, but they don’t have as many channels and it’s not as set up.” Analysts also noted that the deal could impact CBC/Radio-Canada's ability to compete for sports broadcasting rights as they expire over the next few years. “The first major issue will be around Hockey Night in Canada rights when they expire ,” Schecter said. At that time, he said, CTV may feel “emboldened” by the acquisition of the Maple Leafs and seek to influence the league's allocation of national broadcasting rights. Bell did not respond to a request for a comment by deadline Tuesday. In an email response to a request for an interview, Rogers spokeswoman Patricia Trott said the company is happy talk more about the purchase at a later date, but for now, “the deal has not closed and it’s premature to speculate on details.” dgrenier@thewirereport.ca

Future of MLSE specialty channels uncertain under Rogers-Bell ownership: Analysts

Broadcast | December 13, 2011

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