ATLANTA, GA – DECEMBER 07: Fans pass along the huge SEC flag during the SEC Championship Game … [+]
Icon Sportswire via Getty Images
The last two years in Hollywood have been all about mega-mergers, tech-driven transformation, and more than a bit of fear. We got another demonstration of the realities of the New Hollywood this week, ironically playing out in that old-school platform known as broadcast TV. How retro.
So what happened? Disney, Hollywood’s reigning 800-lb. gorilla, flexed its muscles, and grabbed one of the most valuable properties in live TV, rights to the Southeastern Conference’s highly rated college football games.
The new deal isn’t final yet, or even officially announced, but widespread reports say Disney bid $350 million to $400 million per year for the rights on behalf of ABC and ESPN, which already runs the separate SEC Network cable channel. Incumbent CBS reportedly blanched at matching that price, roughly six times what it’s been paying under a deal that runs through 2023.
The new largesse is great news for the Southeastern Conference and its 14 member schools (including my alma mater, Mizzou). But it also says quite a lot about several bigger issues:
- This deal, if completed, would cap a remarkable two months for the Mouse House. It arrives less than two months after the Disney+ subscription video service debuted, and quickly grabbed 22 million subscribers. It also comes during a record box office run, as Disney films near $11 billion in worldwide grosses. The latest Star Wars film, The Rise of Skywalker, has already pulled in $517 million worldwide in just six days of release. It’s already 13th all-time in box office, according to BoxOfficeMojo, and likely will become the seventh Disney release of 2019 to gross $1 billion, another record.
- Everyone knew Disney was going to be big after buying most of 21st Century Fox, including a controlling share of Hulu, in a $71.3 billion deal that closed early this year. But certainly no antitrust regulator, never mind anyone else, thought post-merger Disney would be this big, this fast, in so many sectors. Its wide-ranging market power affects everyone from theater chains trying to negotiate revenue splits to cable operators trying to control programming costs to streaming services hoping to grab a sustainable market share to all the bidders on other TV sports rights coming available in the next few years. You can’t help wondering if maybe, just maybe, some of those DOJ regulators are having second thoughts about allowing the Fox deal.
- The deal would unite SEC sports coverage under one corporate family, with potential benefits for the SEC Network. Disney launched the cable network in 2014, using it to carry football-related content as well as many of the league’s other sports. And for fans of SEC athletics, there’s plenty to watch, including national powers in men’s and women’s basketball (Kentucky, Florida and Auburn on the men’s side, and Tennessee and Mississippi State for the women) as well as baseball, softball, track, wrestling and other sports. That’s a lot of high-quality live programming that ABC and ESPN can leverage in a lot of ways. You can also imagine some interesting ad packages still to come.
- Is ViacomCBS still too small? Shari Redstone pushed the re-combination of her family’s two media companies, in the belief that together they could better compete with Disney and such other beasts of the New Hollywood as Netflix, AT&T, Apple, Amazon, Facebook, and Google. And under CEO Bob Bakish, pre-merger Viacom made a string of smart acquisitions and investments in digital-first companies, including Pluto.TV, Awesomeness, Vidcon, WHOSAY, and Pocket.Watch. But now that the ViacomCBS merger has closed, can it stay in the game? Live sports will be increasingly important for broadcasters (and advertisers) who want tune-in, linear audiences in an online, on-demand world. Can ViacomCBS afford to play this game?
- Did ViacomCBS get cheap at the wrong moment in the SEC negotiations? CBS was smart enough to have locked up the SEC under a long-term deal that cost a bargain $55 million a year at a time when SEC teams were regularly competing for the national championship, and drawing audiences nearly as big as the NFL. That long-term deal became even more valuable when the conference added Missouri and Texas A&M, which brought along seven Top 100 TV markets in the new schools’ home states. CBS reportedly bid as much as $300 million a year to extend its deal, but balked at making those payments retroactive under the current deal’s remaining four years. Now it will have to promote and build up an asset that, soon enough, it won’t control.
- At almost the same time ViacomCBS was backing away from the SEC negotiations, it announced it would buy a 49-percent stake in Miramax’s admirable film library from beIN Media Group. By happenstance, that deal will cost ViacomCBS a “total investment of $375 million” over the next five years, the company said in a release. That’s pretty much what the SEC will cost Disney per year. Instead of sports, Paramount Pictures beefs up its aging and modest-sized library with 700 more films, including four Best Picture Oscar winners. That will create potentially valuable new remake and distribution opportunities for CBS, Showtime, the cable networks, streaming services and Pluto. But you have to wonder whether several hundred older films will make the same bottom-line impact as a regular string of attractive live sports events involving the biggest teams in the biggest conference and the biggest sport in college. We’re about to find out.
The ViacomCBS-beIN news release said the two companies “will explore other strategic partnership opportunities across content production and distribution, live events and recreation globally.”
Maybe that will include some of the global soccer and other TV sports rights that beIN also controls, though it seems unlikely that they’ll play as well as SEC football in most U.S. markets.
As it is, Wall Street investors and analysts already were unimpressed with the merger’s value. Since the deal closed, shares are down 21 percent, or more than $11 a share, from this summer’s high (though they’re up from the mid-fall swoon that took shares down about $35 a share as the deal closed).
And that’s the point. Disney once again demonstrated its overwhelming heft across multiple markets, while ViacomCBS may have given investors more reasons to wonder about its future competitiveness. In the New Hollywood, size matters more than ever, and this SEC football negotiation just showed why.