Looks like News Corp’s trying to boost the Deputy COO’s profile on Wall Street: James Murdoch’s appearance today at the Morgan Stanley Technology, Media and Telecom Conference was his second high-profile presentation to investors this month. (He was also on News Corp’s latest earnings call.) Rupert’s son, who last year had to defend himself against allegations that he was at least partly responsible for News Corp’s UK hacking and bribery scandals, seemed to relish the largely friendly questions about the company’s plans. He assured the audience that the company won’t go overboard in buying rights to sports programming amid reports that News Corp plans to create a national sports network. “It’s important to have a portfolio of rights where you can walk away,” Murdoch says. For example, the Los Angeles Dodgers wanted payments that were “too rich for us,” leading the team to create its own regional sports channel.
It sure looks that way. If the current arrangement breaks apart, giving way to a system where consumers can buy just the programming that they want, then high-priced channels such as the YES Network could lose their slugging power faster than, well, New York Yankees’ aging star Alex Rodriguez. That doesn’t seem to have factored into Rupert Murdoch‘s thinking for his deal today to buy 49% of the nation’s top regional sports network. The agreement values YES at $3B, or 15 times its annual cash flow. It also gives Murdoch an opportunity to buy 80% of YES with the channel valued at $3.8B, or 19 times cash flow. How high is that? If you applied the same back-of-the-envelope formulas to ESPN, it would be valued anywhere from $45B to $66.5B, Bernstein Research’s Todd Juenger estimates. Either number is far more than investors figure ESPN is worth; Disney’s entire market value — including ABC, the theme parks, and the studios — is $87B.
YES Network has local media rights to the New York Yankees and Brooklyn Nets and becomes the newest regional sports network for News Corp. The network commands almost $3 per subscriber per month in fees, according to SNL Kagan, making it among the most lucrative RSNs in the country. (Time Warner Cable’s new LA channels that carry the LA Lakers get a reported $3.95 per sub per month.) The News Corp-YES deal means current owners Yankee Global Enterprises, Goldman Sachs and others will reduce their stake, and News Corp has the option to acquire an additional stake after three years that could give it up to 80% of the network. No other deal terms were announced, but the acquisition is reportedly valued at $3 billion — lower than the $4 billion sellers had suggested. Here’s this morning’s release:
NEW YORK – November 19, 2012 – News Corporation (NASDAQ: NWS, NWSA; ASX: NWS, NWSLV) and Yankee Global Enterprises today announced an agreement that calls for News Corporation to acquire a 49 percent equity stake in the Yankees Entertainment and Sports Network (YES). The YES Network delivers exclusive live local television coverage of New York Yankees baseball and Brooklyn Nets basketball, as well as other leading local and national sports-related programming. The YES Network also announced a media rights agreement that will keep Yankees baseball on the YES Network through 2042.
The media rights agreement is subject to Major League Baseball approval. The investment is expected to close by the end of the calendar year.
Rupert Murdoch’s company is nearing a deal to buy out stakes in the New York Yankees’ regional sports network that are owned by private equity companies including Goldman Sachs and Providence Equity Partners, I’m told. The sellers are …