Fox Sports 1 Debuts In August: News Corp Could See A Backlash From Cable Providers That Fear Another ESPN

On Tuesday, News Corp. (NASDAQ:NWSA) announced that it will launch Fox Sports 1, its long-anticipated all-sports cable network, in about 90 million homes this August. News Corp. hopes the network will go toe-to-toe with ESPN, a unit of the Walt Disney Company (NYSE:DIS) and the untouchable leader in sports programing. The channel had been rumored for several months as News Corp. has been busy beefing up its sports portfolio, including acquiring a 49 percent equity stake in the Yankees’ YES Network in November.

Impervious to the spread of delayed viewing on DVRs (an insidious trend from an advertiser’s perspective), sports programing is rapidly becoming the most valuable asset of the TV industry. But like any commodity, it’s also the focus of contentious battles. The affiliate fees that cable providers must pay to carry regional sports programming have skyrocketed in recent years -- jumping as much as 44 percent from 2007 to 2011, according to Forbes.

And yet cable providers have little choice but to pay, unless they want to suffer the wrath of viewers who are left with no way of watching their favorite teams. As such, even a theoretical competitor to ESPN -- a must-have channel in virtually every region -- could be a welcome change for distributors, which have zero leverage against Disney and its sports behemoth.

But Michael Corty, a media analyst with Morningstar, cautions that cable providers may not get the ESPN alternative they’re hoping for in Fox Sports 1, and in fact could feel the burden of being locked into yet another channel. If that were to happen, News Corp. could see a backlash from fee-weary companies like Cablevision (NYSE:CVC) and Time Warner Cable (NYSE:TWC).  

“The distributors have longed for a second option to carrying ESPN (and its sister channels), but instead we believe Fox Sports 1 will become an additional channel they are ‘forced’ to carry at a rumored price of $1 per sub per month,” Corty wrote in a research note published Wednesday. “We expect resistance to come from distributors, who have been complaining about sports rights fees for years and have been even louder recently with the run-up in fees for local sports channels.”

Corty believes News Corp. is better poised to launch an all-sports network than Comcast Corp. (NASDAQ:CMCSA) or CBS Corp. (NYSE:CBS), both of which are rumored to be cooking up their own sports networks. Ultimately, though, Corty wrote that Fox Sports 1 “won’t approach ESPN’s wide economic moat.” The real winner, he said, are the sports leagues, which will have yet another “deep-pocketed” entity to bid for programming rights.

Initial programming on Fox Sports 1 will include college football and basketball, as well as NASCAR races. The network is expected to add Major League Baseball games next year.

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