The American Cable Association has urged the Department of Justice to bar Disney from selling Fox’s regional sports networks to any in-market, big-four TV station or MVPD, saying it would raise pay TV prices and create new antitrust problems.
In June, the DOJ signed off on Disney’s $71.3 billion purchase of most of 21st Century Fox’s entertainment assets with the requirement that Disney divest Fox’s 22 regional sports networks.
At the time, the agency said that without the divestitures, the deal would likely result in higher prices for cable sports programming licensed to MVPDs in local markets.
In a letter submitted to the DOJ Monday as part of the agency’s Tunney Act review, the ACA said allowing an ABC, CBS, NBC, or Fox station the same local market as the RSN to purchase it would create a similar issue the department found with Disney owning them. Operators would run into negotiation problems when one entity could potentially blackout two sets of must-have programming, resulting in a hike in MVPD licensing fees, the trade group says.
“Losing both sets of programming simultaneously is far worse than losing each set of programming individually,” ACA wrote.
The group explained that if a traditional pay TV provider couldn’t reach a licensing agreement with Disney and networks like ESPN were blacked out, the operator may see some subscriber loss, but it would be stemmed by the availability of the local Fox RSN. This would not be the case if Disney owned both and could cause a dual blackout of significant cable sports programming.
As in the Disney-Fox combination, ACA says members would face the same situation with a Fox RSN and in-market big-four broadcaster, “which invariably controls sports rights at least as important as those controlled by ESPN.”
When it comes to potential MVPD buyers in the same market as the RSN, ACA contends it would create a vertical combination that results in price increases, citing the DOJ’s stance against the AT&T-Time Warner merger.
A competing MVPD would have a “silver lining” when combined with an RSN if negotiations fail with an ACA member, according to the letter. The group says that MVPD could still gain new fees from subscribers who switch to it in order to keep their RSN programming, even as the RSN loses license fees from the ACA member and advertising revenue.
“This gives the combined entity additional leverage – which means that prices will increase,” the ACA says.
“DOJ’s Antitrust Division has the sole discretion to approve a divestiture party for Fox’s RSNs. It should modify the proposed Final Judgment to make clear beforehand that it will use such discretion to prohibit any divestiture to a same-market broadcaster or same-market MVPD. The public interest dictates such a modification,” ACA President and CEO Matthew Polka said in a statement.