News Corp (NASDAQ:NWS) is looking to build a sports network that could rival Disney’s (NYSE:DIS) ESPN.  News Corp seems to be the only major media company in a position to challenge the dominance of ESPN’s empire. A few months back, Comcast’s (NASDAQ:CMCSA) NBCUniversal division rolled out its re-branded sports network to aim at the lucrative sports programming market (see Comcast Updates: NBC Rolls Out Sports Network Targeting Juicy Programming Fees). News Corp currently has Fox Sports and some other small sports networks. Fox Sports is mainly a collection of regional sports network and does not have the nationwide appeal and grandeur of ESPN.
ESPN is a huge business for Disney, and the network has been so successful because of its control of programming rights for the most-watched games and its nationwide appeal. This is why ESPN is able to charge highest fee per subscriber in the cable industry. This fee is inching close to $5 per subscriber per month.
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Naturally, these profit opportunities are encouraging other media giants to revamp their sports programming and bid against ESPN. This is going to drive costs upward and increase competition, which could reduce the profit margins for the industry. As far as consumers are concerned, they could potentially benefit from some price competition and ESPN’s unstoppable subscription price increases could halt.
We estimate that sports programming constitutes close to 20% to News Corp’s value and could further expand if the company can leverage its reach and deep pockets to successfully bid for some of the most watched sports events. It is going to be all about the content quality.
Our price estimate for News Corp stands at $23, implying a premium of about 15% to the market price.Notes:
- News Corp. Said to Plan U.S. Sports Network to Rival ESPN, Bloomberg, Mar 29 2012 [↩]