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Bobby McMahon

Bobby McMahon

You can see me on Soccer Central most Mondays and Thursdays on Rogers Sportsnet in Canada. I write a regular column for Forbes.com and Soccerly.com and frequently guest on various podcasts and radio shows.


TANGENTS

A Very Strange Arrangement

Written by on December 12, 2011 | 7 Comments »
Posted in General

I doubt that the story is getting much play in the US media but at the end of last week a deal to sell the largest collection of Canadian sports properties was agreed.

Maple Leaf Sports and Entertainment (MLSE) own and operate the Toronto Maple Leafs of the NHL, the Toronto Raptors of the NBA, and Toronto FC of MLS along with interests in Canadian TV – Leafs TV, GolTV (Canada) and NBA TV. 

The majority owner of MLSE was the Ontario Teachers’ Pension Plan but their shares were put on the selling block months ago.

The price accepted by Ontario Teachers’ Pension Plan values the collection of prized assets at $2.1 billion and that suggests that the company spins off at least $100m in profit annually.

Any sale of this magnitude is going to send tremors through various interrelated businesses.

The fact that the new owners are broadcasters is not unusual – what is unusual is that two bitter broadcasting rivals have teamed up to buy MLSE.

Rogers Communications operate Rogers Sportsnet in Canada while BCE Inc. operate TSN (ESPN hold an interest in the station).

Each company will own 37.5% MLSE and 25% will owned buy a minority owner. The extraordinary move by the rivals is all about the need to own the broadcasting rights to the aforementioned sports teams.

Or more to the point the strange relationship and arrangement probably has more to do with each ensuring that they don’t get outflanked with the rights falling exclusively into the others grasp.

No doubt the two parties will announce publicly that both are committed to making the arrangement work and that both have the best of intentions. 

Almost certainly the assignment of the broadcast rights the first time around will be satisfactory to all.

But the “partnership” will not work in the long run. You cannot expect two rivals to suddenly put aside the need to compete every day for viewers, advertisers and broadcast rights and then hold hands and sign campfire songs when it comes to down to MLSE related rights.

The third wheel of a minority owner only makes the situation worse as anyone who has had to operate within such confines can testify

It is the ultimate marriage of convenience and one that is sure to finish in acrimony and a painful, costly and public split.

We will just have to wait and see who gets their heart broken.

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7 responses to “A Very Strange Arrangement”

  1. John Bladen says:

    Bobby;

    Being a minority partner isn’t fun… unless (like Tanenbaum) you actually hold the balance of power in any dispute between the two broadcasters.

    I agree that long term it won’t work and one of the broadcasters will either buy the other out or sell to Tanenbaum (who I believe still holds right of first refusal on any share sale), assuming he can raise the additional capital.

    Now… conspiracy theory moment: I’ve never believed that MLSe would allow a second NHL team in Toronto… but this precarious partnership might change that for precisely the reasons you’ve outlined… It’s a big enough market for at least one more team, and clearly each partner in this deal wants their own club.

    If this happens, though, the question would be: who gets the legacy franchise and who has to build anew when the inevitable split happens?

    For all the talk of the prospective value of a second NHL team in Toronto, one only has to look at the Lakers/Clippers, Cubs/WhiteSox, and Yankees/Mets to see that the second franchise in any major market isn’t as desirable as the first…

  2. Bishopville Red says:

    One issue that the two partners individually brought up the other day was the point that MLSE properties are too big for one network to own anyway. There are simply too many shows that would need to be aired at the same time, and the two stations regularly subcontract games right from each other.

    The real interest kicks in after 2014, when the first contract (Leafs? Raptors? Can’t remember) is up for renewal. How they plan to negotiate amongst themselves remains to be seen, but that’s where the 25% minority owner proves his worth. While the majority owners have split loyalties when it comes to content distribution, the minority owner can stay focused on the task at hand – getting the best deal for MLSE, not the best deal for Bell or Rogers.

    What I want to know is, what does this do for the future of soccer broadcasting in Canada? MLSE owns GOL TV Canada. Rogers own whatever it’s called now that Setanta isn’t Setanta. How much will viewers have to pay to watch “their” MLS club once the CBC deal evaporates.

    And on a sports-but-not-footy note, how much longer does CBC enjoy the Leafs as their Saturday night HNIC staple? I’d imagine it’ll be Habs and Oliers games in the near future.

    SB

  3. SB – CBC’s deal with MLS evaporated before the 2011 season. the games were on TSN this season.

  4. Bishopville Red says:

    That’s right. Time for a Christmas break! So, what happens when the TSN deal expires? Both MLSE and one of it’s owners have dedicated footy channels; the other actually owns the rights. This could get interesting. As long as Canadian footy fans won’t have to pay more to see games I don’t care how it shakes out, but that’s a big “if”.

    SB

  5. John Bladen says:

    BR: Yes, both networks have claimed that they have “too much” programming to air on their present channels.

    Take a good long look at the five (now six) Sportsnet channels and the two TSNs. TSN is by far the lesser offender, but roughly 50% of sportsnet’s regional and “one” channel fare is repeats… often repeats of connected in some form or other, along with Poker & dog shows (yes, TSN).

    I would think a network with five channels on tier 2 plus a pay channel (the former Setanta) and dedicated “team” channels could find a place to put almost all of it’s four major sports properties’ games – particularly considering the fact that two are mainly summer sports and the remainder winter.

    The issue is not scheduling. It’s money. They’d much rather sell you poker, Connected repeats, poker after dark, classic poker and jays/leafs/sens/oilers/flames connected than real live sports. It’s far more profitable for them.

    And they can still get some of us to pay premium prices to watch actual sports along with the garbage they fill out their multiple channels with.

    Expect to pay more for Leafs/Raptors/Jays/TFC broadcasts. They’ve just spent over a billion dollars collectively to own those rights. Their shareholders will want a handsome return on that investment and you know where that money is coming from…

  6. John and SB
    Rogers + TSN = Canadian Sky Sports
    It could be that the move answers the question I have have been asking myself for a long time which is why hasn’t someone been willing or able to do to hockey what Sky did to football in England.

  7. John Bladen says:

    It’s certainly possible, Bobby. Though, of course, the two media giants are claiming that it will never happen and their purchase will “benefit everyone”. (just who IS everyone anyway?)

    One of my investor friends phoned me immediately after this deal was announced and asked “so, is this a prelude to a full merger?”.

    It’s hard to imagine that happening, but never say never. The two have done joint ventures of one kind or another for some time, despite their obvious hatred for each other etc.

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