The Department of Justice’s move this week to block AT&T’s purchase of Time Warner shocked many analysts who follow mergers and acquisitions that require federal government approval.
Government opposition to a proposed deal involving two companies that are not direct competitors is rare. The last such DOJ case that was litigated to conclusion was in 1979, and the government lost.
History aside, the fact that the DOJ is trying to stop the sale has created ripple effects throughout the M&A industry, but it also could impact professional golf.
The union of TV and professional golf stands out as a match made in heaven. CBS, Fox, Golf Channel, NBC, Sky Sports, TBS and other networks have proved to be the lifeblood of professional golf.
Irrespective of the competitive excellence of Tiger Woods in the past two decades, TV contracts have made the purses on the major professional tours what they are today. The money would be exponentially smaller if TV were not so deeply involved in the sport.
Consider this fact: If the PGA Tour did not sell one ticket to its events, the purses would not be any lower than the record $363 million that will be handed out in the 2017-18 season. That’s because money from the gate goes to the charities to which each non-profit tournament contributes and not the prize money for which players compete.
It’s no surprise that the PGA Tour is dead set on launching a PGA Tour channel. If you look at the Tour’s growth in the areas of video and web productions – not only the hundreds of hires in recent years but the fact that many of those new employees have come from other TV companies – the path is clear.
Upon closer inspection, the Tour’s specific plan is not so clear. Sources have said that the Tour has asked its TV partners to help launch a PGA Tour network. Such a network could take shape in a number of ways:
- The Tour could ask Comcast, the parent company of NBC and Golf Channel, to rename Golf Channel as PGA Tour Channel.
- The Tour could ask its other key partner, CBS Sports, to use one of its cable channels – likely the CBS Sports channel –and rename it as PGA Tour Channel.
- The most intriguing option might lie beyond CBS, NBC and Golf Channel. Turner Sports has been on the periphery of golf with its involvement in the annual PGA Championship, but Turner’s parent, Time Warner, is in the midst of an $85.4 billion takeover attempt by AT&T. The DOJ contends that it would be detrimental to consumers as anti-competitive.
The proposed AT&T/Time Warner deal would be a marriage of vertical properties.
When the proposed takeover was announced in October 2016, many observers thought that the deal would trigger federal anti-trust concern because it would be a merger of vertical integration, similar to Comcast’s purchase of NBC a few years earlier. The Comcast deal was approved by DOJ under President Barack Obama’s administration. Today’s DOJ under President Donald Trump contends that proposals such as the Comcast deal are anti-competitive.
Randall Stephenson, AT&T’s chairman and chief executive, is a PGA Tour board member who prodded then-commissioner Tim Finchem, who retired late last year, about looking toward the future for delivery of the Tour’s product, specifically over-the-top delivery and other digital products.
So, if the AT&T/Time Warner deal gets done, would one of Time Warner’s cable channels – say, Headline News – be available for conversion to the PGA Tour Channel? With Stephenson at the helm of a company that would be worth more than $300 billion after the deal, the switch of HLN to a PGA Tour network would be minuscule.
Now let’s add intrigue that came about in recent weeks.
Rupert Murdoch, chairman of 21st Century Fox, disclosed that he wants to sell parts of the company, including Sky Sports, a pay-TV channel in the United Kingdom and Ireland.
Sky Sports is deeply involved in golf on both sides of the Atlantic, and any sale or merger likely would not change that influence, but which company actually would control that coverage? Disney and Comcast have been reported to be interested in purchasing the Fox assets.
A Disney purchase would bring the parent of ESPN back into golf in a big way after ABC dropped out in late 2006. ESPN has continued to provide coverage of professional golf at the Masters, but the network has been absent from the U.S. Open, British Open and Ryder Cup since letting those rights expire during the past five years.
Getting Disney back into golf not only would help the PGA Tour’s exposure but could bring another suitor into any discussion about the Tour’s television deals, which expire in 2021.
The more complicated issue would be if Comcast were to purchase Sky Sports from Fox. That would provide Comcast, NBC and Golf Channel with more leverage in any future negotiations, including if the PGA Tour were to launch its own network.
A PGA Tour network clearly would be harmful to the viability of Golf Channel, which currently provides coverage of the PGA, Champions and Web.com tours plus the LPGA and European Tour.
With Comcast in 22 million homes, carriage for a PGA Tour Channel might find some pushback by the Philadelphia-based company.
Of course, the DOJ could be the biggest obstacle to any deal. It’s clear from comments that Makan Delrahim, the DOJ’s new antitrust chief, made to the American Bar Association last week that his department has taken a different approach to antitrust. Delrahim said that the traditional “behavioral remedies” that were cited in approving Comcast’s 2011 purchase of NBC from General Electric no longer would be appropriate during his watch.
Despite the DOJ’s opposition to an AT&T purchase of Time Warner, most analysts think that the sale will happen and that if AT&T were to take the fight to court, the company would win.
But it’s hard to believe that a Comcast purchase of Fox’s assets would meet with the same approvals by the government after the DOJ has taken such a strong stand against an AT&T/Time Warner deal.
How golf fans consume the professional game clearly is changing as the media world continues to evolve. In the short term, the DOJ will have some say in how fans watch golf. Longer term, what happens with the AT&T/Time Warner sale, Comcast, Disney and 21st Century Fox ultimately will determine what golf on television will look like in the future.
Alex Miceli is the founder and publisher of Morning Read. Email: firstname.lastname@example.org; Twitter: @AlexMiceli