Friday, December 9, 2011

Rogers and BCE to own pro sports in Toronto...both content and distribution...

By Tim Kiladze, Tara Perkins and Rita Trichur, Globe and Mail, December 9, 2011

BCE Inc. (BCE-T40.52-0.08-0.20%) and Rogers Communications Inc. (RCI.B-T36.59-0.36-0.97%) have struck a deal to buy 75 per cent of Maple Leaf Sports and Entertainment, giving the telecommunications giants majority ownership over a lucrative sports empire with highly sought after television content.

Together, BCE and Rogers will take control of a franchise that produces some of Canada’s most-watched live sports programming. This content is one of the hottest commodities in broadcasting because advertisers are willing to pay top dollar when viewers are likely to sit through commercials.
The deal also gives the buyers control over both ends of the broadcasting spectrum, creating “the perfect marriage of content and distribution,” Rogers chief executive officer Nadir Mohamed said at a press conference on Friday.

Under the purchase agreement with Ontario Teachers’ Pension Plan, BCE and Rogers will buy 75 per cent of the company in a joint bid, splitting their ownership evenly. Larry Tanenbaum will also boost his stake from 20.5 per cent to 25 per cent, giving him ownership of the rest of the company.
The deal values MLSE, the parent of the Toronto Maple Leafs, the Toronto Raptors, the Toronto FC soccer club and other assets, at just over $2-billion, including debt. Teachers’ 80 per cent stake is being sold for $1.32-billion.
That Teachers agreed to a sale came as a surprise. Just two weeks ago the pension fund publicly announced that its 80-per-cent stake in MLSE was no longer on the block because it did not receive bids that met its terms and conditions.
On Friday morning, Jane Rowe, senior vice-president of Teachers' Private Capital, noted that “less than a week later, we were unexpectedly approached with a new, unsolicited offer. It was comprehensive, it was firm, and it met all the terms and conditions that we considered necessary.”
Packaging and selling televised sport content over television, internet and cell phones is what this deal is all about.
It is certainly not about providing Toronto sports fans with winning teams, now that Rogers will own all professional sports franchises in Toronto, including the American League Blue Jays. Their recored on the baseball diamond has certainly not exceeded, or even matched minimum expectations of moderate patient and long-suffering fans. The Blue Jays won the World Series in both 1992 and 1993, and since have struggled even to make the first round of the post-season.
The NHL Maple Leafs have not won a Stanley Cup since 1967; the Toronto Raptors of the National Basketball Association have been in the first round of the play-offs only once or twice in their history.
This deal is about money, more mounds of money, generated by the predictable sale of both live hockey, basketball and baseball games, and secondarily, through the broadcast of these games.
One suspects that, if this deal had developed in a U.S. city, the anti-trust section of the competition laws in that country would require a federal panel to review and potentially to disallow such a single-ownership conglomerate of all the sports teams in a single market.
In Canada, under the current government, there is little or no reason to expect the Harper conservatives to intervene to block, or even to amend this proposed sale. After all, BCE (Bell Canada Enterprises) and Rogers are both, most likely, heavy contributors to the Conservative party coffers. Companies of the size of these two behemoths in the telecommunications sector make such contributions in order to be able to pull off such mega-deals with their mega-bucks, if and when the opportunity presents itself.
Now, if either the Liberals or the NDP were in power in Ottawa (I know, I dream!) and they were to facilitate a purchase, by making shares available to ordinary Canadians, in this, one of the most lucrative corporations in the country, that would be something to crow about. It just isn't going to happen. Professional sports franchises like the Green Bay Packers and the Saskatchewan Roughriders are only two public ownered franchises on the continent at the top professional level and that model is not going to have any traction in Ottawa.
In Toronto, the provincial Liberals are unlikely to even ask to intervene in the sale-puchase, even if there were a legal opening for such an intervention. The Toronto city council, under Mayor Ford, could conceivably be asked to pass a resolution of support for the deal, given the right-wing leanings of the chief executive.
High-tech, digital communications is riding a huge wave of both sales and investment dollars, and likely to continue to grow, at least among the few "big players" still remaining in the sector, for the conceivable future.
The Maple Leafs have been a season sell-out for decades; the Raptors cost and deliver much less, as the single pro-basketball team in the country. The Blue Jays, also the single pro-baseball team in Canada, are available for the few Canadians whose passion is the "field of dreams," and the several U.S. visitors who cross the border each year,and take in thei national sport on Canadian soil, although the players themselves come from the U.S. and the Dominican and other Caribbean islands.
Public addiction to the wireless world of digital communications, soon to be enhanced by "talking smart phones"...that can eliminate the need for keypads and 'typing'...will only grow, as will the profits of these mega-corporations, and they could care less whether or not the teams under their ownership win, lose or draw, so long as it takes a fleet of Brinks trucks to cart the cash to the various banks after each game that has been beamed into the living rooms, rec-rooms, bars and lounges across the country, over cable, internet and wireless cell phones.
Talk about another monopoly, or should we say monopsony and monopoly...with the owners owning both the content and the delivery systems of the highly lucrative sports entertainment business.
The history of these telecommunications companies in Canada is filled with evidence of profit-generating strategies and tactics that certainly have not favoured the Canadian consumer. We pay higher rates for our cell phones, for example, that do U.S. consumers. Our cable rates are higher as well. Our long distance rates have been no bargain and the market has not been opened to world competition, because of the strong lobby of the political connections and strategies of the players.
In fact, the CRTC, the Canadian Radio and Television Commission, a government appointed equivalent to the U.S. FCC (Federal Communications Commission) has demonstrated little or no muscle when hearing and granting both fee increases and market share to the Canadian giant in the field.
One wonders whether the NHL governors will see this sale/purchase as one that seeks and supports the long-term goals and aspirations of the league, and if it does not, whether they will intervene to block the sale.
Canadian sports fans clearly are not being considered in executing this deal, only the profits of the corporate players.

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