December 28, 2012
Reports indicate that Fox Sports is on the verge of closing on its purchase of SportsTime Ohio, a network with approximately 2.8M subscribers owned by the same family that owns the Cleveland Indians. At a more than $235M purchase price, let’s say $250M, this works out to about $90 per subscriber. The network has little programming beyond the Indians, such as Ohio high school sports and local, non Big Ten sports. And despite being owned by the Indians ownership group, STO has had problems getting carriage agreements in its six years in operation. All in all, STO is a lot like ROOT Sports Northwest.
ROOT is almost entirely dependent on the Mariners. It does have rights to the Sounders outside the Puget Sound area and also is a partner of the Timbers, but beyond that it shows Washington high school sports and some non Pac-12 sports. By placing a $90/sub multiple on it’s 3.7M subscribers, you get a valuation of $333M. This is a price the M’s should be willing to consider to purchase ROOT to gain full control of the network. At a conservative $1.75/sub monthly charge to carriers for the network, this works out to $78M a year in revenues without considering the impact of advertising revenues that would also go straight to the club. In just fours years, they’d nearly make back the entire purchase price of the network. By purchasing ROOT, the team would get a network that already has carriage agreements and a staff, avoiding all the hassles of starting up a network from scratch on their own. The benefits and risks locally are pretty much the same as they were a year ago. After gaining ownership of ROOT, the M’s could then work to add programming that makes the network even more valuable while having the option to add partners when the right situation arises.
December 11, 2012
T-Mobile USA will begin selling the iPhone, and perhaps other Apple products beginning next year. While the last of the major domestic carriers to offer the phone, one thought is that the company will start offering the phone at the same time it strengthens its 4G network early next year. Reports indicate T-Mobile will offer the phone without subsidies, but with cheaper monthly plans. This is more common in Europe, for instance, and other U.S. carriers could be moving in this direction. Overall, it’s a good step to provide customers with an alternative to the usual way of purchasing a phone and plan. But the market for potential new buyers of the phone may be somewhat capped by the full cost of the phone. On the other hand, consumers who already have the iPhone may be tempted to sign up with T-Mobile due to the low monthly plans.
More positive steps are needed by T-Mobile to make up the ground it has lost over the years to its competitors. Sprint may be close to purchasing a controlling stake in Clearwire and appears fully energized following its agreement for investment from Softbank. And Dish may finally be getting somewhere with its wireless proposal. T-Mobile’s proposed MetroPCS merger is really a way for Deutsche Telekom to slowly exit the U.S. market. It’s a necessary step that will allow T-Mobile to go its own way as a public company, whether this be as an aggressive acquirer or to sell itself. If the company chooses to be aggressive, I’ve previously proposed one way for it to differentiate itself in the market.
The mobile market continues to shake out and this will take some time. There will be players exiting and entering the market. T-Mobile’s challenge is to stay ahead of the curve this round, rather than allow events in the market to dictate its position. Their margin for error is even slimmer this time around.