Saturday, December 10, 2011

The MLSE purchase by Rogers and BCE makes sense

Initially the sale of 75% of MLSE to Rogers and BCE was a bit of a shock but as I thought about it, it all made sense. Everyone was aware that both telecom giants would be interested in buying one of the most valuable sports assets in North America. The telecom industry has slowly been buying franchises as a form of vertical integration. Programming for TV and cable networks is the product they sell and sports is now the most valued type of program. Sports is watched live so commercials are more likely to be viewed while other programming is more likely to be PVR'd which means advertisers won't pay as much.

So why would these two rival become partners? In a bidding war to get the bigger piece of that large pie, one company would end up overpaying by a considerable amount while the other company would get nothing. The stakes were high and perhaps neither company would be totally happy in the end. The big winner would have been the Ontario Teachers' Pension Plan. Instead they both own a share of MLSE and pay a reasonable price. With over 160 Leafs and Raptors games plus playoffs (I'm being optimistic) there is more than enough programming for both TSN and Sportsnet. Perhaps the biggest winner is Larry Tennenbaum who increases his share to 25% and retains chairmanship of the company. But the telecom companies get what they really want which is control of the broadcast rights.

So what does it mean for Leafs and Raptors fans? Nothing. MLSE continues to be owned by a huge conglomerate. Fans will blame failures on owners that are bottom lined oriented. The Leafs, Raptors, and Blue Jays are run in the same manner. The teams are run by a management structure that is accountable to the corporation but there is no interference in the day to day operations which is the way it should be. If these businesses care only about the bottom line then they will want their teams to make the playoffs. That means more ticket sales, more ads sold during playoff games, more merchandise sold.

So now I will be able to watch these mediocre teams on my blackberry - oh boy.

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