March 28 (Bloomberg) -- Rupert Murdoch’s News Corp. is taking steps to start a national U.S. sports network on cable television aimed at challenging Walt Disney Co.’s ESPN, according to people with knowledge of the situation.
News Corp. is assembling the required rights from pay-TV carriers and sports organizations, said the people, who requested anonymity because talks are private. While a final decision to move forward hasn’t been made, the company is considering converting its Fuel action-sports network to the new channel, two of the people said.
With a national network, Fox would join Comcast Corp.’s NBC Sports Network and CBS Corp.’s CBS Sports Network in taking on the dominant ESPN. News Corp. last year secured rights to the Pac-12 Conference and Big-12 Conference games and owns 20 regional sports networks. The company in October won TV rights to soccer’s World Cup in 2018 and 2022.
“The success of all these networks will depend on the quality of their sports rights,” David Joyce, an analyst at Miller Tabak & Co. in New York, said in an interview. “There’s been a lot of competition for those rights and that’s driven up costs.”
ESPN is well-positioned to withstand competition because of its rights for Monday Night Football and national baseball and basketball games, Joyce said.
A national sports channel can capture higher affiliate fees from pay-TV providers such as Comcast and DirecTV, according to research firm SNL Kagan. ESPN will command $5.06 per subscriber per month this year, the most of any cable channel, SNL Kagan estimates.
That would help pay for sports rights that are growing ever more expensive. Fox, for example, holds rights to broadcast Los Angeles Dodgers games through next year, and exclusive negotiating rights to renew through late this year. The price is likely to go up with the team’s planned sale, for a record $2 billion, to a group led by basketball hall of fame player Magic Johnson and Guggenheim Partners Chief Executive Officer Mark Walter.
Fuel, a 24-hour action-sports network that carries mixed-martial arts fights, is available in 36 million U.S. homes, according to Fox.
In addition to Fox Sports Net regional channels and Fuel, News Corp. owns motor-sport network Speed, available in 78 million homes, the Fox Soccer Channel, the Big Ten Network, a partnership with the college sports conference, and Fox College Sports, consisting of Pacific, Central and Atlantic regional networks. News Corp. also shows games on broadcast television through Fox Sports.
Leverage the Channel
To compete with ESPN and NBC Sports, Fox will need to make an attractive offer to sports organizations and teams, said Neal Pilson, president of Pilson Communications and former head of CBS Sports.
“The way you do that is you give a new sports property exposure on the Fox broadcast network and then you put other games on the new channel,” Pilson said. “You leverage the broadcast channel to get product on the cable channel.”
The new channel could begin service by the end of this year, one person said. The effort is being led by David Hill, the chairman of Fox Sports, one person said.
News Corp., based in New York, has clearance from some carriers, including DirecTV, the biggest U.S. satellite television provider, two people said.
Lou D’Ermilio, a spokesman for Fox Sports, declined to comment, as did Darris Gringeri, a spokesman for El Segundo, California-based DirecTV.
News Corp. fell 2.5 percent to $19.74 and Disney dropped 1.5 percent to $43.51 at the close in New York. DirecTV added 1.3 percent to $48.83.
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