In an agreement with Brazil’s antitrust agency, Disney will sell the Fox Sports cable channel that serves the largest media market in South America. Brazilian regulators focused on Disney’s ownership of ESPN and Fox Sports as giving it too much power over sports rights and related deals.
Approvals from Brazil and Mexico are believed to be the last hurdles Disney needs to clear before formally taking ownership of most of 21st Century Fox’s assets. There’s been speculation that the historic union of two Hollywood studios could be completed as early as next week.
On Wednesday, Brazil’s Administrative Council for Economic Defense approved the Disney-Fox deal contingent on the agreement to sell Fox Sports, among other measures negotiated in a Concentration Control Agreement. The deadline for the sale remains confidential, the council said.
The merger had generated competition concerns in Brazil’s pay-TV sports channel market, which includes ESPN and Fox Sports. The antitrust council noted that “currently, there is only one rival…capable of competing with these channels.” Regulators in Mexico are said to have similar concerns about Disney’s ownership of ESPN and Fox Sports properties in the country.
“In the board’s assessment, the [merger] would leave the pay-TV sports channel sector even more concentrated, with an elevated probability of an exercise of market power on Disney’s part,” Brazilian regulators wrote. “Beyond this, there would be the potential of a reduction in the quality and diversity of available sports content, as well as a rise in costs that could be passed on to consumers.”
The sale of Fox Sports is designed to ensure that the market retains the same number of sizable competitors in sports, with SporTV (from GloboSat), ESPN and whichever business buys Fox Sports’ assets.
“The package of assets to be divested includes all the sports events broadcast rights belonging to Fox Sports, all the contracts with pay-TV operators, key employees, real estate, and transmission equipment,” regulators wrote.
Disney has also agreed, for a fixed period, not to sign agreements with the sports leagues that have agreements with Fox Sports, not to try to reacquire those rights, and to offer free use of the Fox brand to the buyer of Fox Sports.
The regulators’ statement indicated that Brazilian antitrust authorities have conferred with their Mexican counterparts in evaluating the transaction, which suggests that approval from Mexico could be coming within days. “In Latin America, the close dialogue between agencies in Brazil, Mexico and Chile resulted in a coordinated solution to the case,” the Brazilian council wrote.