FOX SNARES SPORTS NETS News Corp. Buys Out Partner Liberty

In another chapter of the often cozy and very profitablebusiness relationship between cable moguls Rupert Murdoch and John Malone, Murdoch'sNews Corp. will buy out Malone's Liberty Media Group's interest in Fox/LibertyNetworks for $1.4 billion in News stock, sources said last week.

But while Fox will have total control overFox/Liberty's sports-centric programming -- including the burgeoning regional sportsbusiness -- industry observers believe that the agreement is a prelude to more deals.

Sources believe that Fox's next step will be to buyout Cablevision Systems Corp.'s share of the regional sports business in order tocompletely corner the market.

News, Liberty and Fox/Liberty officials would not comment.

The buyout will give Fox sole ownership of Fox/LibertyNetworks, the three-year-old venture that owns 12 regional sports networks and that hasdirect or indirect equity interests, ranging from 12 percent to 70 percent, in nineadditional regional sports networksFox/Liberty also owns FX, the sports/entertainmentnetwork that reaches 39.4 million subscribers, and it has interests in Outdoor LifeNetwork, Speedvision and Fox Sports World.

Fox would also obtain Liberty's half of thecompany's 40 percent interest in Cablevision's sports and entertainmentholdings, which include Madison Square Garden, the National Hockey League's New YorkRangers, the National Basketball Association's New York Knicks and Madison SquareGarden Network.

The deal would give Fox complete autonomy in financial andprogramming decisions regarding the regional sports business.

While still a 50 percent partner with Cablevision'sRainbow Sports Holdings in Fox Sports Net, Fox is the managing partner of the umbrellanetwork, which feeds national programming to the regionals.

"Fox has wanted to buy out Liberty for a while -- itgives them greater equity in the services, and it gives them the ability to make decisionsmore easily," said Robert Gutkowski, president of sports-marketing company TheMarquee Group.

Both Fox and Liberty envisioned Fox/Liberty Networks as acompetitor to ESPN for national sports rights.

But sources close to the situation said Liberty began toexpress concerns about the millions of dollars that Fox was spending to brand and programthe regionals, causing friction between the two companies.

Liberty, formerly the programming unit ofTele-Communications Inc., is now an AT&T Corp. subsidiary that is controlled by Maloneand other Liberty shareholders.

"I don't think that Liberty was happy with theway that Fox is running the regional sports business. They weren't squeezing as muchmoney out of the business as Liberty would have liked," the source said.

Fox will now have free rein to aggressively pursue ESPN ona national basis. But ESPN executives were not concerned about the deal.

"We've always faced competition from theregionals, and we will be competing with the same networks and the same local-teamprogramming that we have competed with in the past," ESPN spokesman Chris LaPlacasaid.

One source close to the situation said more deals are inthe works. One possibility is that Fox would buy Rainbow's share of Fox Sports Net byyielding to Cablevision Fox/Liberty's stake in MSG. But one source close toCablevision said MSG may be too valuable for Fox to walk away from.

Cablevision officials would not comment.

Liberty will pick up a sizable chunk of News stock to addto its other investments, which include about 10 percent of Time Warner Inc., in additionto minority stakes in programmers such as Discovery Communications Inc. and BET HoldingsInc.

"Malone's acquisition of News Corp. stock is agreat endorsement for [News]. He must really like the future value of the company,"one cable financial analyst said.

And Malone and Murdoch remain business allies: They sharecontrol of TV Guide Inc., for example.

Malone will apparently keep a toehold in the regionalsports business, too. Sources said News is not buying Liberty's 50 percent of FoxSports South. Time Warner owns the other half of that regional network.

R. Thomas Umstead

R. Thomas Umstead serves as senior content producer, programming for Multichannel News, Broadcasting + Cable and Next TV. During his more than 30-year career as a print and online journalist, Umstead has written articles on a variety of subjects ranging from TV technology, marketing and sports production to content distribution and development. He has provided expert commentary on television issues and trends for such TV, print, radio and streaming outlets as Fox News, CNBC, the Today show, USA Today, The New York Times and National Public Radio. Umstead has also filmed, produced and edited more than 100 original video interviews, profiles and news reports featuring key cable television executives as well as entertainers and celebrity personalities.