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Disney-bound Fox Sports Brasil ‘has amassed $22m in losses’

Brazilian pay-television broadcaster Fox Sports Brasil is said to have amassed a R$120m ($22.3m/€20m) deficit between 2016 and 2019.

The broadcaster, which now falls under media giant Disney’s control following the recent merger approval from the Administrative Council for Economic Defence (Cade), the Brazilian competition regulator, has returned losses due to significant sports-rights costs.

The financial statements, which have been seen by Brazilian portal UOL, show that Fox Sports Brasil performed well between its launch in 2012 and 2015.

However, the financial performance dipped thereafter and the accumulated losses are reported to have dissuaded the Mediapro agency and Simba Content, the Brazilian pay-television group, from pursuing a purchase of the broadcaster.

Fox Sports Brasil’s deficit in 2019 was R$51m, according to the financial statements, with the combined losses in 2016, 2017 and 2018 amounting to a total of R$69m.

Sports-rights costs reached R$314m in 2019 with deals for football’s Copa Libertadores and Uefa Europa League, plus the Copa do Nordeste regional tournament, taking effect.

The sports-rights spend in 2019 was augmented by R$88m in ‘operating expenses’ stemming from salaries, travel costs and technology investment.

Fox Sports Brasil, which has a subscriber base of around 10 million, was hit particularly hard by costs associated with its broadcast of the 2018 Fifa World Cup as it failed to meet targets with not all broadcast sponsorship packages sold.

Merger

Following the Cade approval, Fox Sports Brasil and ESPN Brasil will fall under the control of Disney, which had initially been required to divest the Fox Sports channels in Brazil as part of its $71.3bn (€64.1bn) acquisition of 21st Century Fox.

The competition watchdog ruled that the merger presented a viable alternative to a divestment as there was no buyer to meet the necessary regulatory requirements, though it had conceded that Disney had made satisfactory attempts to carry out a sale.

Cade issued a number of stipulations for the merger to progress. These included a commitment for Fox Sports to continue broadcasting events to which it holds the rights in Brazil, such as the Copa Libertadores, and that Fox Sports must continue as a linear channel on basic pay-television platforms until at least January 1, 2022.

Following the completion of the merger, ESPN will also be able to showcase sports properties to which Fox Sports holds the rights, raising the possibility of Copa Libertadores matches being shown across both.

After January 1, 2022 it is expected that the Fox Sports properties and broadcasts will be absorbed into the Brazilian arm of ESPN. At that time, Disney will inherit Fox Sports’ headquarters, rights and staff and will be able to sell the Fox Sports brand.