By Ronald Grover and Diane Bartz
(Reuters) - Twenty-First Century Fox's plan to buy Time Warner could create an upheaval in the sports television world, creating the first meaningful challenge to Walt Disney Co's ESPN.
Time Warner's board has rejected an $80 billion bid, but Fox Chairman Rupert Murdoch is unlikely to walk away quickly. A deal would bring him college basketball's "March Madness" championship tournament, prime time National Basketball Association (NBA) games, and Major League Baseball (MLB) games.
Fox's sports rights include National Football League games, professional baseball games and NASCAR racing. In 2015 it gets the rights to women's World Cup soccer and in 2018 the men's World Cup.
Disney's ESPN, with Monday Night Football, Major League Baseball games, NBA games and college football, will still be the team to beat, but for once there might be a match.
"You start to put it all together and you create a significant competitor to ESPN for ratings and advertising dollars,” said Marc Ganis, a sports TV consultant.
In an age of DVRs and on demand viewing, sports stands out for its ability to draw television audiences which are large and watch live, two traits crucial for selling advertising, says Ed Desser, a former president of NBA Television and New Media Ventures, who advises teams and league's on their TV contracts.
"It's TV's growth engine," he says. "It drives subscriber fees and keeps people watching."
Ganis speculates that some key Time Warner sports, such as its professional basketball doubleheaders, could move from TNT to Fox Sports 1. Fox Sports 1 already airs major league baseball, motor sports, mixed marital arts and college football and basketball games from the larger conferences.
The additions could allow Fox Sports 1, now in about 90 million homes, to add subscribers and raise the affiliate fees from cable and satellite operators that make up the majority of its revenues.
ESPN is in more than 100 million homes, not too far ahead of Fox.
However, ESPN currently can charge cable companies $6.04 per month for each subscriber, according to data compiled by consultant SNL Kagan.
By comparison, Fox Sports 1 is paid 68 cents for each of its subscribers. Thanks in part to its National Basketball Association games, TNT gets $1.48 per subscriber.
SPREADING THE COSTS
Murdoch could also use Time Warner's collection of channels to outbid competitors for key sporting events, spreading the costs among its Fox network and cable channels, said Derek Baine, Research Director at SNL Kagan.
"One of the things driving this deal is that Fox will be more aggressively bidding on sports rights, so this will give them more fire power," Baine said in an email. "Like NBCU with the Olympics, they can spread games across multiple networks."
Combining the two would also eliminate a major buyer of sports programming, which may raise concerns at the U.S. Justice Department when it reviews a deal, said Peter Carstensen, who teaches antitrust at the University of Wisconsin Law School.
Carstensen says the review may focus on specific parts of the content business -- movies, sports, news -- rather than a new company's entire offering of content.
"My guess is that enforcers are less likely to be concerned by the overall programming," he said. "If you're not going to take the general market view, you may have to divest some sports programming."
Fox also will have to convince sports leagues or conferences to alter existing contracts to shift around the sports, said Desser. Contracts usually tightly prescribe where games can be shown, and leagues are loath to change them for fear of upsetting other TV rights holders.
Fox already airs NBA games on many of its 22 regional sports cable channels, he says.
"But anything is possible, and deals get rewritten," he said. "Sports are such a pure growth engine that they may try."
(Editing by Peter Henderson)