Analyst Fears Bubble in Sports Rights as News Corp (NWSA) Dumped By Dodgers

According to reports, next season News Corp (NASDAQ: NWSA) and Fox Sports Network will lose TV rights to LA Dodgers games. The news follows a breakdown in negotiations as the two parties failed to reach agreement, sending the Dodgers into the arms of Time Warner Cable (NYSE: TWC). At present, the two sides are said to be nearing a deal that could total up to $8 billion over 20 years. Fox's current rate is approximately $39 million for the season.

From an investor perspective, analyst Michael Nathanson of Nomura thinks it is a positive sign that News Corp did not overbid.

"Clearly, the LA sports market is experiencing significant price inflation and it is still early days whether these levels of investments will prove to be justified many years down the road or if we have reached the top of the sports rights bubble," said Nathanson.

Fox will carry the Dodgers for one last season, so an immediate impact on earnings isn't expected. However, once the rights roll off Nathanson thinks News Corp will have to roll back rates. Michael also believes the company has enough sports content locked in at its two LA regional sports networks, though it may choose to consolidate them at some point down the road.

Nomura Securities has a Buy rating on News Corp. (NASDAQ: NWSA) with a price target of $29.00.

For an analyst ratings summary and ratings history on News Corp. click here. For more ratings news on News Corp. click here.

Shares of News Corp. closed at $27.17 yesterday.

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