Dodgers near TV rights deal with Time Warner Cable
Jan 23, 2013 (Los Angeles Times - McClatchy-Tribune Information Services via COMTEX) --
The Los Angeles Dodgers have negotiated a long-term television deal that would pay the team $7 billion to $8 billion, a move that would help cover its recent spending spree and quiet critics who scoffed at the record $2.15-billion purchase price paid by the new owner, Guggenheim Partners.
The expected 20-year agreement with Time Warner Cable could be announced this week, according to people familiar with the matter. They asked that their names not be used because the deal has not yet closed.
The arrangement is bad news for rival News Corp's Fox Sports unit, whose channel Prime Ticket holds cable TV rights to the Dodgers through the upcoming season. Fox will pay $39 million this season -- a fraction of what Time Warner Cable would pay under the new contract -- and found the proposed price tag too high, people inside News Corp. said.
And the pact would probably mean bigger pay TV bills -- even for those who don't watch Dodgers baseball, potentially leading to a backlash against the team and Time Warner Cable.
Under the terms of the proposed contract, Guggenheim would own a Dodgers-dedicated television channel that would start carrying games in 2014, said the people with knowledge of the pact. Time Warner Cable would manage much of the channel's operations and handle distribution to other pay TV companies, including DirecTV and Cox Cable.
The Dodgers' move to control their own channel is driven in part by a desire to pocket as much money as possible while still abiding by Major League Baseball's revenue-sharing agreement -- which requires that 34% of each team's locally generated revenue, most of it from TV rights and ticket sales, be contributed to a pool for other teams.
Mark Walter, the Dodgers' controlling owner, was believed to be sharing details of the tentative deal Tuesday with Major League Baseball officials. Walter has negotiated extensively with the league over how much of the television money must be shared with the other 29 Major League teams.
The Dodgers' revenue-sharing bill could range from $1 billion to $2.7 billion, based on the structure of the deal.
The new channel would also give the Dodgers the opportunity to expand team-related programming throughout the day, as the Los Angeles Lakers do on their Time Warner Cable channel.
"If you look at what the Lakers are doing, they're communicating with their client base," Dodgers owner and Guggenheim Partners President Todd Boehly told The Times last fall. "It's fantastic. It becomes self-fulfilling. If you start interacting with the team in all-new ways, you're going to love the team even more."
Boehly was not available for comment.
The addition of a new Dodgers network would bring the number of local sports channels in Los Angeles to six, the most in any major city in the United States. Besides Time Warner Cable's SportsNet and Deportes, and Fox's Prime Ticket and Fox Sports West, the Pac-12 Conference also has its own channel here. Fox Sports West carries Los Angeles Kings and Los Angeles Angels games.
"That's too many channels," said Marc Ganis, a sports industry consultant in Chicago. "I can't imagine that is sustainable on a long-term basis."
Sports channels aren't cheap. Time Warner Cable already charges other cable and satellite operators close to $4 a month a subscriber for SportsNet. The Dodgers and Time Warner Cable are expected to seek as much as $5 for their new channel, which is double what Fox charges for Prime Ticket, according to industry consulting firm SNL Kagan.
Those price hikes are generally passed on to consumers, who may resent the increase.
"Why do I have to pay for the Dodgers when I am not a Dodgers fan " said Laura Burnes, a mother of two who lives in Orange County. "I don't want to see my cable costs go up any more."
The cost for sports has skyrocketed over the last decade. That's partly because the content is seen as "DVR proof." It is watched live by viewers, which makes it more valuable to advertisers and networks than sitcoms and dramas, which are often recorded and viewed later by people who skip ads.
But non-sports fans and pay TV companies are increasingly frustrated at having to pick up the tab for big sports deals. There have been calls to sell sports channels "a la carte," or separately from other programming.
The Dodger agreement with Time Warner Cable may be a tipping point.
"That is the solution everyone should be looking at seriously," said Derek Chang, a former senior executive at satellite broadcaster DirecTV. Such a move, he added, may be the only way to lower the cost of TV sports. "Ultimately the market for fees would then reset."
The Dodger deal marks the second time in less than two years that Time Warner Cable has outbid Fox Sports for a Los Angeles franchise. In 2011, the company agreed to pay $3.6 billion for a 20-year accord with the Lakers, which had been on Fox Sports West.
Time Warner Cable used the Lakers to create SportsNet and Deportes, a Spanish-language sports channel.
The two media titans have also done battle on other turf.
Last year, Fox acquired an ownership stake in Yes, the New York sports channel that is home to the Yankees. In 2011, Fox outbid Time Warner Cable for rights to the San Diego Padres.
Losing the Dodgers will hurt Fox's Prime Ticket, but the company still has rights to the Los Angeles Clippers and Anaheim Ducks. A Fox executive said there are no plans to consolidate Prime Ticket and Fox Sports West, which besides the Angels also has rights to the Stanley Cup champion Kings.
Distributors will press for a reduction in the fee for Prime Ticket without the Dodgers, but it's not a sure thing they'll get it, Ganis said. When New York's MSG channel lost rights to the Yankees, the subscription fee did not decrease.
Times staff writer Meg James contributed to this report.
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