Ventura County Star, Calif., Jim Carlisle column
Jan 24, 2013 (Ventura County Star - McClatchy-Tribune Information Services via COMTEX) --
Just when we got through one enormous pro sports local television deal, here comes another.
The Los Angeles Dodgers are very close to signing a contract with Time Warner Cable that would create a new regional sports network for the team, much like the cable company did for the Lakers this season.
Reported terms of the contract are $6 billion-$8 billion for 20-25 years beginning in 2014. The deal was first revealed Tuesday by Bloomberg News. It would be by far the largest local TV sports contract in history. Time Warner Cable is in the beginning of a $3 billion, 20-year deal with the Lakers.
There would, however, be distinct differences between the Dodgers' agreement with TWC and the Lakers'. Bloomberg reported Guggenheim Baseball Management, the group that owns the Dodgers, would develop the channel. Time Warner, as a partner, would run it and sell advertising for it, but the Dodgers would maintain their broadcasting rights.
Fox has carried the Dodgers since 1997 when it launched a second sports network, now called Prime Ticket, to go along with Fox Sports West. KCAL (Channel 9) will also be in its final year of broadcasting Dodgers games this season.
Fox was reported to be interested in holding onto the Dodgers -- especially after FS West lost the Lakers this season -- and had offered a $6 billion, 25-year deal in November, which included giving the Dodgers partial ownership of the network. But Fox's exclusive negotiating window ran out at the end of that month, allowing Time Warner to get involved.
The Los Angeles Times reported Thursday the Dodgers, who were said to be impressed with certain elements of Fox's proposal, have invited it to take a lesser TV role with the team. That could include showing some games on Fox-owned KTTV (Channel 11) or KCOP (Channel 13), thus keeping a few games on free local TV. A new national network, Fox Sports One, could also play a part, the newspaper said.
Reports earlier in the week by SportsBusiness Daily said the Dodgers-TWC deal was being held up because sources said Fox had "certain back-end rights" that could give it the right to match or challenge a deal, and that the Dodgers and TWC were trying to craft the deal in a way that would avoid that situation.
When it is finalized, the new Dodgers network would be much like the YES Network the New York Yankees launched in 2002 with the then-New Jersey Nets in order to have better control over their broadcast rights and eliminate the middle man.
That in essence is also what Time Warner Cable has done with the Lakers and Dodgers. TWC is the primary cable provider in Southern California and, along with other distributors, has balked at ever-increasing rights fees for sports networks. By starting its own channels, Time Warner locks up rights to L.A.'s two most popular teams. There may be a steep price to pay at the start, but it gives the company cost certainty for at least the next two decades.
Fearing it might lose the Dodgers, News Corp., Fox's parent company, bought a 49 percent stake in YES worth $3 billion in November with an option to buy up to 80 percent in three years.
Money from the Dodgers' deal with Time Warner -- some of which will go to Major League Baseball's team revenue sharing -- is the windfall their new owners were expecting when they bought the team for $2.15 billion last year. The Dodgers are expected to have baseball's highest payroll in 2013 at $220 million; their new TV deal could bring in at least $280 million annually. The Dodgers earned a reported $40 million in local TV revenue in 2012.
The Angels signed a 20-year deal with Fox Sports West in December 2011 for $3 billion, or $150 million per year. The Yankees got $90 million from local TV in 2011, but it also owned 34 percent of YES, which generated $224 million in operating income that season, according to the Orange County Register.
"From a Dodgers standpoint, this puts them at the same rank as the Yankees, Red Sox and Giants," media consultant Lee H. Berke told Bloomberg. "Valuation is the name of the game. That's what Guggenheim is going to achieve by developing a Dodgers network with Time Warner."
Time Warner will have to try to get other TV distributors to carry the new Dodgers channel, much as it did for the Lakers channels, Time Warner Cable SportsNet and Time Warner Cable Deportes. From a programming perspective, it would seem ideal for the Dodgers and Lakers to share the channels since there is little overlap in their seasons, but having their own channels gives the team more value.
It took Time Warner right up to the start of the season and beyond before most providers signed up for SportsNet and Deportes. Dish Network still doesn't carry them.
What these new channels mean for cable and satellite customers' bills is uncertain. TWC charges $3.95 per subscriber per month for distributors to carry SportsNet and Deportes. Prime Ticket reportedly receives $2.50. YES charges $3.20.
Another question is what will happen to Prime Ticket without the Dodgers. Does FS West and Prime have enough programming to sustain two channels Losing the Dodgers leaves the networks with the Angels, Clippers, Kings and Anaheim Ducks as their major tenants.
Prime Ticket may survive -- once a channel is in existence, it may change its identity, but never closes down entirely -- but it may have to renegotiate its deals with providers to adjust to the lower ratings without the Dodgers.
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