Dodgers, DirecTV Trade Barbs as Standoff Threatens Opening Day

7:57 AM PST 03/28/2014 by Alex Ben Block

DirecTV and other distributors are resisting the team's increase in broadcast rights fees — from $50 million to over $200 million a year — as the Dodgers president calls the complaints "disingenuous."

Major cable and satellite distributors are balking at the price and terms being asked by Time Warner Cable to carry the Los Angeles Dodgers' new regional television network, SportsNet LA, which launched less than two months ago.

The team, which owns the network, is seeking around $4 per customer, per month for all subscribers across the entire market area under deals being discussed by Time Warner Cable, according to multiple sources.

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So far, not a single major outside satellite or cable provider has accepted the Dodgers' terms. Dan York, head of programming for DirecTV, which is the second-largest video provider in the Los Angeles area, predicts the logjam will not break before the first week of the new season is over and perhaps not for a long time after that. 

The Dodgers' season kicks off on Sunday in San Diego against the Padres.

"We're happy to carry [the network] if the price is right for all consumers," says York. "But since the price is too high, we're happy to carry it on a sports tier or a la carte and let Time Warner Cable determine the price themselves. We would do a typical revenue-sharing deal, [but TWC] has continuously balked at that." 

Stan Kasten, president of the Dodgers and a minority owner in the team, held a press conference at Dodger Stadium on Thursday, accusing those who object to the deal of being "disingenuous."

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"There is not another team in baseball whose games are a la carte," said Kasten. "Those same providers [who are suggesting the channel be offered a la carte] have done deals at higher prices for bigger packages than [what] has been offered to them right now. But that’s the negotiations game. I wish we could just get past that."

But that might not be so easy. Before Time Warner Cable SportsNet launched in 2012 after signing a $3 billion deal with the Lakers in 2011, there were also weeks of tense negotiations with other pay TV providers. But by the first regular-season game, several deals were in place. This time there is virtually no chance other satellite (DirecTV, Dish) or wired cable TV services (FiOS, U-verse) in TWC's territory (spanning from Las Vegas to Hawaii) will be carrying Dodger games when the first pitch is thrown on Sunday. 

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Kasten insists this isn't about price at all, but is part of the negotiation process. "We know these deals are going to get done," he says. "We see it in city after city. I just wish it would hurry up."

York isn't as confident. He says even though DirecTV is known for its sports offerings, it is willing to pass when the price and terms are too high. "We have an obligation to all of our customers -- sports fans and non-sports fans -- to keep the cost of their programming under control and try to fight for the right value. When someone pays four to seven times more for the same games compared to what was paid last year, that's not a sustainable price increase for consumers."

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After weeks of negotiation, Time Warner Cable appears to be at an impasse with all of its competitor/customers. Under the deal, according to knowledgeable sources, the Dodgers own 100 percent of the new network, but Time Warner Cable distributes, produces programming and does ad sales. Since TWC reaches between 35 and 45 percent of the TV homes in the market, the network can only be a financial success if Time Warner convinces competitors to ante up as well. Sources say that the true value of the Dodgers' new TV deal has risen to about $8.8 billion with the inclusion of additional promotional partners and other extras, and TWC has to pay whether it finds partners or not.

Kasten argues that the Dodgers are worth a premium price. He says TV ratings were up 40 percent last year, and the team, which sold 3.7 million tickets in 2013, is poised to have 35,000 season ticket holders and sell more than 3 million tickets this season -- before opening day. He goads video distributors to "come up with some other excuse because the reality is in the history of this franchise, now is the time of the greatest interest our team has ever had."

The stakes are as big as the Dodgers' ambitions, according to sources. If successful, the annual take from the teams' TV rights fee is expected to rise to about $220 million this year, up from about $50 million last year when games were show on cable channel Fox Sports West and KCAL, which broadcast about 50 games free.

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That revenue, expected to average $350 million a year over the 25 years of the contract, is about four times what Guggenheim Partners’ Mark Walter and Todd Boehly paid for the team in 2012 (Guggenheim Partners also owns The Hollywood Reporter). At the time the cost -- just over $2 billion -- was surprising, but this week Forbes, in its annual ranking of team values, said the Dodgers are now worth that, which experts say is largely due to the rich TV rights deal.

York doesn't think DirecTV is alone in refusing to pay more than four times what it paid for the same games a year ago: "I think it's highly unlikely that anybody of any real merit will be carrying that network soon."

After years of rapidly rising sports rights deals, especially among a proliferation of regional sports networks from coast to coast, SNL Kagan senior analyst Derek Baine believes the rich Dodger deal may be a breaking point. "I think a lot of the multichannel operators have just had it. They've seen their margins being eroded for many years," he says, predicting: "You're going to see a lot of changes in channel lineups and going forward the whole sports cost issue puts pressure on everybody."

Lauren Alvarez contributed to this article.

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