What to Expect in the L.A. Dodgers TV Rights War
UPDATED: The first round of a battle between Fox and Time Warner for local sports TV dominance already is being fought over the San Diego Padres.
Much has been made of the importance of TV-rights revenue to support the record-breaking sale price of more than $2 billion for the Los Angeles Dodgers. The most likely players in the high-stakes bidding for cable TV rights are Time Warner Cable and News Corp.’s Fox Sports.
However, the battle between Fox and Time Warner already under way in San Diego, in what might be the opening round of a titanic struggle for sports TV dominance Southern California — a battle that will have national implications for all of pro sports.
When the Dodgers open their season April 5 in San Diego against the Padres, the game will be carried in Los Angeles on Fox Sports' Prime Ticket in the second-to-last season of the current contract. In San Diego, the game will be carried on a brand-new cable channel called Fox Sports San Diego, as part of a 20-year deal that doesn’t even officially exist yet; because of ownership issues in San Diego, Major League Baseball has yet to approve the contract, but Fox is going ahead as if it has.
In another sign of the times, the Padres games won’t be seen by all San Diego cable subscribers. While Fox Sports has made a deal to license some 157 Padres games this season to Cox Cable, the biggest cable TV provider in that market, and DirecTV, it has yet to come to terms with AT&T or — no surprise — Time Warner Cable.
Time Warner Cable represents about 30 percent of the TV homes in the San Diego market and also would carry the games in some other markets where it operates, including Las Vegas and Hawaii, if there was a deal. Until last year, the Padres games were carried on a Cox cable-only channel called 4SD.
Under the new deal, Fox owns the channel, with the owners of the Padres holding a minority equity interest. The problem is, the ownership of the Padres is up in the air. A deal to sell majority control of the team recently unraveled, and it is unclear when or if there will be a sale. The TV rights deal is being held hostage until the ownership situation clears up.
This comes at a time sports rights fees are on the rise nationwide. In the era of the DVR, Hulu, Netflix and other ways to watch TV shows after they air in pattern on a network, sports are one of the few things people want to watch as they happen. This makes the programming increasingly valuable.
That fact of modern media was behind the deal late last year for Fox Sports to reportedly pay more than $3 billion for rights to the Los Angeles Angels of Anaheim baseball games (about $150 million a year) for the next 20 years. The Texas Rangers made a deal last year with Fox Sports Southwest for a reported $1.6 billion (about $80 million a year) over 20 years.
In February, Time Warner Cable -- a separate company from Time Warner which owns Warner Bros. – made a deal to launch two new cable channels (English and Spanish) featuring the Los Angeles Lakers, both due to start airing in October. The Lakers rights were held through this season by none other than Fox Sports. A Time Warner spokesperson said the deal with the Lakers is for 20 years and disputed a reported value of $5 billion, suggesting that number was was too high. TWC also said it holds sole ownership of TV rights to the games and the new cable channels. The spokesperson said TWC does not have a joint venture with the L.A. Lakers. The terms had not been disclosed when the deal was announced.
Fox Sports still has the exclusive rights to negotiate a new TV rights deal with the Dodgers through November. It reportedly offered outgoing owner Frank McCourt a 20-year deal that would have paid about $175 million a year for the rights. Major League Baseball would not let McCourt do that deal and shortly after took control of the team and ousted McCourt (who walks away with about $1 billion and still owns half of the land under the Dodger’s parking lot).
After November, if there is no deal with Fox in place, the Dodgers’ new owners will be free to make any TV rights deal they want for games beyond the 2013 season with anyone they choose. That is where the big bucks are to come from to pay back the new owners.
Their options would include selling the rights to the highest bidder, which besides Fox and Time Warner could include long shots such as CBS, Comcast/NBC, ABC/ESPN and even the MSG Network (controlled by the owners of Cablevision).
The Dodgers also could create their own network, as the New York Yankees did several years ago and the New York Mets did recently. When successful, these networks become cash cows.
Or the Dodgers could follow the Lakers model and create a new network that they would partially own along with an existing operator such as Fox or Time Warner, which would handle the back office, distribution and advertising sales for the channel.
Whatever happens, the costs will be passed on to cable systems, their advertisers and ultimately to the public.
In Southern California, Fox already operates two sports networks (Fox Sports West and Prime Ticket). Time Warner will soon launch its network with the Lakers. The NCAA's Pac-12 Conference has a deal to launch a new network. If the Dodgers join the parade, that would be half a dozen networks, all seeking license fee payments to go along with their ad revenue to cover the high costs of the rights and to return a profit to investors.
ESPN (including ESPN HD) gets the highest fee at present for its national network, $5.06 per subscriber per month.
Among regional sports networks, the highest fee goes to Comcast Sports/Washington (D.C.), which gets $4.02 per sub. The New England Sports Network, which carries the Boston Red Sox and others, commands $3.56 per sub, according to analysis by SNL Kagan.
It is estimated that a Dodger network would get a similar $3.50 per sub. Time Warner has about 2 million subscribers in the greater Los Angeles market. That would be about $7 million a month in sub fees, or $84 million per year (not counting advertising and sponsorship revenue).
Whatever happens, subscribers will not be getting the opportunity to make a la carte choices of what networks they want to buy anytime soon. On Friday, the U.S. Court of Appeals sided with Time Warner Cable, Comcast/NBC, Viacom, Fox and others when it rejected a lawsuit by consumers who said it was unfair that they had to buy a bundle of channels. The court ruled that bundling is not anti-competitive.
What will be competitive, however, is the upcoming fight for the Dodgers TV rights.
- Prince Takes Over the 'Arsenio Hall Show,' Debuts New Funky Song
- A Train, a Trestle and 60 Seconds to Escape: How 'Midnight Rider' Victim Sarah Jones Lost Her Life
- 'Divergent' Star Shailene Woodley: The Next Jennifer Lawrence?
- 'Noah' Banned in Several Middle Eastern Countries
- Lindsay Lohan's OWN Series Gets First Official Trailer (Video)
- MOST SHARED
- MOST POPULAR