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Time Warner Signs First Major Deals for Lakers Rights (Updated)

Dwight Howard Lakers - H 2012
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UPDATED: Pact with Charter Communications and Verizon FIOS means pressure grows for DirecTV and others to sign, despite the reported high price.

A major shot has been fired in the battle over Los Angeles Lakers basketball TV rights.

Charter Communications, the fourth-largest cable company in the U.S., has become the first major cable provider serving Southern California to agree to distribute Time Warner SportsNet and Time Warner Cable Deportes.

Charter, the fourth largest U.S. cable system operator, has 360,000 subscribers in Southern California.

Shortly after the deal with Charter was announced, Time Warner announced it had also struck an agreement with Verizon FIOS to carry the new Lakers-centric sports channel. 

This deal puts tremendous pressure on other competitors including DirecTV, AT&T, and Cox  to sign deals to carry the channels. Negotiations with those providers have been at an impasse for weeks, as they've balked at Time Warner Cable's demands of $3.95 per subscriber per month for the new service, as well as guarantees that the stations will be on the most basic tier, making them available to all of their customers.

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The announcements Friday from TWC did not indicate the terms of the deals. The new channels will  launch Oct. 31 on Charter in time to carry the first game scheduled to be shown exclusively on the new English- and Spanish-language channels.

The protracted negotiations have been not only about the price but also the terms. TWC wants the services on a basic tier so that they can offer advertisers as big an audience as possible.

“Charter is committed to bringing programming to our customers that mirrors their interests,” said Allan Singer, Charter’s senior vp programming. “We are proud of Charter’s robust selection of sports programming. Charter is the first provider of this brand-new programming in our service areas, and we know that the addition of these networks especially pleases our customers in Southern California.”

“Southern California sports are important to our partners at Charter, and we’re excited to work with them to bring Lakers, Galaxy and Sparks games and programming to their customers and our viewers,” said Dan Finnerty, senior vp Time Warner Cable Sports. “Time Warner Cable SportsNet and Time Warner Cable Deportes will help bring Charter customers closer to their teams than they have ever been before.”

The only other cable provider who had previously agreed to a deal for the channels is Bright House in Bakersfield, Calif. 

TWC considers the market to be all of California from Fresno to the Mexican border and the Las Vegas market.

Others who are in talks, according to TWC, include DirecTV, Dish, Cox, Comcast and, AT&T U-Verse.

There is some skepticism that TWC really wants to license their new channels to all of those operators. Derek Baine, a senior analyst for SNL Kagan, says that TWC would certainly want to make deals with other cable systems that don’t directly compete with their service in the market including Cox and Comcast. However, when it comes to so-called over-the-top operators who compete for the same customers, such as AT&T  and  DirecTV, they may not be as anxious to make a deal.

Baine cites the example of Philadelphia, where Comcast has a regional sports channel that is for the most part exclusive to them. “They feel it gives them a real edge by having it only on Comcast in that market,” says Baine. “You don’t want to say that publicly because then you’re going to hear discrimination charges. So you would never come out and say that if you  were Time Warner Cable. But I can see them thinking, ‘Well, if they don’t want to take it, that’s probably fine for us because we’re going to get more subscribers in this market.' ”

A Time Warner Cable spokeswoman on Friday said that was not true. She said it is their business plan for the channels to sell them to others to help cover the reported cost of the rights, about $3 billion, over as many platforms as possible.

Baine says the other unusual thing about this is that TWC is bundling a package with both an English-language and a Spanish-language channel. “Typically you have the Spanish channel on a tier,” says Baine, “which is obviously going to have a smaller number of subscribers.  Essentially it’s a big price to pay for this bundle. That’s what a lot of the bickering is about.”

A Time Warner spokeswoman said after the Verizon deal was announced that it was proof they want to sell to all cable and satellite distributors who are willing to meet their terms. 

Baine says he doubts the Dish Network will ever carry the two new channels because they are very price sensitive and have refused to pay for carriage of expensive regional sports networks in other markets.

However, DirecTV is in a much more difficult position. It is known as “the sports service,” and many customers subscribe for the extensive sports offered, including every NFL football game all season long. DirecTV is so popular with sports fans, it is the service that is used inside the L.A. Laker offices.

DirecTV has balked at the deal because, say sources, TWC wants them to pay the $3.95 a month for all 12 million of their subscribers, not just the 1 million or so in Southern California. That would be over $50 million a month.

Typically regional sports networks are sold by ZIP code. Baine pointed out that the Big 10 Network, for instance, goes for $1 a sub per month in Big 10 markets, but only 5 cents a sub outside those markets. Baine says that around the country, top regional sports networks are getting from $2 to $4 a subscriber in the team's markets, which puts the TWC channels at the high end of what the rights command. 

TWC argues that they not only offer the L.A. Lakers, with about 53 exclusive games out of the regular season schedule, but also L.A. Galaxy soccer and Los Angeles Sparks basketball games, as well as in-depth programming around each team. If Fox Sports is not able to make a deal for the L.A. Dodgers rights during its current exclusive negotiating window, TWC is expected to be an aggressive bidder for the baseball team's local rights as well -- and could add those to these channels. 

Charter will carry the TWC channels in both standard and high definition. The English-language channel will be in SD on channel 215 and in HD on channel 787; the Spanish-language channel will be in SD on channel 216 and in HD on channel 788.