Valuing the Dodgers TV Rights
Live sporting events are arguably the most valuable content on TV. They deliver a consistent audience, are largely DVR-proof and can be a decisive reason to maintain a pay-cable subscription. There are just a handful of superpremium franchises, the rights to which rarely hit the market. For these reasons, Dodgers rights should command an extraordinary price. The team's new owners have three options when its deals with Fox Sports and KCAL expire after the 2013 season:
Sign a Rights Deal: Most Major League Baseball teams license about 150 regular-season games a year for regional telecast. The Dodgers can extend the license arrangements with Fox and/or KCAL; make deals with other stations in the market; contract with the two Time Warner Cable sports networks that launch Oct. 1; or license a new entity or some combination of these alternatives. Given the competitive marketplace for Dodgers rights, we estimate average annual rights fees between $175 million and $225 million. Assuming a 20-year initial term -- the length of a deal recently inked by the L.A. Angels of Anaheim -- this low-risk arrangement could be worth $4.5 billion.
Start a Network: The Dodgers could start their own regional sports network. In this scenario, they would essentially "sell" the rights to themselves and compete with their jilted suitors. The team would control production, ad and sponsor sales integration, team-related support programming and distribution of its product. But it would also undertake far greater risk, effectively "doubling down" rather than outsourcing the risk. Several teams have successfully launched such networks (the New York Yankees/Brooklyn Nets YES Network, Boston Red Sox/Bruins NESN). However, others have been unsuccessful in such endeavors in the past decade (Minnesota Twins, Kansas City Royals). Because of the wide range of potential distribution outcomes, we estimate average annual revenue from as little as $125 million to as much as $425 million. Over 20 years, if everything were to go very well, this could be worth $8.5 billion, including rights, profits and equity value.
The Hybrid Model: The Angels, San Francisco Giants and Texas Rangers have partnered with Fox and Comcast regional sports network operators to license their rights and obtain a share of equity ownership. The risks of obtaining distribution are effectively mitigated, and a large entertainment company provides the financial backing. The Dodgers could make such a deal with Fox or TW Cable. They could also take on production, sales, financial and/or distribution partner(s) to gain greater control but with lower risk and upside. With predictable distribution, the difference in value turns on the ownership percentage the team might obtain, the rights fee and the network's profitability. We estimate the annual value to the Dodgers of $225 million to $375 million. A 20-year deal could be worth $7.5 billion in rights, profits and equity.
See THR.com for key assumptions and methodology.
BY THE NUMBERS
- $4.5 billion: Potential value to the Dodgers of a 20-year rights deal.
- $8.5 billion: Potential value in the first 20 years of starting a network.
- $7.5 billion: Potential value of a 20-year hybrid deal.