BC Beat

Questions and Answer Time as Dodger Deal Heads for Home

1/25/2013 07:34:48 PM

By Tim Baysinger & Jon Lafayette

The hype may be building for football season’s annual Super Bowl climax, but baseball is taking center stage for many sports-TV watchers.

Time Warner Cable is reportedly close to clinching a deal valued at between $7 billion and $8 billion to carry Los Angeles Dodgers games over a 20-to-25-year period. If those are indeed the final terms, the No. 4 MSO would pay the roughly $5-per-subscriber carriage fees for any provider in the market that opts not to go with the new Dodger service.

Guggenheim Partners, which bought the Dodgers last year for a record $2.15 billion with participation by a glittery consortium that included Magic Johnson and former studio boss Peter Guber, would own the new network. TWC would manage and operate the service, which would launch in 2014.

As the deal moves toward being announced, here are nine questions — one for each player on the diamond - that the pact-in-progress raises for the industry:

Q: Will TWC look to do this in other big markets?

A: TWC’s Glenn Britt has complained recently about rising sports costs. The MSO already tried to steal the San Diego Padres away from Fox and had been handling affiliate and ad sales for SportsTime Ohio, which Fox recently purchased.

Q: Will this signal more cable ops buying more local rights fees and creating their own nets to cut out middle man?

A: The rising carriage costs have led to some ugly spats (the TWC-MSG dispute last winter). This could be a way for MSOs to have more control. Before it was spun off in 2010, Cablevision owned MSG Networks in New York, which is the TV home for the NBA’s Knicks and NHL’s Rangers, Islanders and New Jersey Devils.

Q: Will more cable/satellite providers (like DirecTV/Verizon are doing) start charging extra for RSNs?

A: Right now, these extra surcharges are for DMAs that boast multiple RSNs. But with the cost of sports rights rising higher and higher, it’s likely that the consumers will be the ones footing the bill.

Q: How will this affect future media rights deals?

A: NBA commissioner David Stern (or Adam Silver when he takes over in 2014) has to be giddily looking forward to its next media rights deal; its current one expires in 2016. The impending deal, along with those from last year, prove live sports are among the most sought-after commodities in the marketplace.

Q: Can the L.A. market handle that many RSNs? 

A: New York, the nation’s No. 1 DMA, only has four regional nets and some of those struggle during months their teams aren’t playing. So while Fox has no plans currently to consolidate its nets (see more below), don’t be surprised if that happens down the road.

Q: Will Fox shutter Prime Ticket?

A: Not likely, at least not anytime soon. Without the Dodgers, Prime Ticket still has rights to the resurgent Clippers (which had the third-best record in the NBA heading into weekend play) for the next three seasons and the Anaheim Ducks through 2014. Analyst Michael Nathanson of Nomura Securities believes some Angels and Kings games could move to Prime Ticket to fill out the schedule, especially during baseball season.

Q: What will Fox do with the $$ saved? Put it towards the Fox Sports 1/2 launch? FX2?

A: News Corp. is planning to reshape its ancillary cable nets by rebranding the low-rated Speed and Fuel into national sports nets Fox Sports 1 and Fox Sports 2. It also has to convince MSOs to keep Fox Soccer, which its reportedly planning to turn into FX2 (or, a source says, FXX), a sister net for FX.

Q: Does this affect Fox Sports 1?

Not really, though it means Fox won’t be able to air as many Dodger games as would have been able had it kept the team’s rights. Sports Business Journal’s John Ourand reports a new stipulation in Fox’s MLB rights deal allows it to show 26 local RSN-produced games on every Saturday during the regular season via its national cable channel.

Q: What will happen to Fox’s regional sports networks in Los Angeles?

A: Nothing this season, since Fox’s Prime Ticket will televise the games in 2013. After that, Fox still might have enough programming to maintain its two channels even without the Dodgers, though its sub fees and ad revenue might fall, changing the equation, according to Nathanson. He estimates that the Los Angeles RSNs now account for about $150 million in earnings, or about 15% of Fox’s RSN profits.

After losing Lakers rights to Time Warner Cable, Fox signed a 20-year, $3 billion deal to televised Los Angeles Angles games on Fox Sports West. FSW also agreed to a $250 million deal with the Stanley Cup Champion Kings that runs through 2004.

Nathanson says that Fox will have to roll back the monthly subscriber fees it charges cable operators when its channels no longer feature Dodger games. “How much will be determined by what the Dodgers will ultimately try to commend, given Prime Ticket looks relatively cheap at $2.50 compared to  $4 per sub the Lakers were seeking.” he wrote in a recent research note.

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