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LWIB: What the Lakers Deal with TWC Means to the Dodgers, Plus Tidbits PDF Print E-mail
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Pete Toms Article Archive
Written by Pete Toms   
Tuesday, 22 February 2011 14:50

Last Week in Bizball by Pete Toms

This week in “Last Week in BizBall, what the Lakers deal with TWC means to the Dodgers, plus many, many tidbits.

WHAT THE LAKERS/TWC DEAL MEANS TO THE DODGERS

The Dodgers current deal with Fox Sports for their local TV rights expires after the 13 season. The Dodgers will reportedly earn $35-$39 million annually over the remaining 3 seasons of the deal. Given the skyrocketing increase in the value of local MLB TV rights (see here and here) the Dodgers have been anticipating at least a threefold increase in local TV revenues once a new deal is concluded. Documents filed in the McCourt’s divorce trial revealed that they had (have?) plans to launch a Dodgers-centred RSN, nominally titled DTV (Dodgers TV). The Yankees (YES), Mets (SportsNet NY), Red Sox (NESN) and Indians (SportsTime Ohio) have all launched their own channels. Many other franchises share equity in Comcast RSNs. LWIB saw a seismic shift in the RSN business with the announcement that Time Warner Cable (TWC) will launch 2 new sports channels in LA (one English, one Spanish) after acquiring exclusive rights to the LA Lakers. The channels will launch for the 12/13 season. TWC will pay the Lakers a staggering $3 billion over 20 years (some reports pegged the deal north of that figure. TWC dismisses the $3 billion figure). The deal was notable for two reasons. 1. TWC is now a force in the RSN business , joining other cable operators Comcast, Cox and Cablevision. (TWC is presently minorly involved in RSNs. They are an equity partner in SportsNet NY but Comcast operates the channel. TWC also has an ad sales partnership with SportsTime Ohio.) 2. TWC had previously expressed no interest in operating RSNs on this scale. Their change in strategy and the dollars they are investing make it unmistakably clear how critical sports programming is to the cable business model. From the Sports Video Group blog, “It is another affirmation that sports has become the biggest entertainment property in America,” says industry consultant Neal Pilson, a former president of CBS Sports. “We have always known that major sports franchises are guaranteed audience generators unlike any other property. A good movie might not make it, and a hit TV show may get cancelled. But, 50 years from now, you can rest assured that people in Los Angeles will be watching the Lakers.”

In December I blogged about how MLB clubs are, in part, able to command huge sums for their local TV rights because MSOs see sports programming as key to preventing “cord cutting”. The TWC/Lakers deal is good news for MLB, NBA and NHL teams in so much as it exhibits again the great leverage that pro sports franchises have in auctioning off their local TV rights. From an article by Mike Freeman LWIB on the future of Padres local TV rights (more on that in the tidbits), “What’s going on is that sports has become the firewall against people cutting the cord on their cable service, so exclusive rights to these games are increasingly valuable,” said Will Richmond, president of Broadband Directions, a market intelligence and consulting firm for broadband video delivery. “Prices are going up. In turn, the owner of the TV rights is trying to charge a lot of money for distributors to get access to that content.”

The future home of local Dodgers TV broadcasts was subject to much speculation subsequent to the TWC/Lakers announcement. Acquiring Dodgers rights makes sense for TWC because it would allow them to increase the subscriber fees they charge other MVPDs in the LA market. (those carriage agreements have yet to be negotiated, but will be) Plus, the 162 game schedule of MLB provides a lot of programming during the summer months. TWC was noncommittal about the possibility of adding Dodgers games, adding that to date there have been no discussions. Whether or not the Dodgers cut a deal with TWC or remain at Fox, it is obvious that the competition between the two will be fierce. After losing the Lakers rights to TWC, retaining Dodgers rights is critical to the future of the 2 Fox LA RSNs (Prime Ticket and Fox Sports West). Losing the Dodgers would make it difficult for Fox to justify to distributors the sub fees they currently command and some speculate that it could result in one of their 2 LA RSNs folding. It is unlikely now that the Dodgers will launch their own channel. The McCourt’s strategy behind launching DTV was obvious. They would either be able to charge lucrative subscriber fees for their “must have” Dodgers programming OR use the threat of launching their own channel to drive up the rights fees from Fox. But with the 2 TWC channels, a fifth (Dodgers) sports channel would not be supported by the MVPDs as RSNs are the most expensive channels to carry (highest sub fees).

What does the entry of TWC into the RSN business mean for the rest of MLB? Is TWC pursuing the same strategy that Comcast has employed of operating RSNs in markets where they are the dominant cable provider? (Such is the case for TWC in LA) Might the Brewers and Reds be monitoring this situation? Fox owns the local TV rights for both the Brewers (Fox Sports Wisconsin) and Reds (FSN Ohio). In both those markets, TWC is the dominant cable provider. Might both those franchises benefit from a bidding war between FSN and TWC? (I’m unable to ascertain the expiry dates of those clubs agreements with Fox, email me if you know) And is it now more likely that TWC will increase its investment in the Mets’ RSN, SportsNet NY? Numerous reports on the Wilpons efforts to raise cash via a sale of a minority stake in the Mets have speculated that they will eventually be forced to auction off a share in their RSN. Many of those same reports also state that the minority partners in the channel, TWC and Comcast, have right of first refusal. Time Warner Cable executive vice president and chief programming officer Melinda Witmer addressed the matter with MultiChannel News, “Asked specifically whether TWC, which has an equity position in SNY would be interested in upping its stake in the RSN, if more of it were to become available as the New York Mets ownership faces financial woes linked to the Bernie Madoff Ponzi scandal, Witmer replied: "We have a great relationship with the Mets, We would certainly talk about opportunities."

Even prior to the announcement that TWC is launching two LA sports channels, Fox was reportedly offering to “advance” money to Dodgers owner Frank McCourt to cover the team's current operating expenses. There have been reports that commissioner Selig has forbidden McCourt from accepting the “advance” just as he forbid former Rangers’ owner Tom Hicks from accepting a similar offer from Fox. (Then Padres’ owner, John Moores was allowed to accept a loan from Cox last decade, but I digress) Given last week’s events, Fox will be even more motivated to secure their relationship with the Dodgers/McCourt. Fox or TWC, one of them will be paying the Dodgers billions of dollars over the coming years. Now, whether or not Frank McCourt will still be owing the Dodgers when that happens….

SELECT READ MORE TO SEE THIS WEEK'S MEGA-LIST OF TIDBITS

TIDBITS

  • I recently commented on how due to the closing of the “terrestrial loophole” by the FCC, Comcast would soon no longer have a monopoly on broadcasting local Phillies games. LWIB, Mike Freeman updated us on the same situation in San Diego. The Padres have been at the centre of a very nasty carriage dispute between Cox and AT&T for years. Again, because of the terrestrial loophole, Cox’s Channel 4 has had a monopoly on Padres’ broadcasts for years. Cox can no longer withhold Channel 4 from their competitors and you should read Mike’s report on the state of negotiations between Cox and AT&T and Cox and DirecTV over carriage fees. Longer term, the Padres deal with Cox expires after this season. The current deal reportedly pays the Padres $16-$17 million per year. The Padres will soon be the next MLB franchise to cash in on the wildly escalating worth of local TV rights. How it plays out? There is much speculation ranging from the Padres launching their own channel, to Fox Sports Net bidding, Cox….in a nutshell, Moorad & Co. are in a great position.
  • LWIB, Mets’ executive VP for business operations Dave Howard told Neil Best of Newsday that he is quite pleased (I’m paraphrasing) with season-ticket renewals. Seems kinda counter intuitive, don’t it? It does, unless you’re aware of the extent of the Mets ticket discounting this off season:

In November, the team announced it would reduce ticket prices an average of 14 percent - covering 62 percent of Citi Field seats - with season-ticket holders getting 10 percent off individual game price.

The Mets added a variety of perks for season subscribers, such as batting practice at the stadium on non-game days.

The latest marketing salvo came last week, when the team announced five-, 11- and 17-game packs that include a ticket to one of the biggest attractions on the calendar - Opening Day or the Yankees series - and add a free bonus ticket. Ordering fees were waived on those packages through next week.

  • Last week in the tidbits I ranted about how locally televised MLB games are increasingly part of the sports biz industry’s migration from “free/over-the-air TV” to cable. In particular, I referenced Cards broadcasts for this coming season. LWIB, Neal Justin reported for the Minneapolis Star Tribune that, beginning this season, Fox Sports North has the entire package of local Twins games. Formerly, weekend Twins games were broadcast “over-the-air” on WFTC. It also means that the 18 percent of Twin Cities viewers who don't have cable or satellite will be left with only eight scheduled games airing nationally on the Fox network. Add in cable subscribers who only pay for the basic tier, which FSN is not part of, and you've got a lot of fans crying foul.” Twins president Dave St. Peter was honest, and correct, when he said, "The days of significant packages with broadcast TV in sports are gone,"
  • I missed this LWIB, but, better late…Earlier this month, Ben Badler reported for Baseball America on the growing number of Cuban players being signed to professional contracts beginning with the White Sox/ Dayan Viciedo deal in December, 08. “Including Reds lefthander Aroldis Chapman and his $16.25 million bonus, more than a dozen Cuban defectors agreed to bonuses of at least six figures in 2010, including five players who earned at least $1 million.” The five who received the seven figure signing bonuses are Chapman, Adeiny Hechavarria (Jays), Noel Arguelles (Royals), Yunesky Maya (Nationals) and Rubi Silva (Cubs).
  • The Frederick Keys, of the A Level Carolina League, have been an affiliate of the Orioles since 89. LWIB it came to my attention that this relationship is in danger of ending. Josh Leventhal reported in Baseball America that the Keys’ ballpark lease expires after this season. Evidently the city of Frederick is seriously considering an offer from a group hoping to lease the stadium for use by an expansion franchise in the independent Atlantic League. This situation is a prime example of the conflict that exists between the affiliated and independent minor leagues. There are a finite number of cities with ballparks suitable for professional baseball and the two regularly compete over them. Keys owner Ken Young (also owner of O’s affiliates in Bowie and Norfolk as well as a PCL franchise) is doing his best to discredit the independent leagues. Mr. Young was quoted in BA, “…One of the things that Frederick needs to be aware of is the stability of being in the Carolina League has to offer, and none of that is offered by Atlantic League or any independent leagues. The stability of independent ball is lacking, not to mention the quality of play. Affiliated ball is better." Mr. Young also made some biting comments about independent baseball to a Frederick newspaper, “They are the quality of a pickup game. They can't even play single-A ball in an affiliated ball team," Young said. "They've got the worst type of ballplayer out there." Within the same report, Mr. Young does little to deny a report that the Keys franchise is for sale. Asking price is reportedly $10 million.
  • In December 09 Maury Brown reported from the Winter Meetings on the presentation made to the media by Bloomberg Sports of their - then new - baseball analytics software. Bloomberg demonstrated their two separate offerings, one targeted to MLB franchises and player agents, the other to fantasy players. LWIB, Eric Fisher reported for the SportsBusiness Journal that seventeen MLB clubs have signed up since December to use the Bloomberg’s “Pro Offerings“. “…Bloomberg in partnership with MLB Advanced Media last year introduced a set of scouting tools tied directly to MLBAM’s real-time statistics and location-based data and video. Twenty-eight of 30 teams agreed to use the Bloomberg material on a trial basis, and the company has since converted more than half the teams in the league to paid commercial agreements.” Bloomberg’s 2011 fantasy offering is integrated with the leagues promoted by Yahoo!, ESPN and CBSSports.com. iPhone and iPad apps are also available.
  • LWIB, The Sports Video Group blog reported on the announcement that MLBAM and CBSSports.com are partnering in fantasy baseball. “Beginning this season, subscribers to CBSSports.com’s Fantasy Baseball Commissioner product will have access to live in-game audio feeds, both home and away, and in-game player highlights as part of an expanded partnership with MLB Advanced Media (MLBAM).” As the report mentions, the partnership is a natural given that BAM already provides the live streaming and authentication technologies behind CBS’ MMOD.


Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.

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