Wednesday, February 16, 2011

Dodgers: Time Warner Cable's Next Target?

I had missed this, buried in the LAT's article about Time Warner Cable's recent lockup of the Lakers (starting in 2012) may have a ripple effect imperiling future free Dodgers television programming:

The fallout from the 20-year deal between Time Warner Cable and the Lakers to create two regional sports networks — one in English and one in Spanish — will not only dramatically restrict the team from free over-the-air television but place them on satellite, cable and telephone carriers, asking fans to pay more to watch the NBA's most successful franchise. [...]

The contract with the Lakers not only gives Time Warner Cable a grip on the most popular franchise in the region, but new clout to try to either lure subscribers away from competitors — including DirecTV, Verizon Fios and AT&T U-Verse — or get those competitors to pay big bucks to carry the still unnamed channels. [...]

For years, Time Warner Cable was one of the more vocal critics of the cost of regional sports networks. While other pay-television distributors such as Comcast Corp., Cox Communications and Cablevision Systems launched channels in their service areas, Time Warner Cable sat planted on the bench.

Now the cable operator, which has about 2 million subscribers in Southern California, has decided if it has to pay big money for sports, it might as well pay itself.

Neither the Lakers nor Time Warner Cable would discuss the terms, but industry executives estimated the deal's value at $3 billion, a figure Time Warner Cable dismissed. Fox Sports West pays $30 million a year for the Lakers games, according to people familiar with the partnership.

"The impact of the Lakers' departure is overstated," Chris Bellitti, Fox Sports vice president said in an e-mail. "Fox Sports West is a strong business today and will continue to be a strong business without the Lakers."

Time Warner's investment is "much more than a TV deal," said sports business expert Rick Burton. "It's a content deal, involving iPads, tweets, Facebook, on-demand content … follow the possible revenue streams. In the digital age, there are no time zones."

For Fox Sports, the challenge will be maintaining its subscriber fees despite losing the Lakers, and ensuring there is no exodus.

The Dodgers' contract with Fox expires in 2013. Owner Frank McCourt said Tuesday he did not believe the Lakers' network would preclude him from starting his own, anchored by the Dodgers. "Maybe someday in the future," he said. "Right now we have a great relationship with Fox. We have a contract with Fox, and we're very, very happy with that."

Fox will pay the Dodgers $35 million this year for broadcast rights, $37 million in 2012 and $39 million 2013.

As a DirecTV subscriber, I would be really aggravated if they hold Lakers television broadcasts hostage to higher fees. But I would go apeshit if they do that for the Dodgers, too.


Greg Hao said...

Of course you will be, so will customers of Comcast, Cox, and any company not named Time Warner.

This deal has an implied value of $3B over 20 years. That's still $150MM/yr that TW has valued the Lakers rights. Currently, Fox is paying the Lakers $30MM for 42 games, I can't imagine KCAL being far behind, but even if KCAL is also paying the same amount, that means it's still over 50% less than what the TW value would imply.

Now, of course, not all $150MM will be handed to the Lakers, but one would have to surmise that the Lakers wouldn't be taking any less than what they are currently making from KCAL and Fox. So, straight away, TW is going to have to figure out where to make up $60MM+.

Greg Hao said...

For me though, I think moves like this is what's going to break the camel's back and finally allow us to go to a la carte pricing for television service.

Fred's Brim said...

@GH - I don't know much about the industry but why hasn't that happened yet? Is there an informal (colluded) agreement amongst all of the providers to not do it? Or is it an FCC thing? You would think somebody would have done it by now, maybe one of the satellite companies as a competitive difference

Greg Hao said...

ya, the cable industry (including satellite providers) doesn't want to do it and the FCC hasn't pushed them on it.

the reason why nobody has done it even as a competitive difference is because for them, it really is _the_ way to generate money; the fear is that moving towards a la carte would decimate the industry.

Greg Hao said...

However, James Surowiecki thinks differently:

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Fred's Brim said...

wow - the bots almost seem like real people! Is this Watson in action?

Greg Hao said...

rofl, for real!