SBD/January 23, 2013/Media

TWC Close To Agreement With Dodgers, But Fox Could Have Right To Match Deal

If TWC wins the media-rights bid for the Dodgers, it likely will develop a new RSN
While media reports say Time Warner Cable is close to a $7B deal to pick up the Dodgers' local TV rights, sources say Fox Sports has certain back-end rights that may give it the right to match or object to any deal, depending on the specifics of the new contract. TWC and Dodgers Owner Guggenheim Partners were close to finalizing the deal late last week. Sources said that one of the hold-ups was in trying to craft a deal that would get around Fox' right to match. It is believed that Fox would be able to match a straight rights deal or any deal that gives TWC an equity interest in a new channel. Sources said that matching rights would not kick in if the Dodgers launch a channel on their own and get TWC to agree to carry it with no equity stake (John Ourand, THE DAILY). Meanwhile, BLOOMBERG NEWS' Sherman & Soshnick cited sources as saying that an announcement of an agreement with TWC "is imminent, although no deal has been signed." Dodgers games will be carried on a new RSN "developed by Guggenheim Partners." Sources said that as a "partner in the project, Time Warner Cable will run the network and sell the advertisements, although it won't own the television rights outright." A source said that like TWC's deal with the Lakers, the Dodgers' contract "will cover about 20 years" (BLOOMBERG NEWS, 1/22).

SETTING AN EXAMPLE: In L.A., Tom Hoffarth notes if "rumors hold that the deal in the $8 billion range covering 25 years is accurate, it would make it the most expensive local TV deal in history." This arrangement would give the Dodgers "a long-term business model that is along the lines" of what the Yankees did with the launch of YES Network 10 years ago. Rather than take "any short-term cash benefits from signing a deal with a local cable operator, the Yankees went on their own and started their own channel, absorbed a couple years of losses at the start, but have built the brand" to where Fox spent $500M on a 49% share of YES (L.A. DAILY NEWS, 1/23). CABLEFAX DAILY writes the TWC agreement "is a blow to Fox." But News Corp. "seemed to be developing an insurance policy against losing the Dodgers rights" in striking the YES deal. The Dodgers' "attraction to TWC is clear." Not only does it "guarantee carriage as the dominant distributor in the market, but it has the successful track record of TWC SportsNet, which was able to reach deals with all the major MVPDs shortly after the 1st Lakers game" (CABLEFAX DAILY, 1/23).

FILLING IN THE HOLES: In L.A., Shaikin & Flint noted Fox Sports "launched a second local cable channel -- now called Prime Ticket -- to carry the Dodgers in 1997." Fox Sports previously "lost rights to Lakers games to Time Warner Cable, and the departure of the Dodgers would leave Fox with the Angels, Clippers, Ducks and Kings as the anchor teams for two channels" (LATIMES.com, 1/22). The L.A. TIMES' Joe Flint cited a Fox source as saying that there are "no plans to consolidate Prime Ticket and Fox Sports West into one channel." However, some Angels and Kings games "could find their way to Prime Ticket." While Fox may be able to "keep Prime Ticket going, it will likely have to renegotiate its current contracts with distributors." Losing the Dodgers will "mean lower ratings and the channel will be of less value to area pay-TV distributors, including Time Warner Cable and DirecTV." Data from SNL Kagan shows that Prime Ticket is "due to receive about $2.50 per subscriber per month from distributors." After next season, when the Dodgers are "no longer on the service, that fee will come down" (LATIMES.com, 1/22).
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