SBD/August 1, 2014/Media

TWC's Carriage Standoff Over SportsNet LA RSN Puts Damper On '14 Revenue Projections

Time Warner Cable paid $8.35B for the Dodgers' media rights
Time Warner Cable on Thursday "lowered its revenue projections" for '14 because of its "inability to distribute SportsNet LA, the new TV home" of the Dodgers, according to Joe Flint of the L.A. TIMES. TWC CFO Artie Minson on a conference call said, "Assume we do not sign affiliate agreements for the Dodger Network this year." The company said that it was "lowering its revenue projection growth for the year from 4.5% to as low as 3.5%," with operating income projections lowered to 3.15-4.75% from 5-6%. The unit that houses SportsNet LA saw its operating costs jump 56% in Q2, while profit for the unit dropped 26% to $173M (L.A. TIMES, 8/1). The WALL STREET JOURNAL's Ramachandran & Calia noted TWC's "big bet" on the RSN was clouding the company's results. Higher programming costs "associated with the network lifted operating costs and damped profits." TWC "cut profit and revenue growth guidance for the year, citing revenue shortfalls related to SportsNet LA." The network "has become a focal point of complaints about rising sports programming costs" (, 7/31). TWC said that it "lost a net 152,000 residential video subscribers in the April to June period compared to the first quarter of the year" (N.Y. DAILY NEWS, 8/1).

INTERVENTION A NON-STARTER? An L.A. TIMES editorial stated it is "understandable that frustrated fans would hope the government could sweep in and solve" the SportsNet LA carriage standoff. But unless the FCC "discovers that Time Warner Cable is competing unfairly in violation of federal law, there will be little it can do." The real problem here "is stratospheric pricing," as TWC paid $8.35B for the Dodgers' media rights. All of these "high-stakes sales are predicated on the idea that sports TV is so lucrative that the sky is the limit in terms of what the TV rights are worth." Well, TWC "may have just hit the sky." If the company "has to lower its price to other providers, it may go back to the Dodgers to renegotiate its deal." The Dodgers "should be concerned." Their deal "won't seem so great if Dodgers fans turn away from the team because the games aren't being aired on TV -- or if they have to pay significant increases in their cable fees to watch" (L.A. TIMES, 7/31). TWC this week agreed to let an arbitrator determine a fair price for the RSN, and in L.A., David Lazarus writes TWC's "kumbaya gambit shows that the company knows its previous take-it-leave-it stance on SportsNet LA was a non-starter with the rest of the pay-TV industry." It also underlines that the dispute over the Dodgers channel "could be a turning point for an industry that has long gouged consumers by charging them for dozens if not hundreds of channels they never watch." Although an a la carte system is "still probably a long way off, breaking off sports channels from current programming packages would be a big step in the right direction." SNL Kagan Research Dir Derek Baine said that sports channels "account for about 37% of the average pay-TV bill" (L.A. TIMES, 8/1).

NFL SUNDAY TICKET UPDATE: CABLEFAX DAILY reports DirecTV is "confident that it will renew the NFL Sunday Ticket rights deal." DirecTV Chair & CEO Mike White, citing good progress, said that parties "are now sorting through digital rights issues such as selling Sunday Ticket to non-DirecTV subs" (CABLEFAX DAILY, 8/1). THE STREET's Jason Notte wrote under the header, "The NFL Needs To Punt Sunday Ticket Away From DirecTV" (, 7/31).
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