MLB's Revenue-Sharing Concerns Could Impact Dodgers' TV Deal With Time Warner Cable
MLB has "major concerns" about the Dodgers' record new TV deal, and "unless an agreement can be reached within a few months, their differences may have to be resolved in federal court," according to a source cited by Bob Nightengale of USA TODAY. The source said that the dispute is "focused on the revenue-sharing implications of the Dodgers' deal with Time Warner Cable that guarantees them at least" $7B over 25 years. When the Dodgers emerged from bankruptcy in April, their agreement "stipulated the club's fair-market TV value would be set" at $84M a year, with 4% increases each season. MLB teams with high revenues are "required to share 34% of their local TV rights with low-revenue teams." But the deal would provide the Dodgers "roughly" $280M annually, leaving some $196M "not subject to revenue sharing at the outset of the contract." MLB argues that the Dodgers "won't be taking a significant risk since Time Warner Cable is guaranteeing" $7B. TWC announced its plans to "be the exclusive advertising affiliate sales network of the channel, vowing to cover affiliate fees from distributors who refuse to carry the channel." If an agreement "can't be reached on an interpretation of the new fair-market value, the two sides could return to the bankruptcy court in Delaware" (USA TODAY, 1/29).
COVERING ALL THE BASES: In L.A., Bill Shaikin noted the Dodgers -- not TWC -- will "program the new channel." TWC execs said that they believed the SportsNet L.A. name "would be distinctive enough from the Time Warner Cable Sportsnet name given to the new Lakers channel." The Dodgers deal "does not include a separate Spanish-language channel." For TWC, the rationale for the Dodgers deal is "similar to the rationale for the Lakers deal -- pay a lot to cut out the middle man and secure access to a popular team for decades." However, TWC Exec VP and Chief Video & Content Officer Melinda Witmer said that there is "no guarantee the company will make money on the Dodgers deal" (LATIMES.com, 1/28). In N.Y., Richard Sandomir writes the Dodgers’ deal "shows a company simultaneously at work in two roles: Time Warner is the largest cable television operator in Southern California and a regional sports network creator." In its first role, it "wants to avoid, if it can, going through a middleman to buy the rights to marquee sports teams." By creating a network to showcase the Dodgers, it "can guarantee that all of its subscribers get that network, while also extracting steep subscriber fees from AT&T, Verizon, Cox, Charter, DirecTV and Dish Network" (N.Y. TIMES, 1/29).