Time Warner Cable and DirecTV are so far apart on a distribution deal for the new Dodger channel SportsNet LA that the two companies can't even agree on whether they are negotiating or not.
On Thursday, Time Warner Cable Executive Vice President Melinda Witmer said DirecTV had "advised us that they will not carry the Dodgers this year" and have walked away from the talks.
DirecTV quickly fired back that Time Warner Cable was only saying that as a negotiating ploy.
"Nothing could be further from the truth," a DirecTV spokesman said. "This is yet another transparent attempt to manipulate all TV customers throughout the region." The satellite broadcaster added that it merely passed on "their latest outrageous proposal" and will continue to engage with them until this gets resolved."
That may be awhile. DirecTV, along with every other major pay-TV distributor serving the Los Angeles area, thinks the price tag for SportsNet LA is way out of whack. Some, including DirecTV and Cox, have said they would be willing to carry the channel on an a la carte basis. Time Warner Cable has rejected those offers.
Getting DirecTV is key because it has almost 30% of the market and is available everywhere. Cox or Charter subscribers can't switch to Time Warner Cable because it doesn't serve those areas, but they can switch to DirecTV.
That means if DirecTV carries the Dodgers, the others could face losing subscribers. The converse is true as well, but it seems that other distributors are waiting to see what DirecTV does rather than try to get a deal done in advance of the satellite broadcaster.
Although SportsNet LA is owned by the Dodgers, Time Warner Cable handles distribution for the network. Time Warner Cable agreed to an $8.35-billion, 25-year deal to run the network, according to a valuation by the Dodgers and Major League Baseball.
The annual fee that Time Warner Cable will pay to the team starts at $210 million this season and grows through the life of the contract.
Before this season, Dodgers games were available on the Fox-owned channel Prime Ticket and the CBS-owned local television station KCAL-TV Channel 9. The rights fees for the team's games last season were $39 million from Prime Ticket, according to a legal filing. KCAL was paying about $10 million to $12 million, according to industry sources.
Time Warner Cable is paying about $1.5 million per game for the 140 or so regular season games SportsNet will telecast this season. Last year, the price per-game was about $335,000.
To be sure, the previous TV deals were several years old, and the new ownership of the Dodgers was going to demand a high price tag from whomever they chose as their teammate. The fees in Los Angeles were lower than many other top market teams, and the owners have spent heavily to improve the team and the stadium in part because they bet on a huge increase in television revenue.
Another reason the price tag was so high is because Time Warner Cable and Fox Sports bid aggressively for the contract. This followed a similar situation in San Diego, where Fox outbid Time Warner Cable for Padre games.
After Fox landed the Padre contract, Time Warner Cable didn't carry their channel for two full seasons.
Neither Time Warner Cable nor other distributors have talked specifics about the negotiations or the price tag for SportsNet LA. Time Warner Cable has indicated that it is not seeking $5 per-subscriber, per-month for the channel.
Area distributors countered that while that may be true for the first year of the contract, the price tag is just under $5 and quickly escalates. Because of the confidential nature of the negotiations, none would speak for attribution.
The cost for Fox's Prime Ticket, according to industry consulting firm SNL Kagan, is about $3 per subscriber. However, SportsNet LA is carrying a much heavier load of Dodger games than Prime Ticket did. On the flip side, Prime Ticket also carries the Clippers.
As for offering the channel a la carte, Witmer notes that no other regional sports network, including those owned by DirecTV, is offered that way. Other distributors counter that SportsNet LA is a one-sport channel whose price tag is so excessive that it would be unfair to force it on non-sports fans.
Time Warner Cable's Witmer charged that DirecTV is using the Dodgers and its fans as a "guinea pig" in an effort to change the regional sports network business. DirecTV replied that Time Warner Cable is trying to "force everyone living throughout Los Angeles to pay for their own $8.35 billion excesses."
These disputes are nothing new in the media world and will likely become more common as the cost for sports rights goes up. In Houston, a sports channel launched by Comcast Corp. (which has a deal pending to buy Time Warner Cable), the Astros and the Rockets, had to file bankruptcy because it could not get distribution.
As for whether DirecTV has really walked away from talks, industry insiders note that last summer, when CBS was trying to get Time Warner Cable to pay more to carry its signal, Witmer made a video in which she told subscribers, "if I said yes to every first proposal that a programmer asked me for, your cable bill would be more than $200 a month."
This is a game of chicken. Unfortunately, fans are caught in the middle and won't be winners no matter the outcome. And if sports rights keep going up, Witmer's $200-a-month cable bill scenario may one day be reality.