My colleague Joe Flint reported this morning that SportsNet LA, the new channel that the Dodgers own but Time Warner Cable manages, hasn't struck retransmission deals yet with the pay-TV operators serving most Angelenos.
The problem, according to Flint's piece, is that TWC is demanding large per-subscriber fees for the channel, which will be the main source of the vast majority of Dodger telecasts. Rival pay-TV operators aren't wild about the idea of having to pay more than $4 per customer, per month for a channel whose sole programming will be Dodgers games and features.
My hunch is that this dispute will end just like the one over the Lakers' channel TWC introduced last year: Most pay-TV companies will come to terms with TWC to carry the channel, although Dish Network may pass on it, as it did with the Lakers. That's because the obvious solution to the problem wouldn't actually work, and SportsNet LA has more leverage than programmers do.
The aforementioned obvious solution is for the DirecTVs of the world to carry SportsNet LA on an à la carte basis, which would give non-Dodgers fans the option not to receive or pay for the channel. Some pay-TV operators touted that alternative in Flint's story, but TWC all but ruled it out as an option.
Many consumer advocates and some lawmakers like the à la carte approach because it lets pay-TV subscribers pay just for the channels they watch. Networks and cable operators (most of whom operate at least some networks, especially those that carry local sports broadcasts) oppose it, however, because it would drastically change the economics of the pay-TV business. Instead of the current jumble of cross-subsidies that spreads money from popular channels to new and niche ones, an à la carte system would force every channel to pay its own way. Only those with the largest or most dedicated (and free-spending) audiences would survive.
That's how markets work, though, so I have trouble seeing why that would be a bad thing. Yet I also see immediately why it wouldn't work for SportsNet LA. TWC agreed to pay a king's ransom to SportsNet LA every year based on the current economics of the business — the assumption that all subscribers will pay for the channel, regardless of whether they have any interest in baseball. And those fees have already been factored in to the price the Dodgers' owners paid for the franchise, as well as the 1-percenter salaries they've doled out to the likes of Clayton Kershaw.
If SportsNet had to get by just with the fees from those who chose to subscribe, it would have to charge significantly more per month. I don't think a rabid Dodgers fan would balk at paying $120 or more per year for SportsNet, but I'm not sure there are enough of them to make the numbers work.
Nor does TWC really want to find out. Once the à la carte horse is out of the barn, it's easy to see how pressure from consumers would lead policymakers to demand à la carte treatment for other types of programming as well.
Which brings us back to leverage. Dodgers fans who want to watch the games at home have only one choice: SportsNet. Major League Baseball sells an online service that streams games, but it blacks out all Dodger games for Web users in Southern California — home and away. So there's no "over the top" TV solution. The only alternative, short of going to a sports bar that has TWC, is to listen to games on the radio (which, I must confess, I do).
That's the same kind of bargaining power that helped TWC sell a new and pricey Lakers channel to rival pay-TV operators last fall, when the team seemed poised for mediocrity. With the Dodgers gearing up for another pennant run, it's safe to predict that TWC will be able to repeat that feat of salesmanship with SportsNet LA.
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