Dodgers sale could mean bigger cable bills
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Congratulations, Angelenos, you may have just bought a piece of the Los Angeles Dodgers!
While former Lakers great Magic Johnson may be leading the group shelling out a record $2 billion to buy the storied baseball franchise, in the end consumers may pick up much of the tab because their cable bills likely will be going up, up, up!
The $2 billion price tag tops by more than $1.1 billion what the Chicago Cubs were sold for three years ago and is $1.5 billion more than what Frank McCourt paid for the Dodgers in 2004. When the Dodgers, which filed for bankruptcy protection last year, were first put up for sale, most baseball watchers thought McCourt would be hard pressed to get $1 billion, much less twice that.
Even Mark Cuban, the outspoken owner of the Dallas Mavericks basketball team who’s not shy about opening his wallet, thought that the Dodgers weren’t worth $1 billion.
But Johnson’s group, whose big backer is Mark Walter, chief executive of financial services firm Guggenheim Partners, which will be the Dodgers’ controlling owner, was willing to pay so much because it figures it can make that money back in television revenue.
It’s not a crazy bet. Sports rights fees have skyrocketed lately. Last year, the Los Angeles Angels and Fox Sports struck a 17-year deal worth about $2.5 billion and Time Warner Cable spent even more to land the Lakers in a 20-year deal valued at $3 billion.
Currently, Fox’s regional cable network Prime Ticket carries the bulk of Dodger games at a price tag of roughly $38 million per season. Fox tried to cut a new deal with the Dodgers similar to the one it has with the Angels, but Major League Baseball rejected it, concerned that McCourt would use some of the money for his divorce settlement.
Fox’s contract with the Dodgers runs through the 2013 season and the network has exclusive rights to renegotiate a new agreement through November of this year. After that, Time Warner Cable, which is launching a regional sports channel here later this year, can jump in the fray and try to grab TV rights to the Dodgers.
But while Time Warner Cable and Fox Sports will likely be willing to pay more than double and perhaps even triple what the Dodgers are currently getting, that still may not be enough given the price tag. Another scenario is that the Dodgers will look to create their own cable sports channel, as the Yankees have with YES. That way the team can keep not only subscriber fees from cable and satellite companies, but also advertising revenue.
Sports channels are some of the most expensive on the cable dial. ESPN goes for north of $5 per month per subscriber. Local channels also come at a steep price. According to SNL Kagan, an industry consulting firm, Fox Sports West costs more than $2.60 per month per subscriber, and Prime Sports runs more than $2.50. Time Warner Cable is said to be seeking more than $3.50 for its new channel, although the company would only say that its plans are not yet finalized.
Those costs, of course, eventually get passed on to subscribers. Currently, cable and satellite TV subscribers pay for Fox’s two regional sports channels. Time Warner Cable is adding both an English and Spanish sports network to the mix. Later this year, the Pac-12 conference will launch its own channel (at a cost of about 80 cents per subscriber). If the Dodgers launch their own network, consumers could find themselves paying for six regional sportsoutlets.
Typically, these channels are offered on all packages, meaning folks who don’t watch a lot of sports end up paying too. Networks and local teams have resisted efforts to put such channels on specialty tiers, although both may be pushing their luck if Angelenos end up with six different local sports channels.
The Dodgers also have a broadcast deal wth CBS’ KCAL-TV, which carries 50 games. Those will likely go away because the team can get more money from cable than broadcast. KCAL is also going to lose the Lakers when Time Warner Cable’s deal kicks in next season.
-- Joe Flint