Small pay-TV provider feels squeeze play over Dodgers channel
The Great Dodgers Blackout continues. If you’re not a Time Warner Cable subscriber, chances are you’re not seeing any games on TV this season.
All the other leading pay-TV providers — DirecTV, Verizon, AT&T, Dish Network — have said thanks but no thanks to Time Warner’s insistence that all their customers pay about $5 a month for a new Dodgers channel, regardless of whether they want it.
In fact, only one pay-TV company in Southern California other than Time Warner now carries the channel. That’s tiny Champion Broadband, which serves about 5,500 subscribers in Arcadia and Monrovia.
And the company isn’t happy about that dubious distinction.
“We’ve always been pushed around by the bigger guys,” Dave Haverkate, Champion’s chief executive, told me. “But never like this.”
As he tells it, his company faced a lose-lose situation when Time Warner cut an $8.4-billion deal with the Dodgers to be the exclusive distributor of SportsNet LA, the new Dodgers channel.
Time Warner reportedly will pay the Dodgers $210 million this season — $84 million for media rights plus $126 million for the so-called value of SportsNet LA. The media rights fee is expected to grow 4% annually, topping $200 million by the end of the 25-year deal.
That sky-high sum pencils out for Time Warner only if it can make all pay-TV customers in the region kick in $4 to $5 a month for the channel.
DirecTV, whose 1.2 million Los Angeles customers give it a roughly 30% share of the local pay-TV market, was the first to declare that jacking up customers’ bills $5 a month was unacceptable. It offered to carry the Dodgers channel on an a la carte basis — that is, anyone who wanted it could have it.
The other big boys quickly fell into line behind DirecTV, forming an uncharacteristically united front in trying to protect customers from a rate hike.
Time Warner has rejected an a la carte deal for SportsNet LA. It’s insisting that all subscribers of each pay-TV company take — and pay for — the channel. It also hasn’t budged on pricing, which isn’t a surprise considering that it’s got $8.4 billion in licensing fees to recoup.
Haverkate’s Champion Broadband has about 4,000 pay-TV subscribers. The other 1,500 are primarily Internet customers.
It also has a problem. Every one of the homes it reaches over its own network in Arcadia and Monrovia is also within Time Warner’s service area.
There are hundreds of little guys like this nationwide doing their best to offer consumers a smidge of competition in a market dominated by a handful of players.
Up to now, Haverkate said, Champion has been able to hold its own against its far larger rival.
“Our prices are about 15% lower than theirs,” he said. “And we’re not Time Warner.”
That last selling point, apparently, is a plus in the eyes of many customers.
At first, Haverkate said, he resisted Time Warner’s take-it-or-leave-it offering of SportsNet LA. “The amount they wanted to charge was absurd,” he said.
“Then spring training came around, and we started getting calls from customers. They asked if we were carrying the Dodgers.”
Haverkate soon realized that roughly half his 4,000 pay-TV subscribers were ready to jump to Time Warner if that was the only way they could see Dodgers games.
“If we lost half our customers, we’d be done,” he said.
So Haverkate caved to Time Warner’s terms and agreed to carry SportsNet LA and to pass along the monthly fee to all its subscribers. He’s gambling that he’ll lose fewer customers because of the forced rate hike than he would from an exodus of Dodgers fans.
“It’s just a terrible situation,” Haverkate said. “There was no good outcome for us.”
In this David-and-Goliath story, Goliath kicks David’s butt. And the same could be said for all pay-TV customers who are forced to pay for dozens, if not hundreds, of channels they may never watch.
It’s a ridiculous situation, inexplicably tolerated by lawmakers and regulators, that allows industry behemoths to force their will on the marketplace, regardless of what the marketplace wants.
The only ray of sunlight here is that DirecTV and the other top pay-TV providers appear to be holding their ground in the face of Time Warner’s unreasonable demands.
I spoke with representatives of all the major players, and each said there has been no significant movement in their ongoing negotiations with Time Warner.
“They’ve backed themselves so far into a corner, there are just not a lot of options for them,” one pay-TV exec told me. He asked that his name be withheld because he wasn’t authorized to discuss his company’s talks with Time Warner.
Only three pay-TV providers in all of California carry the Dodgers channel: Time Warner, Champion and Bright House Networks in the Bakersfield area.
“SportsNet LA is available on fair terms, consistent with its value,” said Andrew Fegyveresi, a Time Warner Cable spokesman. “We are eager for all consumers in the Dodger footprint to have access to SportsNet LA, and we hope that providers will come on board soon.”
Champion’s Haverkate estimates that his company now pays about $20 a month per subscriber for local sports channels and passes along just over $12 of that amount to customers. He tries to make up the difference in charges for other services.
“It’s difficult,” Haverkate said. “You’re seeing more and more small operators getting out of video and focusing solely on Internet.”
Is that what’s in store for Champion?
“We’re reevaluating that all the time,” he said.
And that doesn’t bode well for what little competition now exists for pay-TV customers.
David Lazarus’ column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to firstname.lastname@example.org.
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