Uncertainty over Dodgers a factor in Lakers channel negotiations
Although the winless Lakers are hardly must-see television at the moment, that is of little solace to the millions of DirecTV and Cox subscribers who are unable to watch the team’s games on their new cable home SportsNet, which is owned by Time Warner Cable.
Time Warner Cable was hoping to have all its distribution agreements for SportsNet and its Spanish-language companion channel Deportes locked up by now. Deals with Charter and Verizon Fios were finished before the first Lakers game appeared on the two channels Wednesday, but both Cox and DirecTV are playing hardball.
Between them, Cox and DirecTV have almost 3 million subscribers in Southern California, many of whom have taken to Twitter, Facebook and other social networking to criticize the two pay-TV companies for not getting a Laker deal done. Time Warner Cable is carrying about 70 Laker games this season, 57 of which are exclusive. Other networks carrying Laker games this season include TNT, ESPN and ABC.
Given how much DirecTV counts on sports programming as a selling point to subscribers, the satellite broadcaster’s slowness to embrace SportsNet has puzzled some. After all, DirecTV has spent heavily on sports programming in the past including the National Football League’s Sunday Ticket package.
One reason DirecTV and Cox are reluctant to sign on for SportsNet and Deportes, at least at the price Time Warner Cable wants (as much as $3.95 per subscriber, per month, according to industry sources), is that they know they also face a big fee increase with regards to the Dodgers down the road.
Currently, the Dodgers get about $40 million a season in TV rights fees from Prime Ticket, which is owned by News Corp.'s Fox Sports. That pact expires after next season. Guggenheim Partners, the new majority owner of the Dodgers, paid $2.15 billion for the Dodgers and the primary reason it was willing to shell out so much was their belief that they can make much of that back in television rights. When Frank McCourt still owned the Dodgers, Fox sought a renewal of the rights for $3 billion over 20 years, which averages out to $150 million per season. That offer was ultimately rejected by Major League Baseball Commissioner Bud Selig.
Fox is currently trying to negotiate an agreement with Guggenheim Partners to keep the team on Prime Ticket. It’s also no secret that Time Warner Cable wants the Dodgers for SportsNet. A bidding war could drive the price beyond the $3 billion Fox offered to McCourt and whatever network gets the team will no doubt seek a big increase in license fees for the channel from pay-TV distributors. Prime Ticket currently charges about $2.36 per month, per subscriber, according to industry consulting firm SNL Kagan.
Much of these costs eventually get passed down to the consumer in the form of bigger cable bills. Pay-TV distributors fear that subscribers are tired of having to foot much of the bill for sports programming.
Time Warner Cable, Cox and DirecTV all declined to talk specifics about negotiations but insist discussions are still ongoing. Time Warner Cable, which shelled out $3 billion for TV rights to the Lakers for the next 20 years, has resisted offers by Cox and DirecTV to carry the channels on a specialty tier that would not reach all of their subscribers.
Time Warner Cable does not want the channels on a specialty tier because it would lower subscription and advertising revenue and make it harder for the company to make money off of them.
Meanwhile, some fans are starting to point their fingers at the Lakers. Michael E. Schwimer, a lawyer and a Laker fan, blasted management in an email to the team and various media outlets
“It was your profit motive that led to this TV deal to begin with, and you should have thought the ramifications through,” Schwimer wrote. “Had you focused on the consequences of this deal to your fans; namely that giving a monopoly on Lakers’ broadcasts to one of several competing cable service providers would necessarily deprive Lakers fans of the ability to watch the games, or at the least cause a serious impact to their pocket books, you should (and could) have taken steps to mitigate the same.”
Mike Bresnahan contributed to this report.
Follow Joe Flint on Twitter @JBFlint.
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