Buyer beware: Time Warner Cable comes with expensive sports channels

If Time Warner Cable is sold, its new owner is also likely to inherit some pretty expensive sports deals.

Besides owning cable systems that have more than 11 million subscribers, Time Warner Cable owns two regional sports networks in Los Angeles and is preparing to launch a third next year. It also owns a piece of a sports channel in New York City and has an Ohio outlet as well.

But it is the Los Angeles outlets that are the big-ticket items. SportsNet and Deportes, launched last year, are home to the Lakers. Next year, Time Warner Cable will roll out another channel, which will carry Dodger games.

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Neither deal was cheap. Time Warner Cable agreed to pay $8.5 billion for rights to the Dodgers for 25 years. The Lakers deal runs 20 years and is north of $3 billion; some have pegged its price tag at as much as $5 billion.

While Time Warner Cable managed to get carriage deals for SportsNet and Deportes done with everyone but satellite broadcaster Dish Network, the process left a bad taste in the mouth of DirecTV, Cox and other distributors. Now Time Warner Cable will try to jam another expensive regional sports network down the throats of distributors and customers in a market where Fox Sports also has two channels.

If Time Warner Cable can’t secure distribution on other outlets in the Los Angeles area including Cox and DirecTV, it is on the hook with the Dodgers to cover the lost revenue. That could add up to more than $300 million annually.

One of Time Warner Cable’s potential suitors, Charter Communications, is not a player in the regional sports network business, and the idea of being stuck with these outlets may not hold much appeal. Cable mogul John Malone, whose Liberty Media owns 27% of Charter, has not been shy about criticizing the high cost of sports channels.

“We’ve got runaway sports rights, runaway sports salaries and what is essentially a high tax on a lot of households that don’t have a lot of interest in sports,” Malone said in an interview last year with the Los Angeles Times. “The consumer is really getting squeezed, as is the cable operator.”

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Comcast, another potential suitor, does have other regional sports channels, and the Los Angeles properties may hold some appeal. On the other hand, Comcast has had a rough go of it in Houston where the regional network it launched in partnership with the Rockets and Astros is in bankruptcy, which may have it rethinking big expensive sports channels.

If neither Comcast nor Charter wanted the Los Angeles channels, Fox Sports would seem to be a suitor. But Fox already has two channels in Los Angeles and dropped out of the bidding for the Lakers and Dodgers because it thought the prices were too high.

The odds of Time Warner Cable holding onto the channels while selling the systems seems unlikely. It only entered the sports channel business to guarantee that its systems would have the product.

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Follow Joe Flint on Twitter @JBFlint.

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