As the Dodgers continue talks with Fox Sports and Time Warner Cable over a television contract that could be worth at least $6 billion, the team also has opened discussions with Major League Baseball over the revenue-sharing implications of any such deal.
Mark Walter, the Dodgers’ controlling owner, has been personally involved in the discussions with MLB, according to two people familiar with the matter but not authorized to comment on it.
In engaging in the discussions, the Dodgers hope to avoid a U.S. Bankruptcy Court showdown with MLB. As part of the settlement under which Frank McCourt agreed to sell the Dodgers, the court -- and not MLB -- has the final say over distribution of the team’s television revenue, according to people briefed on the settlement terms.
The Dodgers have not agreed to the terms of a deal with either Fox or TWC, the people said.
The discussions with MLB center on whether all of the Dodgers’ guaranteed television revenue should be subject to baseball’s revenue-sharing program. The league believes -- and there are indications the court might agree -- that the Dodgers must take some element of risk with any money not subject to revenue sharing.
In the settlement, MLB agrees that an annual rights fee of $84 million -- plus a 4% increase each year -- reflects fair market value, according to the people briefed on the settlement terms. Those were the essential terms of the proposed Fox contract rejected last year by Commissioner Bud Selig.
The Dodgers must contribute 34% of the annual rights fee to baseball’s revenue-sharing program. The team plans to launch its own regional sports network, in part to avoid the prospect of Fox or TWC paying a much higher rights fee.
One concept, as reported last week by Forbes: The Dodgers and Fox join forces on an RSN that would pay the team the $84 million annual rights fee -- plus the prescribed annual increase -- as well as a guaranteed annual dividend of $100 million. Over the life of a 25-year contract, the Dodgers could keep another $1 billion that otherwise would be diverted to revenue sharing.
However, in order to get dividends from an RSN, the league believes the team should be required to take the accompanying risk of ownership. The Dodgers are looking at other ways to structure a deal that would shield that money from revenue sharing and satisfy MLB as well.