In Dodgers bankruptcy case, Fox Sports has a prime interest
The headlines in the Dodgers’ bankruptcy case can give the appearance of a boxing match. It’s Frank McCourt vs. Bud Selig — and let’s get ready to rumble.
Yet the McCourt adversary with the most at stake might not be Selig, the baseball commissioner who is fighting a challenge to his authority.
Fox Sports has lined up with Selig and sued the Dodgers, defending against what media analysts say could be the possible extinction of one of its two Southern California regional sports networks.
The Lakers are leaving Fox Sports West next year. If the Dodgers were to leave Fox’s Prime Ticket network, Fox could face pressure from cable companies to drop the rates to carry both networks — or to drop one of those networks entirely.
“They would most likely explore the need for two RSNs in that area,” said Adam Swanson, sports media analyst at SNL Kagan. “I don’t think it would be surprising if they were to fold their two RSNs into one.”
Fox declined to comment for this story. However, a person familiar with the thinking of Fox executives said they considered the potential closure of FSW or Prime Ticket as “an option of last resort.”
McCourt has asked for Bankruptcy Court permission to auction the Dodgers’ television rights, currently controlled by Fox. The network has alleged McCourt already violated his contract with Fox, a claim disputed by the Dodgers.
In court papers, Fox attorneys said the success of Prime Ticket “has been integrated with the Los Angeles Dodgers and the telecast of [Dodgers] games, because of those games’ popularity.
“The telecast rights to the Los Angeles Dodgers baseball games are an inherently unique and irreplaceable asset and business opportunity.”
In 1997, Fox bought the Dodgers, largely to secure the team’s long-term television rights. Fox launched a second local RSN, keeping the Lakers as the foundation of the original FSW and making the Dodgers the marquee attraction on the new channel, now called Prime Ticket but then called Fox Sports West 2.
In 2004, after ESPN had abandoned plans for its own Southern California regional sports network — one that could have provided a new television home for the Dodgers — Fox sold the Dodgers to McCourt. Fox provided a little more than half the financing in the $421-million sale, and McCourt signed a contract that bound the Dodgers to Prime Ticket through 2013.
McCourt planned to launch his own regional sports network — dubbed “DTV: Dodger Television,” according to court documents — but turned to Fox amid his financial crisis.
Fox pounced upon the opportunity to lock up the Dodgers’ television rights yet again, advancing the team $25 million last winter and lending McCourt $30 million so he could meet the Dodgers’ first payrolls this spring. Fox also offered a separate $200-million loan, but Selig rejected the deal.
Fox and McCourt ultimately presented Selig with three versions of a new long-term contract, the last one valued by McCourt at $3 billion over 17 years. Selig rejected them all, according to court testimony.
By then, with litigation looming between the Dodgers and Major League Baseball, and under pressure from Selig, Fox abandoned McCourt.
If Selig would not approve a new contract so long as McCourt were to remain the owner, then Fox needed to protect its rights under the existing contract, according to the person familiar with the thinking of the Fox executives.
That contract includes provisions McCourt now says the court should not enforce, including exclusive negotiating rights until Nov. 30, 2012. In court papers, Fox claimed an auction now “would destroy Prime Ticket’s vested property interests.”
As Fox and McCourt worked for months on what both sides hoped would be a long-term deal to keep the Dodgers on Prime Ticket, Fox lost the Lakers to a new Time Warner Cable channel and lost most of its UCLA and USC coverage to the fledgling Pac-12 Network.
If McCourt were to take the Dodgers elsewhere — probably to join the Lakers on Time Warner — the viability of FSW and Prime Ticket could be threatened.
“If you lose the Lakers and Dodgers, that’s a serious change to your business model,” said sports media consultant Neal Pilson, former president of CBS Sports. “Those are the two premier sports properties in the L.A. market. That’s why Fox is taking the strong position that it is.”
Without the Lakers and Dodgers, Fox would be left with the Angels, Clippers, Kings and Ducks as its major sports properties for FSW and Prime Ticket. In that event, Pilson said, cable companies probably would demand that Fox slash the rates it charges to air FSW and Prime Ticket or combine the two networks into one.
“You end up with the same result — reduced revenue for Fox,” Pilson said.
There is no guarantee Fox can keep the Dodgers beyond the 2013 season, even if MLB prevails in court, or if Selig and McCourt agree on a settlement under which the team would be sold.
That sale process could take months, which could leave Fox with only a few months to persuade a new owner to sign a new contract without soliciting offers from Time Warner or any other possible competitor. In these curious times in Bankruptcy Court, that scenario would be a win for Fox.
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