The Dodgers officially announced their new television contract with Time Warner Cable on Monday, with the team-owned “SportsNet LA” channel starting in 2014. The deal, pending the approval of Major League Baseball and the possible intervention of the U.S. Bankruptcy Court, covers 25 years and is believed to be worth between $7 billion and $8 billion to the team.
The Dodgers declined to comment beyond prepared statements that did not say what non-Dodgers programming the channel might carry, sports or otherwise. Also, even as a statement said the new channel would be the “exclusive local home” of the team, the Dodgers would not say whether they might broadcast any games on free local television.
The league is expected to approve the deal, but the process will be far from routine. The league two years ago rejected a proposed television contract between Fox Sports and former owner Frank McCourt — albeit primarily as a means to push McCourt to sell the Dodgers. The team did not submit the TWC contract to MLB before Monday’s announcement.
Left unsettled is whether the Dodgers can keep more than $1 billion that ordinarily would be contributed to the league’s revenue-sharing program.
The league collects 34% of all local broadcast revenue and redistributes it among poorer teams, although clubs assuming the risk of owning a television channel can keep almost all of the profits. At least two elements of the new television contract probably will draw particular scrutiny from MLB, according to people familiar with the deal but not authorized to discuss it.
Time Warner Cable has guaranteed the Dodgers fees from cable and satellite providers even if those companies do not carry the new channel, the people said. Also, TWC has guaranteed the Dodgers certain fees as part of what the team might present as an expansion of TWC’s current sponsorship.
If MLB contends the Dodgers are taking no significant financial risk in those or other elements of the contract, the league could assess the 34% fee on the relevant revenue.
The Dodgers are prepared to appeal any such assessments to the U.S. Bankruptcy Court, which has final say as part of the settlement between McCourt and MLB.
The settlement sets $84 million a year — plus a 4% annual increase — as the maximum basis for revenue-sharing assessment, although MLB insists it can levy additional fees against all guaranteed money. The Dodgers would average $320 million a year in an $8-billion deal.
The Dodgers, not Time Warner Cable, will program the new channel. In an interview, TWC executives said they believed the SportsNet LA name would be distinctive enough from the Time Warner Cable SportsNet name given to the new Lakers channel.
The Lakers and TWC also launched a Spanish-language channel. The Dodgers deal does not include a separate Spanish-language channel from TWC.
Millions of Lakers fans could not see the team at the start of this season because of extended negotiations between TWC and rival cable and satellite providers. Such negotiations are typical when a new channel starts, so it is possible millions of Dodgers fans might not be able to see their team on opening day in 2014.
“There’s always some variation of the distribution dance,” Time Warner Cable executive vice president Melinda Witmer said. “I would expect this won’t be any different.”
The company charges other providers close to $4 a month to carry the Lakers channel — fees that are passed on to consumers in some way — and the new Dodgers channel is expected to be sold at close to $5 a month.
For TWC, the rationale for the Dodgers deal is similar to the rationale for the Lakers deal: pay a lot to cut out the middle man, and secure access to a popular team for decades, at a predetermined price. However, Witmer conceded that there is no guarantee the company will make money on the Dodgers.
“There’s always risk,” she said. “With the hundreds of channels we deal with, there are many we carry that it would not be easy to assign a direct return on investment.”
The Dodgers will remain on Fox Sports through the 2013 season, but the team decided it wanted a team-owned channel thereafter and negotiated with Fox and TWC. The channel is expected to contain Dodgers programming far beyond the usual pregame and postgame shows.
“We concluded last year that the best way to give our fans what they want — more content and more Dodger baseball — was to launch our own network,” Dodgers controlling owner Mark Walter said in a statement.