The Los Angeles Dodgers are in first place and gunning for the World Series, but the majority of local fans won’t be able to watch any of it on television.
The second half of the season begins Friday. Yet, off the field no progress has been made in the standoff between Time Warner Cable, which is distributing the new Dodger-owned channel SportsNet LA, and area pay-TV providers including DirecTV, Dish Network, Charter Communications and Cox Communications.
“It is unlikely that we are going to get a deal done,” David Rone, president of Time Warner Cable Sports, acknowledged for the first time this week.
Dodger President Stan Kasten called the situation “extremely troubling” and urged everyone to “return to the table to continue to work to try to make a deal as quickly as possible.”
Many observers expected that pressure from fans would force the pay-TV providers to the negotiating table, or face mass defections. But not this time. Instead, cable customers had drawn a line in the sand that they were unwilling to pay more money on top of their already sky-high cable bills to catch a Dodgers game.
This could become a definitive moment for the world of sports programming. Team owners may now be realizing that cutting exorbitantly priced television deals may backfire. Pay-TV providers are walking away with more bravado about standing up against distributors like Time Warner Cable.
Executives at DirecTV, Cox and other distributors contend that Time Warner Cable’s price for the sports channel is too high and would force them to charge consumers, many of whom are not sports fans, even more for their pay-TV packages. They are equally pessimistic about coming to terms on deals this season.
Time Warner Cable is seeking more than $4 a month per subscriber for SportsNet LA and the price escalates sharply from there, people familiar with the negotiations said. While Time Warner Cable declines to comment on its offer, it says the price is not out of line with the value of Dodger baseball to distributors.
Left in the lurch are millions of Dodger fans who have been unable to see Clayton Kershaw’s masterful pitching performances or Yasiel Puig’s reckless abandon on the base paths this season. Since opening day, the only games fans have been able to watch are the handful broadcast on ESPN, Fox and Fox’s national sports cable channel Fox Sports 1. Only subscribers to Time Warner Cable, which has about 30 percent of the Los Angeles pay-TV market, are seeing games regularly.
“It’s driving me crazy,” said Bill Sanders, a Malibu resident who is a DirecTV subscriber. “Kershaw throws a no-hitter and I can’t watch it with my son.” Sanders lives in an area where he could switch to Time Warner Cable but he doesn’t want to drop DirecTV or add a second pay-TV service just for SportsNet LA.
DirecTV has seen some 2,000 subscribers defect since the baseball season began, a person familiar with the matter said. But, that is not considered a huge number given the company serves 1.2 million households in the Los Angeles market.
“People understand what’s going on,” said Dan York, chief content officer for DirecTV.
DirecTV and other TV providers say consumers know that a Dodgers TV deal would mean significantly higher monthly bills — requiring subscribers to fork over around $50 a year even if they are not baseball fans.
The prospect of higher bills to watch the Dodgers on TV was widely predicted in 2011, when Guggenheim Baseball bid a record $2.15 billion for the team and TV rights were seen as the avenue in which they would pay back the loans used to finance the acquisition.
Time Warner Cable landed distribution rights for SportsNet LA last year after a heated bidding war with Fox’s Prime Ticket, which had been carrying the bulk of Dodger games.
Tired of playing second fiddle to Fox, Time Warner Cable agreed to a massive $8.35 billion, 25-year deal to run the network, according to a valuation by the Dodgers and Major League Baseball. That topped the Fox bid by $2 billion. A year earlier, Time Warner Cable won rights to the Los Angeles Lakers, which had been on Fox Sports West, with an over-the-top $3 billion, 20-year deal.
The annual fee that Time Warner Cable agreed to pay to the Dodgers started at $210 million this season, or $1.5 million per game, and increases through the life of the contract. That is more than four times what the Dodgers got last season from Prime Ticket and CBS-owned KCAL-TV Channel 9, which aired 49 games last season.
Those fees are the reason Time Warner Cable wants so much for SportsNet LA. Last season, Prime Ticket charged about $3 per month, per subscriber, according to industry consulting firm SNL Kagan.
DirecTV’s York said he offered Time Warner Cable “more than what we paid for Prime Ticket last season when it had rights to three teams” and was refused. He said Time Warner Cable can’t justify its asking price.
Rone contends that DirecTV is refusing to engage in any serious negotiations. “These guys have shown no sense of urgency to get a deal done. It is so unfair, Dodger fans are waiting to see a first-place team.” Rone also said the cost for Prime Ticket was based on the decade-old deal it had with the Dodgers and has no relevancy to the current situation
The rising costs to carry sports programming has distributors caught in a bind. On the one hand, sports is incredibly valuable content — Chris Bevilacqua, a top sports TV deal-maker described it as “the glue holding the pay-TV system together.”
On the other hand, the cost to carry regional sports networks and national services such as ESPN and Fox Sports 1 is getting so high distributors fear their customers who aren’t sports fanatics will cut the cord to their subscription.
“It’s like a giant greedy monster that is incredibly difficult to stop,” said Jimmy Schaeffler, who heads the Carmel Group, an industry consulting firm.
Distributors have said they are willing to carry SportsNet LA on a specialty tier along with other more expensive channels or even offer it on an individual or a la carte basis.
“We only want to charge the sports fans who want to see the team,” said Andy Albert, senior vice president of content acquisition for Cox Communications. “To burden all of our customers with the high cost of this network is not what the majority of our subscribers want.”
Time Warner Cable wants SportsNet LA to be mandatory for all pay-TV subscribers, which is how regional sports networks have been traditionally sold including those owned by DirecTV. By being in every home, a network has a greater opportunity for higher ratings and ad revenue than when it is in limited distribution.
“They disseminate and distribute their networks in the exact same fashion we are asking,” Rone said of DirecTV.
Source: MCT Information Services