The owners of the Los Angeles Dodgers said Monday that they intended to start a regional sports network in southern California, confirming weeks of reports about the team’s plans.
The network, to be named SportsNet LA, will be backed by Time Warner Cable, one of the main television distributors in the region, with a commitment of $7 billion to $8 billion over the next 25 years. The price tag, though not made public by the parties, was confirmed by a person with direct knowledge of the deal. Analysts said it was the most lucrative television deal for a single team in sports history.
Time Warner Cable will carry the Dodgers network and will be in charge of convincing others to carry it, as well. In exchange, Time Warner Cable will keep all the advertising revenue that it sells for the network. The Dodgers owners said in a news release on Monday that SportsNet LA would carry all the team’s games and “comprehensive behind-the-scenes Dodger programming.”
The multibillion-dollar deal with the Dodgers seemingly flies in the face of Time Warner Cable’s public statements about tamping down on the rising costs of programming. SportsNet LA is likely to amount to $4 to $5 a month per subscriber in southern California, and some of that cost will be passed on subscribers through their monthly cable bills, with Time Warner Cable also absorbing some of the cost.
But Time Warner Cable says that doing business directly with the Dodgers cuts out the middleman, in this case Fox Sports, which was also bidding for rights to the Dodgers games. The company said the same thing when it outbid Fox to carry Los Angeles Lakers games in 2011, a 20-year deal valued at $3 billion.
“This deal, like our Lakers’ deal, furthers our efforts to attain greater certainty and control over local and regional sports programming costs,” David Rone, the president of Time Warner Cable Sports, said of the Dodgers agreement in a statement.
Fox Sports, owned by the News Corporation, disputes this notion, in part because its bid for the Dodgers was significantly less than Time Warner Cable’s bid. Dodgers games will continue to be televised on Fox Sports’ Prime Ticket network until the new network starts in 2014.
A group led by Magic Johnson and financed by Guggenheim Partners bought the Dodgers last year in a deal valued at $2.3 billion. “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,” Mark Walter, the founder of Guggenheim Partners and the chairman of the Dodgers franchise, said in a statement.
The network will be operated by American Media Productions, a subsidiary of the Dodgers ownership group. “The creation of AMP will provide substantial financial resources over the coming years for the Dodgers to build on their storied legacy and bring a World Championship home to Los Angeles,” Mr. Walter said.
The financial terms of the arrangement were not released. The arrangement will require the approval of Major League Baseball.
Assessing the impending deal last week, the Nomura analyst Michael Nathanson said Time Warner Cable should “be careful what they wish for.” In a note to investors, he pointed out that the News Corporation is likely to use the high rates for the Lakers and Dodgers channels as negotiating leverage for other regional sports networks. News Corp. recently acquired 49 percent of YES, the Yankees channel in New York, and full ownership of a channel that carries the Cleveland Indians in Ohio. Time Warner Cable is a major distributor in New York and Ohio.
Mr. Nathanson said Los Angeles, which will have six regional sports networks once the Dodgers network starts, is “experiencing significant price inflation.” It’s too soon to know, he said, “whether these levels of investments will prove to be justified many years down the road or if we have reached the top of the sports-rights bubble.”
Media Decoder Blog: Dodgers, Signing Lucrative TV Deal, Plan to Start Regional Sports Network
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Media Decoder Blog: Dodgers, Signing Lucrative TV Deal, Plan to Start Regional Sports Network
