The survival of an entire cable channel effectively depends on the disposition of future TV rights of the Los Angeles Dodgers, reflecting how abruptly sports TV fortunes can rise and fall.
When 2011 began, the top two sports franchises in Los Angeles, the Dodgers and the Lakers, were quietly clicking off another year with Fox Sports as their primary cable home.
With 2012 beckoning, the Lakers have already been pried away by Time Warner Cable, and Fox is in litigation to preserve its hold on the Dodgers.
The stakes are high for both media giants. Time Warner is under pressure to make profitable its multibillion-dollar commitment to English- and Spanish-language networks dedicated to the Lakers — keeping those networks thriving during the warm-weather months without regular-season NBA games — while Fox may have to collapse one of its two Los Angeles-centric sports cable channels (either Fox Sports West or Prime Ticket) if it loses the Dodgers.
“There’s no question, because essentially (Fox would be) left to the Angels and hockey and lesser properties,” Sports Business Journal baseball and digital media writer Eric Fisher said. “The legal papers have already suggested as such that Prime Ticket’s future is certainly threatened.”
Should Fox Sports West and Prime Ticket be consolidated into one network, the revenue loss to Fox would be in the hundreds of millions.
“Essentially you’re not only losing the advertising, but you’re losing some of the carriage fees as well,” Fisher said.
Complicating matters locally is another 2011 development: the Pacific 12 Conference’s bold plan to debut its own group of proprietary networks in August 2012, which will pry still more content away from Fox Sports.
Time Warner also made a noteworthy, albeit smaller-stakes, raid on Fox Sports content by inking a deal in November for 10 years’ worth of TV rights to the Major League Soccer champion Los Angeles Galaxy beginning next year.
Fox Sports retains rights to MLB’s Angels, the NBA’s Clippers and the NHL’s Kings and Ducks, but the viability of spreading them over two channels is limited — especially with the Angels as the only summertime attraction.
“Given that Time Warner has got the Galaxy and there’s a little bit of a summer foothold, I would say Fox and Prime Ticket are the more desperate party (for the Dodgers),” Fisher said.
Whoever gets dibs on the Dodgers will pay dearly for the privilege. Thanks to skyrocketing valuations, the Dodgers figure to cost their next TV home at least $150 million per year, perhaps much more if the bidding heats up. The Lakers’ 20-year deal with Time Warner is believed to be worth approximately $200 million per year.
The Dodgers’ linchpin role for Southern California cable networks is nothing new. When Fox acquired the Dodgers from the O’Malley family in 1998, it was with an eye on having a centerpiece that could launch that second all-sports cable network in Los Angeles and forestall ESPN from invading the territory.
In theory, Fox’s hold on the Dodgers shouldn’t currently be in jeopardy. Their current deal runs through 2013, with a clause that through November gives Fox exclusive negotiating rights to a post-’13 extension, including a chance to match competing offers.
But the ongoing legal drama surrounding outgoing Dodger owner Frank McCourt has put Fox’s exclusivity on the ropes. With the Dodgers still in bankruptcy court since their filing in June, lawyers for McCourt have requested permission to immediately open the sale of future media rights to all comers in order to maximize value for creditors. Settlement talks are taking place, with a hearing on the matter scheduled for later this month.
Mere months ago, before becoming legal combatants, Fox and McCourt were allies. The media giant, which helped finance McCourt’s highly leveraged purchase of the Dodgers in 2004 and no doubt was looking to reinforce his dependence, made a personal loan in April to the McCourt to help keep his embattled ownership dreams alive.
Two months later, a June deal between Fox and McCourt to extend Dodger broadcasting rights through 2030 was rejected by MLB commissioner Bud Selig on the theory that it sold out the long-term future of the Dodgers.
If Fox does comes away with the Dodgers for the long-term future, Fisher speculated, “You could have a situation where Prime Ticket gets amalgamated to a more front-and-center Dodger branding.”