The Dodgers have not had their TV deal with Time Warner Cable (for SportsNet LA) cleared by the MLB yet, as I mentioned yesterday, and chances that it’ll be allowed to stand as is are bleak, according to Bob Nightengale of USA Today.
Major League Baseball has major concerns over the Los Angeles Dodgers’ record new TV deal, and unless an agreement can be reached within a few months, their differences may have to be resolved in federal court, according to a high-ranking MLB official with direct knowledge of the negotiations.
When the Dodgers emerged from bankruptcy in April, their agreement stipulated that the club’s fair-market TV value would be set at $84 million a year, with 4% increases each season. MLB teams with high revenues are required to share 34% of their local TV rights with low-revenue teams.
But the $7 billion, 25-year deal with Time Warner, as reported by Sports Business Journal and the Los Angeles Times, would provide the Dodgers roughly $280 million annually, leaving some $196 million not subject to revenue sharing at the outset of the contract.
In the revenue-sharing agreement among the 30 teams, if teams assume the risk of ownership in their own TV network, they are permitted to keep their revenue. Still, MLB has the right to establish a fair-market broadcasting rights fee to those teams, and require teams to contribute 34% to revenue sharing, such as the New York Yankees and Boston Red Sox, with the YES Network and NESN, respectively
MLB argues that the Dodgers won’t be taking a significant risk since Time Warner Cable is guaranteeing $7 billion. Time Warner announced it plans to be the exclusive advertising affiliate sales network of the channel, vowing to cover affiliate fees from distributors who refuse to carry the channel.
So basically, a billion dollars are at stake here, which is ~$40 million a year and hardly pocket change. The difference comes down to whether or not the parties involved can agree on how much risk the Dodgers are actually taking by creating their own network/channel. From the viewpoint of a totally uninformed layman (me), it honestly doesn’t seem like the team is taking much risk at all considering what Time Warner Cable is guaranteeing them at the outset, but we don’t know all the intricacies of the deal yet either, so maybe it looks different in court.
Regardless, it seems highly unlikely that things are allowed to stand as is. What the exact changes will be though? No idea.
Unfortunately, that’s not the only issue still left unresolved, as whether any games will be broadcast for free on local television is still at odds, according to Bill Shaikin.
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.
I always hated games on KCAL because it meant that I literally couldn’t watch, but I’m not sure how many people would be affected if those free games were taken away. To me, it seems like you’re a dinosaur if you don’t have cable, or maybe that’s just in my world?
Millions of Lakers fans could not see the team at the start of this season because of extended negotiations between Time Warner Cable and rival cable and satellite distributors. 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.”
So yeah, don’t expect a resolution soon, as it might not even be resolved until we’re into the 2014 season, much like the Lakers situation in 2012.