Chad Moriyama Dodgers, Sabermetrics, Scouting
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.
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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?
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Additionally, as I alluded to in the previous post on this agreement, TWC still has to negotiate with other carriers over rights, and that could always take a while/get ugly.
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.
The most surprising part of the story, which Nightengale leaves out from the Sports Business Journal story, spells out explicitly what has been alluded elsewhere before:
This is shocking to me and frankly, pretty damned audacious of the Dodgers. If this is true then I can totally understand why MLB would have SUCH a problem with the deal.
Uh, that second blockquote should have been /blockquote. But you get the point.
Edited.
Sweet! Thanks.
Explain why this is shocking?
Doesn’t that put all the risk on the Dodgers? Or is it because TWC is guaranteeing them money anyway?
This is shocking because the Dodgers, or rather AMP will be able to have their cake (100% or near total ownership/equity of Sports Net LA) and eat it too (TWC guaranteeing the risk).
Just to unfold this a bit more. Should AMP at some point decide to sell parts of their ownership stake in SNLA, because they own so much equity, they have a lot to sell (e.g. more money). And this is really the property that’s worth so much money. AMP will leverage Dodgers’ media rights to build the channel and then sell it on at some point and returning some, but probably a lot, of money back to Guggenheim Partners which remember, is an asset management company that will eventually need money back to pay out. For an idea of just how much this will be worth, take a look at how much money the Steinbrenners have been able to milk out of YES Network.
TWC is assuming pretty much all of the risk here because in addition to paying for the media rights, they are also going to cover affiliate fees (but I assume that these two are largely the same things). So, even if AMP never sells a single share of ownership, they will make their money back by the guaranteed money from TWC.
And on top of all that, MLB will only get their hands on ~$80MM/yr with a 5% raise every year which is a pittance once you take all of the money into consideration.
Ah, yeah, I can see why it’s gonna get shot down now. :o
If those games are gone i won’t be able to watch, so i’ll have to go in on a mini-plan. That’s the way things are going now days, wonder if the Super Bowl will eventually be on cable too…
Ya, it really sucks that pretty much the only reason I have cable still is for live sports. At least with the slingbox I’m able to watch my tv when I’m out of town. Still.
Interesting. So are people getting rid of their cable now? Maybe I’m the one that’s behind. :o
This has nothing to do with the TV deal, but… I also posted this on Feelin’ Kinda Blue and was wondering what Chad’s thoughts were on Alex Castellanos’s future.
What are your thoughts on Alex Castellanos? None of the prospectors seem to give him any love, yet he’s OPS’d over 1.000 with the Dodgers and has 71 XBH’s(!) in 126 games. With all the talk that LA doesn’t have a 2b or 3b of the future, why can’t it be Castle? I think he could be a Howie Kendrick type but w/more plate discipline and offense but less defense. Kendrick’s been worth at least 2 fWAR each of the last 6 years.
Do you have any insight as to how bad Castle’s defense is at 2b or 3b? If it’s at least passable, he could be a poor man’s Allen Craig, platooning for Dre/CC while presenting an alternative to Cruz at 3b, and taking over for MEllis next year. Thoughts?
I should really start my Prospect Profiles, but yeah I’m not that different from everybody else.
I do think he could hit at least around league average if given the chance, but the question is that I don’t think he can play second base. Putting him in left field on this team with an average bat is obviously not an option.
A league average bat at 2b is a plus 2b bat. For example, a .754 OPS would’ve been top 3 among 2b in the NL last year.
A league average bat with below average-to-awful defense gets you Rickie Weeks, and I’d take him every day of the week.
Right, but that’s assuming he hits exactly league average and can play second base, which many people seem to doubt he can do.
In other words, I’m not so sure the concern here is his bat, but rather whether or not he can play the infield. If not, there are better options at the corners, hence where I think he stalls.
How is Rickie Weeks a league average bat?
Alright, fine. Weeks is above average. But the point wasn’t to directly compare him to Weeks, it was to pinpoint Weeks’ value as a baseline. He was the closest comp I could find for a best case scenario for Castle. And out of Weeks’ last 4 full years btw, 2 were league average offensively (08 and last year), so pretend I’m just referring to those seasons. Anyways, my point is that he averaged 2.2 fWAR even when he was “league average”, and I would love to have 6 cost-controlled years of that. But if you want to talk about Weeks and argue that in his career, he’s been above average offensively, then yes, you’re right.
The major issue is that even if Castellanos has that type of talent, he won’t get to the peak immediately, and the Dodgers have financial options that make patience optional.
That’s in addition to the defensive questions.