When a new ownership team with incredibly deep pockets takes over your team (and breaks the bank with a ton of free agent acquisitions), you gotta be thinking things are headed in the right direction. Well, back in 2012, that’s exactly what Dodger fans were enthused about. Gone was the stingy McCourt regime; the new Magic Johnson-led group said and did all the right things, including now having the largest payroll in MLB (surpassing the Yankees). From the very beginning, the key driver in all this was the TV deal. Before taking over the team, there was a pending TV offer on the table, potentially worth billions. The deal ended up being worth an estimated $7 billion over 25 years and gave Time Warner Cable exclusive rights to a new Dodger channel, coined SportsNet LA; it would be available for free to all Time Warner subscribers (~30% of Southern California homes). For Dodger fans outside that group, that sealed their fate for at least the start of the 2014 season…
First and foremost, Time Warner is a publicly-traded cable TV company (the 2nd biggest in the US, only trailing Comcast). That means their primary objectives are to expand their subscriber base and maximize revenue, wherever possible. That’s capitalism, though, right? Sure is – so, when, the Dodgers picked Time Warner’s deal over a handful of others, they at least had to wonder whether a “lockout” of other TV providers was a real possibility. Fast forward to Jan 2014 when rumblings started to surface that Time Warner still hadn’t reached an agreement with any of the other major TV providers (DIRECTV, DISH, Charter, etc). Most fans not on Time Warner figured 3 months was plenty of time. Well, by first pitch at the home opener in early April, nothing had changed; even worse, all parties involved were seemingly further apart than ever.
All along, negotiations have been incredibly contentious AND public. From seething commercials to social media campaigns, it’s been an ugly, drawn out battle. At the heart of it all is the licensing fee. Reportedly, Time Warner wants providers to pay $5/month per subscriber for the right to broadcast Sportsnet LA. Some quick math and that equates to hundreds of millions per year. To put it in context, other LA regional sports channels have gone for anywhere from $1.40 to $3.22/month (the Lakers’ new channel hit that $3.22 rate just 2 years ago). So, $5/month is quite a step up and the cause of the stalemate. If that ends up being the final, agreed-upon rate, subscription rates for all other providers WILL increase to partially offset those costs.
1) Time Warner hits their new member quota – from the outside looking in, it appears Time Warner is more than happy to drag the proceedings along — as the baseball season progresses and Dodger fans STILL can’t catch a game at home (and get tired of driving to a bar or buddy’s house), a fair percentage of them will switch over to Time Warner. I’m sure Time Warner has an internal target of new accounts they’re looking to reach. If/when that happens, that might trigger a drop in the licensing fee and an eventual agreement. Likelihood: 30%. Timeline: April/May June 2014
2) Fan protests and bad PR turn the tide – not surprisingly, there’s been a TON of fan push-back and semi-impartial press lately. As the saga continues, you can expect those sentiments to get increasingly hostile. At a certain point, even the most strident campaigns and companies give in to pressure. They’ve already taken it into the season, so there’s obviously plenty of resolve there. My guess? Even if they don’t hit their new member levels, if we get into June and are staring mid-season right in the face, given all the bad PR, they’ll be highly motivated to agree to the best deal on the table. Likelihood: 60%. Timeline: by end of June 2014
3) Worst-case scenario – in the unlikely event this turns real ugly, it’s possible Time Warner shuts out the opposition for the duration of the season (or at least far enough into the season where it sadly makes more sense to negotiate for 2015 instead). Likelihood: 10%. Timeline: July/Aug 2014
To be clear, we don’t have a dog in this fight (other than a bunch of friends who can’t watch their Dodger Blue at home). But given all the recent momentum and positive changes in the TV industry, it’s a shame a fair and equitable rate can’t be reached in a timely manner. And big picture, it sets a bad precedent for future licensing deals, which are are only going to increase in frequency as more teams and conferences spin off into their own networks. Here’s hoping Dodger fans can tune into Vin Scully again before he hangs ’em up!
To learn more about Time Warner’s services and how it stacks up to satellite TV, click here.