Few consumers are welcoming the new Los Angeles Dodgers/Time Warner Cable TV deal because they’re going to get screwed out of more hard-earned money per month. They can thank Guggenheim Partners which bought the Dodgers with an ownership group including Magic Johnson and Peter Guber for $2.15 billion last year. Guggenheim plans to carry the games on a new regional sports network it’ll own called SportsNetLA. It’s got Time Warner Cable doing the heavy lifting as its charter distributor, exclusive advertising and affiliate sales agent, and channel operations manager. But now there’s a problem: the January deal has yet even to be submitted to Major League Baseball for approval. The reason is that MLB wants to know exactly what its cut of the $7 billion, 25-year television deal will be. And Guggenheim looks like it’s trying to pitch curveballs to the league. Trust me, if you think Hollywood studios are greedy, you’ve never seen sports team owners or their leagues. So this is greed vs greedier vs greediest.
To summarize what’s in dispute, the current collective bargaining agreement’s base portion of the revenue-sharing plan calls on MLB teams to contribute 34% of net local revenue. But the way that figure gets calculated is becoming increasingly blurred by stuff like these regional sports networks and who owns them. Guggenheim’s deal is even blurrier. So now everything from rights fees, naming rights, guaranteed carriage money, and other revenue expected to go into Guggenheim’s wallet can be picked by MLB’s revenue-sharing plan. That’s the crux of the delay. Why didn’t Guggenheim forsee this? [ESPN on Thursday explained it very well here.] None of this would have been in dispute had Guggenheim taken the straightford but still gynormous Fox Sports deal on the table first.
News Corp wanted to continue in business with the Dodgers. At one point it owned the team and pays about $40 million a year to broadcast the games. But that contract expires this year. In fact, the Fox Sports offer was just $100M behind Time Warner Cable’s. But News Corp execs are still furious at Guggenheim’s Todd Boehly who conducted the Dodgers negotiations and according to insiders never seemed to know what he should do. (“He was the strangest man I’ve ever dealt with,” one exec puzzled.)
Boehly led the media giant into thinking it had a deal during an exclusive negotiating window, and then let News Corp twist in the wind. While Fox wanted the team for its new national sports network which starts August 17th to rival ESPN, Time Warner Cable needed the Dodgers more to pair with its 20-year LA Laker deal and as a hedge against retransmission fee hikes. In the end Boehly opted for the riskier SportsNetLA deal for Guggenheim – he’s a part-owner and expects more reward if the gamble pays off – than the sure thing with Fox Sports.
Problem is, no amount of big money can put the Dodgers at the same status level as, say, the Yankees. And then there’s the disgrace of what this deal is doing to consumers and their love of sports. Any day now enough viewers will hate on the Dodgers deal and give up watching to force an end to this price gouging.