For the second straight season, the highest-paid baseball team in history can’t be seen legally by more than 70 percent of its viewing audience, and everyone involved seems more than content to let the impasse fester on. Every last bit of it reeks of greed from Time Warner Cable, the Los Angeles Dodgers and Major League Baseball, who have skipped past the stage of caring about the team’s fans and sequestered themselves inside a bubble where this is still a fight worth fighting.
It must be lonely in there. Because the inevitability of change, of admitting this is a lost cause that needs to be remedied, grows more evident by the day. Time Warner promised $8.3 billion for 25 years of local TV rights for the Dodgers. It was a ridiculous overpay that forced an ask of around $5 a month from other Los Angeles-area pay-TV providers to carry SportsNet LA, the network that broadcasts the Dodgers. Every satellite and cable provider refused.
Gridlock ensued, the sort that even for an Angeleno looked ugly. The calculus was simple: Time Warner wants an over-market price for a product whose customers don’t demand it enough to warrant that. Lowering the price would worsen what’s already a disastrous investment, with reported $100 million-plus annual losses for Time Warner.
MLB is standing by Time Warner for now, kind enough to run a propaganda website called I Need My Dodgers. Rather than take a stand against such systematic blacking out, MLB prefers to protect the sanctity of its lucrative local-TV deals, an understandable position if the league’s prime motivation at this point weren’t growing the game. Shutting out more than two-thirds of fans in the second-biggest TV market in the country with an eminently marketable, interesting, enjoyable team isn’t just counterintuitive. It’s puzzling.
Stuck in perhaps the worst position are the Dodgers – a position of their doing, no question, because they chose to chase the money Time Warner was offering and understood the monthly nut Time Warner would need to make its profit. In the regional-sports network business, the general rule says about 80 percent of money comes from subscriber fees and 20 percent from advertising. With an estimated 4.7 million pay-TV homes in Los Angeles, getting into them at $5 a month clears $282 million a year. Even at $4 a month it would more than cover the $200 million-plus annually Time Warner owes the Dodgers in the early years of the deal.
The longer they wait in hopes DirecTV and Dish Network and local cable companies relent and pay the asking price for SportsNet LA, the more the ...
1) Los Angeles Dodgers are saying that TV penetration doesn’t matter so long as checks are cashing. Dodgers owner Mark Walter told the Los Angeles Times earlier this spring the team has no plans to renegotiate its deal with Time Warner, putting the impetus on Time Warner to figure out how to profit while siphoning off the Dodgers’ annual take.
Although the stalemate grows worse by the day, the fear that this could turn into another CSN Houston – in which Comcast’s regional sports network (RSN) with the Astros ran into similar carriage problems as SportsNet LA and ultimately declared for bankruptcy – is not yet there. Considering the evolving pay-TV landscape, with Comcast-Time Warner and DirecTV-AT&T mergers in the offing, the future is murkier than ever, and even a little fear would be healthy.
To bet on SportsNet LA, as the Dodgers continue to, is a considerable risk. Mounting frustration exists. Brand awareness lessens with every game not shown on TV. Forcing fans to miss what could be Vin Scully's final season is treasonous. While the feelings of disappointment are difficult to measure, they’re certainly palpable among a fan base missing the prime years of Clayton Kershaw and Yasiel Puig, a pair of players …
2) Major League Baseball itself is marketing around. Expanding the game is new commissioner Rob Manfred’s greatest imperative, which makes the league’s tack with the Dodgers as well as another avenue for potential growth dangerous.
Currently, MLB and all of its RSNs are tussling over in-market streaming rights. The price for them is unclear because live video on phones and tablets would be a new product – local games are not yet available on mobile devices – but they’re valuable enough that MLB is willing to fight its partners and rainmakers over them.
At issue is simple: Whether the RSNs get exclusive streaming rights to in-market games or if MLB and its At-Bat app also get to participate in streaming. The desire for the RSNs to use their own apps, like Fox Sports Go or CSN Live Extra, is significant, as is the concern that MLB simultaneously streaming games would cut into their products’ potential profitability. In addition, the pay-TV carriers want a chance to use their streaming products, too, inserting a third wheel into a situation where two is already a crowd. MLB and Dish Network agreed in late March to a deal on in-market streaming, potentially carving a path for other providers – and, eventually, RSNs – to follow.
In the end, it’s the same story as the Time Warner fight and the ridiculous out-of-market blackouts that remain despite litigation aiming to overturn them: Money trumps all. That could be the tagline for the main-event bout between the ...
3) Washington Nationals and Baltimore Orioles that continues over local TV rights a decade after Nats moved to Washington, D.C.
In order to placate Orioles owner Peter Angelos, who ceded his team’s territorial rights to allow the Nationals to play in the capital, MLB granted Baltimore an 86 percent stake in the Mid-Atlantic Sports Network, which owns rights to both Orioles and Nationals games. The deal said Baltimore would pay Washington a fair-market rate for the rights from 2012-16, a clause that, considering Angelos’ litigious nature, was an invitation for this to land where it has: in court.
A group of MLB owners ruled the value in the range of $60 million a year. The Nationals asked for nearly $120 million, while the Orioles offered somewhere in the $35 million to $45 million range. Still, the Orioles considered the ruling unfavorable, refused to pay and now are embroiled in a fight that Manfred has inherited from his predecessor, Bud Selig.
Like Selig, Manfred said publicly the dispute will soon end. Remember, Selig, in a letter obtained by the Hollywood Reporter, threatened to “not hesitate to impose the strongest sanctions available to me” were the fighting to continue. Both teams called his bluff and have kept fighting, and it’s particularly onerous for the Nationals, whose success would warrant an open-market deal a lot closer to what they asked than what Baltimore wanted. The longer they wait, the more they run the risk the ...
4) Chicago Cubs share: The TV rights bubble will pop before they lock in a monstrous contract like the Dodgers or Yankees (whose YES Network deal with Fox Sports could come close to the size of Los Angeles’) or the Phillies ($5 billion over 25 years with Comcast).
After opting out of a long-term deal with WGN for a portion of their local TV rights, the Cubs re-signed for five years, which was intentionally short: A contract with Comcast for the other portion of their local rights ends in 2019, too, allowing the Cubs a half-decade to build their own RSN and cash in like the Dodgers, Yankees and Red Sox.
Considering some of the Cubs’ young core should be nearing free agency around that year, the timing is perfect, too. Between the TV deal and a renovated Wrigley Field, the Cubs will be printing money, enough to compete with the ...
5) St. Louis Cardinals, who are the most understated cash cow in baseball. Last season, according to Forbes, the Cardinals generated nearly $300 million in revenue despite a local-TV deal that pays pennies compared to other markets.
The biggest money goes to the teams with the largest potential subscriber base, and that is the test St. Louis will face in its current negotiations with Fox Sports Midwest, which the St. Louis Post-Dispatch first reported last month. The Cardinals draw massive TV ratings, which helps on the ad-sales end and could prompt a high carriage cost for Fox Sports Midwest, but ultimately St. Louis is the 21st-biggest market in the game.
Surely the Cardinals’ deal will exceed $1 billion, considering they’re presently slated to make around $30 million a year. It’s a handicap, though, compared to the less-popular …
6) Arizona Diamondbacks fetching $1.5 billion or the Seattle Mariners getting $2 billion for their rights. Phoenix is the 12th-biggest market in the United States, Seattle-Tacoma 14th, and even if neither boasts the success of the Cardinals nor the following, size matters.
Both also did their deals amid the uncertainty of TV going forward. Every time a customer pulls the plug because of exorbitant cable bills, it prompts another sound of cable’s death rattle. Modern customers want choices, not bundles, and with a-la-carte programming not just the future but the present – hello, HBO Now – a scenario in which RSNs lose their monthly subscriber fees and need to scramble to sell directly to customers looks far likelier than it did even a year or two ago.
There’s Amazon and Netflix and Hulu and YouTube and plenty of excellent niche services that make bundling look like what it is: a product that makes you pay for things you don’t want. Cable companies will argue prices go up otherwise, but free markets tend not to work that way. If something has demand and is priced fairly, people will buy it. And knowing that, the ...
7) Tampa Bay Rays and Cincinnati Reds may be a good litmus test. Both the Rays and Reds have local-TV deals set to expire after the 2016 season, and they’re positioned in spots vital to baseball’s sustained success going forward.
The reason the Rays have not moved despite their disaster of a stadium is rather simple: Tampa-St. Petersburg is the 13th-biggest TV market in the U.S., bigger than the Twin Cities, Miami, Cleveland, Denver and others. With a new TV deal, the Rays finally will have a chance to generate the sort of money necessary not just to compete but survive when other teams are printing it.
While the Rays get to define how unbundling could affect the mid-market teams, Cincinnati will set the floor for teams going forward. It is the second-smallest market in baseball, ahead only of Milwaukee, and the Reds’ long-term commitments to Joey Votto and Homer Bailey seemed to indicate even the lowest ends of TV money will be lucrative. Which means that while the ...
8) Detroit Tigers aren’t exactly looking at Cubs money, the reported expiration of their deal in 2017 could triple or even quadruple the $40 million a year they currently reap so long as the market is robust.
Other teams anticipate a relative austerity plan for the Tigers going forward as owner Mike Ilitch grows older and potentially transitions out of decision-making role, and if such prophesies prove accurate, TV money would go a long way to keeping them competitive in free agency and with player retention. Even if the Tigers play in the 11th-biggest market, they often act like New York and Boston and Chicago and Los Angeles, the baseball bourgeoisie. The Dodgers ate more than $100 million in Carl Crawford and Josh Beckett’s contracts only so ...
9) Adrian Gonzalez could play in Los Angeles. And, no, Gonzalez doesn’t exactly fit the theme of this 10 Degrees, but it would be foolish to ignore anyone who finished the first week of the season with an OPS over 2.000. No longer is Gonzalez on pace to hit 270 home runs – he’s at a measly 135 – but another multi-hit day Sunday left him hitting .609/.667/1.391 the first week.
Others worth mentioning:
- The otherworldly Miguel Cabrera, whose 4-for-4-with-a-walk Sunday raised his slash line to .520/.586/.840 and helped push the Tigers to one of two perfect starts.
- The other 6-0 team: The defending AL champion Kansas City Royals, who as a team are hitting .327/.398/.537 – behind only Detroit (.355/.433/.550) in all three categories.
- Those chasing Gonzalez and his five home runs for power supremacy: Kansas City’s Salvador Perez, Detroit’s J.D. Martinez and a pair of Reds, Todd Frazier and the resurgent Joey Votto, each with three.
- Not to forget pitching, because there’s a lot more of it than good hitting, but two of the most impressive first weeks belonged to two men who stand to make themselves a small country’s GDP this offseason: David Price and Johnny Cueto, both free agents to be, both with a pair of strong starts and good peripherals, both who would look awfully good in ...
10) Los Angeles Dodgers blue. With the Yankees’ first week not exactly inspiring hopes of a resurgence this season, the Dodgers assume the mantle of baseball’s glamour franchise, with the $275 million payroll to match. How MLB and the Dodgers can sit around while the season begins and accept that this team can be seen only if a fan goes through the hassle of switching to Time Warner Cable, which is up there with the IRS, Nickelback and Justin Bieber in terms of universal hatred, boggles the mind.
Fed-up fans already are traversing the nonsense by paying $5 a month for an IP-spoofing service that tricks servers into thinking the person’s location is in another state, thus allowing Dodgers games to be streamed through out-of-market packages. It’s a wretched indictment when a company forces customers to resort to such chicanery simply to consume its product.
In the meantime, Time Warner has started charging customers a “sports-programming fee” of $2.75 a month because, well, it can. This is the epitome of hubris, the pride before the fall, a company taking its own bad decisions out on the people it expects to purchase its services. Surely the Dodgers are thrilled to be betrothed to such a partner for the next two decades.
All of this could end tomorrow, but that presumes that the Dodgers are willing to trade present and future monies for good will. Unfortunately, good will does not cost much. The Dodgers drew 3.8 million fans last year. They’ll well exceed 3 million this season. Business is good, at least in that vacuum, where it’s easy to forget about those who can’t go to games and simply want to watch.
It’s 2015. That’s not too much to ask.