How the Dodgers' $8.3B TV deal turned into an unmitigated disaster

MLB columnist
Yahoo Sports

Let’s get one thing straight, as the parties involved in the Los Angeles Dodgers’ unmitigated disaster of a local television deal invoke the unblemished name of an 88-year-old man in an effort to curry goodwill they themselves have spent more than two years flushing down the toilet: This is the consequence of greed, myopia and stubbornness, and no amount of pandering can placate the fans suffering because of it.

The Dodgers, Time Warner Cable, the commissioner of baseball and even the mayor of Los Angeles on Wednesday orchestrated a four-pronged attack to try and shame DirecTV and others into offering to their customers the network that broadcasts Dodgers games. They said it would be wrong if Dodgers fans didn’t get to watch the final season of legendary play-by-play man Vin Scully, ignoring that most of them missed the previous two seasons because the $8.3 billion Time Warner promised the Dodgers for 25 seasons of local rights meant excessive costs transferred to the consumer.

And that’s really the lesson in this Dodgers snafu, an unnaturally large microcosm of how the sports industry has transformed in the last quarter-century. The smartest executives saw the power of TV money, whether national for the NFL or local in baseball, and hoarded it like a prepper does gold. As teams celebrated their newfound bounty, those with cable and satellite subscriptions bore the brunt of the cost.

The system makes companies like Time Warner glorified middlemen. They shovel out beaucoup bucks to the teams, recover even more from the monthly fees for putting the channel on all their packages and end up with a nice profit for the risk they took in guaranteeing the teams their cash. At least that’s how it’s supposed to go.

Because Time Warner promised the Dodgers such an exorbitant sum, it wanted $4.90 per month from other providers for the right to broadcast SportsNet LA – an extra Abe that neither DirecTV nor any of their cable brethren were willing to charge their customers. So Dodgers games existed only for Time Warner customers, and the rest of the Los Angeles area was faced with a choice no company wants to foist on its consumers: get it illegally or don’t get it at all.

This is the consequence of sporting avarice, of teams valuing their TV rights above all and either ignoring or simply not understanding the changing landscape of content and how it was bound to turn this deal into a lemon. The Dodgers are still getting their money, and it’s enough that they’ve yet to shift their disappointment toward Time Warner for not fulfilling its end of the deal. Time Warner is taking a reported $100 million-a-year bath, which prompted it to cut the monthly asking price this week to a more reasonable $3.50 a month – a number at which DirecTV and others continue to balk.

Because the reality of content today is quite simple: You can get almost anything you want a la carte. And that is a powerful, emboldening truth bulldozing traditional cable companies’ business plans. Around 24 percent of Americans don’t have cable or satellite, according to a 2015 Pew Research Center study, and that includes 15 percent that are so-called cord cutters. The demographics on them, in particular, are frightening for baseball.

While those 83 percent of those 50 and older have cable or satellite and same goes for 73 percent ages 30 to 49, less than two-thirds of adults 18 to 29 have cable or satellite service, according to the Pew study. A large portion of the younger generation – the one baseball so desperately covets – is outright rejecting the model by which the sport distributes its most valuable product: day-after-day game coverage.

And thus the saber-rattling Wednesday. Time Warner offering a one-year deal to other providers at a 30 percent discount from its previous asking price was enough to prompt commissioner Rob Manfred to release a statement: “The distribution dispute involving DirecTV, AT&T, COX and Verizon has gone on too long. The Dodgers’ massive fan base deserves to be able to watch Dodger games regardless of their choice of provider. The situation is particularly acute given that this is Hall of Fame broadcaster Vin Scully’s final season. Time Warner has made a significant economic move that I hope will be accepted by the providers.”

The first sentence is right. So is the second. And the third. It’s the last one that conveniently ignores Time Warner’s most important economic move: the one in which their inability to understand the disruption of their industry had the unintended consequences of essentially blacking out a social institution in the country’s second-biggest city.

There was talk of a sports-rights-fee bubble long before Time Warner and the Dodgers entered into their agreement, and perhaps this is a sign that it’s pop is coming. The more people shift to a-la-carte programming, the less vital cable monopolies become. The fewer customers cable companies have, the higher price their customers are charged for existing services. There is a tipping point. It’s close. And once it happens, other teams’ local-TV deals could be a mess just the same.

Cord cutters are a legitimate threat to baseball, as Manfred acknowledged earlier this year in an interview with Yahoo Sports earlier this year: “Anything that interrupts that model is something we have to worry about. Having said that, I do think our over-the-top capacity at BAM [MLB Advanced Media] and BAM Tech gives us downside protection that is a little more robust than other businesses.”

In other words: Baseball’s streaming technology platform – the same one that the NHL, HBO and plenty more use – could turn MLB into a content distributor similar to Netflix or Hulu. Considering the success of MLBAM in particular, the likelihood of this is not as far-fetched as one might think for a sport that struggles with drawing a more youthful audience.

Still, the fear inside the sport is palpable. Not just in Los Angeles that fans will miss another season of televised games but other places that the slow death of bundled packages could coincide with their own financial reckoning. It’s no wonder the institutions that have the most to lose are banding together and trying to make DirecTV and others out to be the bad guy.

On the contrary, this is the free market at work. If there were enough demand to make it worth DirecTV or any other company’s while, they would subscribe to SportsNet LA. There isn’t, not yet, not at this price, no matter how much sweet talking the cabal does to make it seem like it’s on the right side. They’re simply businessmen frightened their business plan is about to blow up, and that will send anyone scrambling.

The future of baseball almost certainly includes a centrally distributed package from the league that covers in-market games. This year offers a beta run with local streaming for the first time. Right now, to stream in-market games on devices or TVs, you need a cable or satellite subscription. How long it takes for baseball to scrap the cable-or-satellite expectation – particularly how baseball gets there – are the tough questions, the ones smart men and women spend their days considering.

However it happens, one can hope it’s friendlier for consumers than the broken cable model. Just look at the Dodgers. Or, as the team and Time Warner and everyone involved have made sure the last two years, don’t.

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