Los Angeles Dodgers fans who enjoyed watching a rejuvenated team on TV last season may find themselves shut out when the squad retakes the field tomorrow -- unless they subscribe to Time Warner Cable.
The cable company, going live today with a new Dodgers network, hasn’t convinced DirecTV, AT&T Inc. (T:US) or other pay-TV operators to carry the channel, potentially missing almost two-thirds of the second-largest U.S. TV market. At $4-plus a month, SportsNet LA would be the town’s most costly regional channel, packaged on a basic tier that all subscribers must take.
Time Warner Cable Inc.’s 2013 accord for 25 years of Dodgers games, pegged at $8.35 billion by the team and the league, is testing the value of sports programming after a run-up in costs. The company, which agreed this month to be bought by Comcast Corp. (CMCSA:US) for $45.2 billion, needs competitors to sign up and charge their customers for the network to profit.
“This is a record price for a one-team regional sports network,” Chris Bevilacqua, a sports media consultant in New York, said in an interview. “These are not easy businesses. They cost a lot to start up and there is significant risk.”
Helping to stoke fans’ interest, the Dodgers were 7-1 favorites as of yesterday to win the World Series in their third season under owners Guggenheim Baseball Management LLC, according to Vegasinsider.com. The team made the playoffs for the first time since 2009 last year and is ranked as the second most valuable in baseball at $2.1 billion, behind the New York Yankees, in part because of the Time Warner Cable (TWC:US) contract.
Pay-TV systems are pushing back against escalating sports costs in Los Angeles, where three new networks have started in less than two years. They see rising monthly bills driving subscribers to cheaper online alternatives, such as Netflix Inc. (NFLX:US), and want flexibility in how they offer the channel.
“The base price is not fair and reasonable for all families -- sports fans or not,” said Dan York, chief content officer for DirecTV, based in El Segundo, California. “If the base price isn’t fair, then consumers should be able to choose if they want to pay for the games.”
Time Warner Cable wants SportsNet LA to be part of the basic pay-TV package, like Walt Disney Co.’s ESPN, forcing viewers as far away as Hawaii and Las Vegas to take the programming. Some companies, like DirecTV (DTV:US) and Verizon Communications Inc. (VZ:US)’s FiOS, charge an extra fee in areas with two or more regional channels. Generally, consumers subscribe to a package and don’t see itemized charges.
Representatives of Cox Communications Inc., AT&T’s U-Verse and FiOS said their companies continue to talk with Time Warner Cable and are interested in the channel at the right price.
Time Warner Cable, based in New York, is distributing SportsNet LA under an accord with the team’s owners, becoming the exclusive agent for advertising and affiliate sales. The company is also seeking digital rights from MLB Advanced Media, according to David Rone, Time Warner Cable Sports president.
In metropolitan Los Angeles, the company wants competitors to pay less than $5 a month per subscriber for the channel, with the price declining in outlying areas, Rone said in a telephone interview.
That would make SportsNet LA the most expensive regional channel in the market, according to researcher SNL Kagan.
“We think the pricing of the network fits with the value proposition that we are providing to consumers and pay-tv providers,” Rone said.
21st Century Fox Inc. (FOXA:US)’s Fox Sports West, home of Angels baseball and Clippers basketball, charges $1.40 a month, according to SNL Kagan. Fox’s Prime Ticket, the former Dodgers home, costs $3.19, while SportsNet and Deportes, Time Warner Cable’s Lakers channels, cost $3.22. The Pac-12 college channels average 76 cents.
In addition to more than 160 games, SportsNet LA will carry the daily show “Access SportsNet: Dodgers” with news and analysis, the “Backstage: Dodgers” documentary series, “Connected With...” interviews with players and coaches, and retrospectives, including an hour-long “2013 Dodgers: A Whole New Blue,” based on last season’s turnaround.
During the off-season, the network will cover winter league baseball developments, trades and contract signings, according to Stan Kasten, the Dodgers’ president and chief executive officer.
“This is the first time ever that Dodgers fans have a single place to follow the Dodgers 24 hours a day, 365 days a year,” Kasten said in an interview.
The broadcast booth will be staffed by Vin Scully, the Dodgers’ longtime announcer, along with Charley Steiner and former Dodgers ace pitcher Orel Hershiser. Ex-Dodgers infielder Nomar Garciaparra, among others, will work in the studio.
The Dodgers have the highest player payroll in baseball at $228.8 million in 2014, according to BaseballProspectus.com, compared with $194.1 million for the New York Yankees.
As the team takes the field tomorrow in Arizona for the spring training opener against the Diamondbacks, Time Warner Cable also lacks agreements with Charter Communications Inc. (CHTR:US) and Cox. Only Bright House Networks, affiliated with Time Warner Cable, has signed on.
If the parties don’t settle by March 22, when the Dodgers open the regular season in Australia, fans who could see every game last year will have to listen on radio, and Time Warner Cable could try to poach TV subscribers from satellite and phone companies, said Bevilacqua.
The Dodgers channel gives Time Warner Cable, with 1.55 million Los Angeles subscribers, a chance to win some of the 2.76 million customers of DirecTV, Dish Network Corp. (DISH:US), AT&T’s U-Verse and Verizon’s FiOS. Los Angeles had 4.84 million pay-TV subscribers as of mid-2013, according to SNL Kagan, out of a total market of 5.7 million TV households, based Nielsen data.
Officials with Charter and Dish didn’t respond to requests for comment after normal office hours.
Each subscriber Time Warner Cable takes away from a competitor adds about $5,000 in enterprise value to the company, Bevilacqua said. With the large numbers involved, it’s possible Time Warner Cable could add 100,000 subscribers, boosting its enterprise value by $500 million, he said.
“This is a customer retention tool and cost-containment play,” Bevilacqua said. “For every new customer they add, there’s a potential to also offer broadband, telephony and all their other products.”
Rone said his goal is to sign up other pay TV systems.
“Our commitment to the Dodgers and the business proposition of the network is to get the broadest distribution possible,” he said. “We want to serve every Dodger fan in the territory.”
To contact the reporter on this story: Rob Golum in Los Angeles at email@example.com
To contact the editor responsible for this story: Anthony Palazzo at firstname.lastname@example.orgHanley Ramirez of the Los Angeles Dodgers celebrates with fans after the Dodgers defeat the Atlanta Braves in Game Four of the National League Division Series at Dodger Stadium on October 7, 2013 in Los Angeles, California. Photographer: Harry How/Getty Images