What is the Deal with the Dodgers Television Deal?

Are you wondering why you cannot watch the Los Angeles Dodgers with your cable or satellite provider? More importantly, have you pondered why it has taken so long for the powers that be to agree on purchasing and selling the Dodgers television programming to its customers? It comes down to competition: getting beat at it, too much of it, and too little of it. Here are three reasons why your favorite team is seen, but not seen by all:

1.Bubble Buster Competition: The Los Angeles Lakers Entered the Market First

In February 2011, the Lakers announced that they had agreed to a 20-year deal with Time Warner Cable (TWC) to air their basketball games on two channels (English and Spanish). Prior to the Lakers announcement, the Dodgers’ former owner Frank McCourt was discussing the launch of two cable channels in English and Spanish, entitled “DTV: Dodgers Television.” After the Lakers announcement, McCourt scrapped those plans and he eventually left the team when Guggenheim Partners purchased the Dodgers franchise in 2012.

Call it bad timing, but the Dodgers missed a great opportunity to hit the market first. The transfer of power between one owner and another only exasperated the problems to come. The Dodgers did eventually sign a longer deal than the Lakers at 25-years in length, and possibly in dollar value at $8.3 billion, but TWC now had to sell an additional à la carte channel (entitled SportsNet LA) in a full market to its customers and those of other cable and satellite providers, like DirectTV.

TWC sold the Lakers channel to its customers and other provides for what some believe is roughly $2.50-$3.50 per month. The Dodgers channel initially sold for $4.50-$5.00 per month. Even though Charter Communications purchased TWC in April-May 2016 after the Federal Communications Commission (FCC) and the United States Department of Justice (US DOJ) gave antitrust approval bringing more households under the Dodgers umbrella, many fans were still left without the Dodgers television station. Regardless, the market price had been set and TWC’s/Charter’s major competitor, DirecTV, balked at the price. That, however, is not the entire story.

2. Antitrust and Collusion Allegations: Television Provider Competition

Between Hulu, Netflix, Amazon Fire TV stick, MLBTV, the multitude of cable and satellite providers, and the à la carte channel choices from each, television now models Burger King’s “Have it Your Way” slogan. This is a problem in regards to large television deals carrying exclusive television licensing rights. According to the Los Angeles Times, “no games [are] available for free on over-the-air television [and] [a]bout 620,000 homes do not have a subscription to a pay-TV provider.”

Mix in the blender the cost, a multitude of choices in providers and channels offered by those providers, and the fact that many Los Angeles residents do not have pay-TV, you end up with a large population of fans without the ability to watch their hometown team. You also end up with fans and competitors who simply do not want to buy what Charter/TWC are, and were, selling.

What is worse, is that when AT&T purchased DirecTV, a majority of households now only have two major choices in television in the Los Angeles market, Charter or DirecTV. According to the Los Angeles Times, “Customers in about 1.8 million homes in the Los Angeles region that receive TV service from Time Warner Cable and Charter Communications [now one company] have the channel in their lineups. But there are an additional 3 million homes in the metropolitan Los Angeles area without SportsNet LA.”

Charter has since lowered its price to $3.50 for a reported $100 million dollar loss, but DirecTV is still not interested. That is interesting because the price is comparable to other regional sports channels. Here is a price comparison from SNL Kagan via the Los Angeles Times and USA TODAY:

“DirecTV owns the Root Sports Northwest channel, which provides coverage of the Seattle Mariners and two soccer teams. This year, pay-TV operators pay an average cost of $3.84 a month per subscriber home for that channel.” –Los Angeles Times

“Pay-TV providers would have to pay an average [emphasis added] monthly subscriber fee of $4.06 for SportsNet LA versus $2.83 for YES Network, which broadcasts the New York Yankees and Brooklyn Nets, and $4.55 for MSG Network (New York Knicks, Rangers and Islanders, New Jersey Devils). It compares to top basic cable channels such as ESPN ($7.21) and TNT ($1.82).” –USA TODAY

The dispute is now more complicated as the FCC considers the AT&T purchase of Time Warner for $85.3 billion dollars (not TWC, but formerly under the same corporate umbrella), while the USDOJ filed suit against AT&T/DirecTV for antitrust and collusion violations involving the Dodgers Charter/TWC deal negotiations.

Let us further consider AT&T/DirecTV’s dilemma because it is a complicated one. AT&T/DirecTV is currently being sued by the same entity for antitrust and collusion violations for allegedly leaking information to competitors about the Charter/TWC SportsNet LA Dodgers Channel, while simultaneously seeking approval from the same entity for a buyout of a major competitor (Time Warner). And that entity is the US DOJ. It is complicated enough for AT&T/DirecTV to entice a settlement prior to trial?

“Since that deal will require [US] DOJ approval, AT&T will likely settle this suit,” Phil Swann, president of TVPredictions.com told USA TODAY. “There is no way that AT&T will allow the Justice Department attorneys to begin merger consideration with this lawsuit pending,” he continued. “This is of course good news for baseball fans since the settlement will likely include AT&T’s U-Verse and SportsNet LA on DirecTV next season.”

Meanwhile, the US DOJ continues the fight against DirecTV/AT&T with its recent opposition to the defendant’s motion to dismiss. A potential settlement is great news for Dodgers fans. It is also great news for sports fans in general as the federal government fights back so that folks can watch some ballgames.

3. Bad Deal-Making: Lack of Competition in the Charter/TWC Dodgers Deal

So what makes the Lakers’ deal different from the Dodgers? According to Variety:

“[First] TWC is not keeping the channels exclusive to its own subscribers. Rather, it will make them available to all satellite, cable and telco distributors in the Lakers’ territory, which includes all of Southern California, Nevada and Hawaii . . .

[Second] National broadcast contracts on ABC/ESPN and TNT are unaffected, but 2011-12 will be the last season of local over-the-air broadcasts of the Lakers in Los Angeles.”

In contrast, unless purchased for a fee, the Dodgers made their games exclusive to Charter/TWC customers with no other available outlets. Furthermore, unless purchased for a fee, the Dodgers have no national television contracts with ESPN or otherwise. Was it an overreach in betting the television market? Is DirecTV to blame? The judge and jury will be singing soon unless a settlement prevails. Seemingly, as opposed to having too many options in choosing a platform or channel provider, the Dodgers were too exclusive and the fans have paid for it, literally and figuratively.

To recap, did the Lakers play bubble buster? Possibly, but three things are certain:

First, the two new football teams in Los Angeles, the Rams and Chargers, might have a difficult time getting local television deals in a sport that derives its revenues from the national market.

Second, the Los Angeles Clippers and their owner Steve Ballmer clearly learned from the Lakers and Dodgers when he signed a six-year deal in 2016 with Fox Sports Prime Ticket with digital and streaming rights options (doubling the team’s revenue) as opposed to creating a separate channel for Clippers basketball.

Third, the team channel competition is proving to be too much.

“Chris Bevilacqua, a New York-based media consultant in the sports and entertainment field, agrees with many analysts in that, with six regional sports networks costing viewers from $18-to-$20 a month in fees and populating the same Los Angeles market with just the two FSW channels six years ago, the Clippers’ owning their own network appears unrealistic,” writes the Los Angeles Daily News. “At least, one in the traditional sense. But it doesn’t preclude them with getting creative and being the first to make the leap ahead of everyone else in digital, outside-the-box platforms.”

We can surmise, therefore, that not all television providers are created equal, but justice may be coming soon for sports fans while setting some new antitrust and collusion precedent.