Thursday, December 8, 2011
Dodgers allowed to sell TV rights
WILMINGTON, Del. -- A judge said Thursday that he would overrule an objection by Fox Sports and approve a process for the Los Angeles Dodgers to sell the media rights to future games as part of the team's plan to exit bankruptcy.
U.S. Bankruptcy Judge Kevin Gross said at the end of a two-day hearing that he would approve the Dodgers' plan to sell media rights to games starting in 2014, a key component of a settlement with Major League Baseball that also calls for Dodgers owner Frank McCourt to sell the team.
"I just think it's in the debtors' best interests," said Gross, who told attorneys he would issue a formal written ruling in a few days.
Fox Sports attorney Greg Werkheiser asked Gross to stay his ruling for 14 days so Fox can file an appeal in U.S. District Court.
Gross did not immediately grant the request but noted that he always includes a "courtesy stay" in his rulings. He did not offer any other details.
Under the proposed sale process, the Dodgers would receive initial bids by Jan. 13 and complete the sale by April 30.
Fox Sports objected to the proposed sale, saying it would violate its rights under an existing contract with the Dodgers. That contract gives Fox certain protections, including an exclusive 45-day period starting in October 2012 to negotiate a contract extension with the Dodgers.
"While we are disappointed in the judge's decision, we understand the court process and will appeal this decision to protect our contractual rights," Fox said in a statement. "Those rights are material and valuable, and the current owner accepted them as binding when he purchased the team in 2004."
The Dodgers want to move up the timetable for Fox's exclusive negotiating period, saying a media rights sale now in conjunction with a sale of the team is the best way to maximize value for creditors and emerge from bankruptcy.
Gross appeared to agree with the Dodgers that Fox would maintain many of the same rights under the proposed sale process as it has under its existing contract, including the exclusive negotiating period.
"I am satisfied that the proposed modifications are nonmaterial, and that to me is the key," the judge said.
The Dodgers contend that because of discussions with Fox during the bankruptcy, the 45-day negotiating period started Nov. 30, meaning Fox has less than six weeks to try to renegotiate its contract with the Dodgers.
Werkheiser asked Gross to halt the time clock on the negotiating period until he issues a formal ruling, but the judge was noncommittal.
Dodgers attorney Bruce Bennett also seemed disinclined to go along with the request.
"We're talking about burning up a couple of days," said Bennett, who told Gross he would talk to Fox attorneys and let the judge know by Friday whether the two sides can agree on how much time is left for the negotiations.
Under the proposed sale process, any buyer of the Dodgers would have the ability to accept or reject any media rights deal reached between Fox and the Dodgers' existing management.
In testimony earlier Thursday, Robert Thompson, a former Fox Sports executive now working as a consultant for Fox, said the company has a much greater likelihood of successfully extending its contract with the Dodgers under the existing agreement than under the bankruptcy sale process. He also said the loss of the Dodgers could spell the end of Fox's Prime Ticket regional sports network, which he said will earn about $70 million for the current fiscal year, thanks in large part to the Dodgers.
"There's no single other sports team that I would say creates as much value that allows Prime Ticket to make those profits as the Dodgers do," Thompson said.
Sports media expert Edwin Desser, also testifying for Fox, said the sale of media rights could put Fox at an unfair disadvantage to other potential buyers such as Time Warner by allowing other bidders to see details of Fox's discussions with the Dodgers during the exclusive negotiating period.
"It really eviscerates the exclusivity and confidentiality of those negotiations," said Desser, a former executive vice president for the NBA and chief negotiator of the basketball league's national media agreements.
Desser said he expects Time Warner to "bid vigorously" for the rights to Dodgers games starting in 2014.
"I expect that Time Warner is going to be very interested, and Fox is well aware of that," said Desser, who estimated the fair market value of the television rights to be at least $100 million a year.
The Dodgers sought bankruptcy protection in June after baseball commissioner Bud Selig rejected a new TV deal with Fox that Frank McCourt was counting on to keep the franchise solvent.
The Dodgers subsequently argued in bankruptcy court that auctioning off the television rights to future games was the best way to maximize the value of the bankruptcy estate for the benefit of all stakeholders.
The league joined Fox in opposing such as sale, saying any plan to sell television rights without MLB approval was "dead on arrival" and would spell the end of the club. League attorneys argued that such a sale would breach the Dodgers' existing contract with Fox and provide grounds for termination of the franchise for failure to abide by MLB agreements.
But after battling with the Dodgers over control of the ballclub and seeking to force McCourt to sell the team, MLB reached a settlement last month with the help of a court-appointed mediator.
The settlement calls for the sale of the team, the future media rights and Dodger Stadium, but not the parking lots and land surrounding the stadium, which are owned by a separate company that is controlled by McCourt and not involved in the bankruptcy. The settlement between the Dodgers and MLB gives McCourt sole discretion to sell the parking lots and land surrounding the stadium.
While decrying the secrecy surrounding the settlement, Fox attorneys have questioned the proposed sale deadline of April 30, which also happens to be the deadline for McCourt to pay his ex-wife, Jamie, $131 million as part of their divorce settlement.