Dodgers launching sports TV network
The Los Angeles Dodgers announced Monday their plans to launch a regional sports network funded almost entirely by Time Warner Cable, a scenario one baseball source says is exactly the type of deal MLB had feared: a team setting up a shell company of sorts in order to pay less in revenue sharing.
The new ownership group, which bought the team out of bankruptcy court in April 2012 for a record $2.1 billion, said it has created a company called American Media Productions that will start broadcasting Dodgers games in 2014 on a channel called SportsNet LA. Time Warner Cable, the largest carrier in the area, will be the network's first distributor.
Although terms were not disclosed, the SportsBusiness Journal calls it a 25-year deal worth $7 billion.
"We concluded last year that the best way to give our fans what they want -- more content and more Dodger baseball -- was to launch our own network," Dodgers chairman Mark Walter said in a statement. "The creation of AMP will provide substantial financial resources over the coming years for the Dodgers to build on their storied legacy and bring a world championship home to Los Angeles."
The deal is subject to approval by Major League Baseball, and one baseball source privy to the negotiations told ESPN.com the team and the league could very well butt heads regarding exactly how much of the revenue will be shared with other teams.
TV rights are subject to revenue sharing, and high-revenue teams, including the Dodgers, have to share approximately one-third of their rights fees with low-revenue teams.
As part of the negotiations with the bankruptcy court, MLB agreed that the Dodgers' fair-market value would be set at $84 million a year with 4 percent increases each season.
The Dodgers could keep anything above that assuming the club took significant risk in starting its own network, as stated in the league's current revenue-sharing rules.
But one report says the club is not taking the risk.
Time Warner Cable "has assumed most of the risk around the channel and promised to cover affiliate fees from distributors who refuse to carry it," the SportsBusiness Journal reported.
Time Warner will also be responsible for other programming and will be the exclusive advertising and affiliate sales network of the channel.In essence, the network will serve as a partner making guaranteed payments to the team.
If the Dodgers are indeed determined to not have much risk in the new network, MLB can charge them revenue sharing on top of whatever the total rights fees are equal to. That would include the guaranteed payout Time Warner is making to cover the cost of every cable home in the Los Angeles market that doesn't carry the network.
While the Dodgers say the network's carriage fee has yet to be determined, MLB will be focused on what is agreed to, keeping an eye on whether what Time Warner agrees to pay the team per subscriber is unrealistic. SportsNet LA would be the sixth regional sports network in the L.A. market.
Sources also say the deal, at last glance, included a branding fee that Time Warner is paying the Dodgers to brand the new network. "I've never heard of that," one team source said. "That will be included in the revenue sharing bill, as well."
The deal could also land the Dodgers back in bankruptcy court for an interpretation of baseball's $84 million-a-year rights-fee promise and a determination regarding whether the Dodgers can keep anything above that amount, regardless of the lack of risk -- a decision other big-market teams with sizable TV deals would have their eyes on.