Q. I’ve read your articles on the Sports TV Bubble and find them very interesting. I live in LA. Do you think that SportsNet LA will eventually go bankrupt because it can’t get DIRECTV to carry it? — Sid, Santa Monica, California.
Sid, thank you for the kind words. Yes, I believe we are approaching a Sports TV Bubble that will soon burst.Basically, the sports networks have paid too much for the rights to carry leagues and teams and they can’t offset their expenditures any more because pay TV providers are refusing to pay up.
That’s why the Yes Network, which carries the Yankees, hasn’t been on Comcast since last October and it’s why SportsNet LA, which carries the Dodgers, is only available in about 40 percent of homes in the Los Angeles market.
As for SportsNet LA, I believe the channel faces financial peril if it can’t get more providers to carry it in the next year or two. Time Warner Cable agreed to pay the Dodgers $8.35 billion over 25 years for the rights to their games. There’s no way it can come close to recouping that investment if the only major providers in the area that carry it are Time Warner Cable and its merger partner, Charter.
DIRECTV is not carrying it. Dish is not carrying it. AT&T is not carrying it. Cox is not carrying it. And so on. They all say SportsNet LA is asking for too much money, which is not surprising because TWC needs the money to pay the Dodgers.
When Charter takes over TWC in the coming weeks, it might lower the price. But if it lowers it too much, it will take a bath because of those big Dodgers payments. And there’s still no guarantee that all, or any, of the major providers will sign on.
Bottom line: It does not look good for SportsNet LA unless Charter and TWC come up with some creative approach to entice the providers to carry it. I don’t know what that is, of course, and obviously neither does anyone else. (But I wonder if Charter/TWC will eventually have to try to sell a stake in the channel to AT&T to ensure carriage by both AT&T’s UVerse and DIRECTV.)
Short of some out-of-the-box solution, SportsNet LA may need to declare bankruptcy to stop the payments to the Dodgers. It would be the only way to stop the financial bleeding. If that occurs, it will have a major impact on the team because it couldn’t rely on that handsome annual payment any longer.
But in the long run, the team would adjust and a new TV contract would be created, one which everyone could live with.
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