Dodgers To Launch SportsNetLA In $7-Plus Billion TV Deal

The Los Angeles Dodgers announced this morning the creation of a new cable television network that will broadcast all Dodgers games and other Dodgers-related programming beginning in the 2014 season. The network, to be called SportsNetLA, will be operated by American Media Productions or AMP, a newly-formed subsidiary of the Dodgers’ ownership group. Time Warner Cable (TWC) will carry the new network in Los Angeles and Hawaii and pay the Dodgers between $7 billion and $8 billion over 25 years for that privilege.

“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 prepared 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.”

Although details of the deal were not released, it is believed TWC will pay the Dodgers in the neighborhood of $280 million per year for the next 25 years. In return, the cable company will control all advertising on SportsNetLA and keep all ad revenue generated by the programming. TWC will also be responsible for convincing other cable operators in the Los Angeles market to carry SportsNetLA.

Major League Baseball has not yet approved the deal, and the league’s approval is not just a formality. Of utmost importance to MLB — and the other 29 teams — is how much of the Dodgers’ annual $280 million rights fee will be counted toward the team’s “Net Local Revenue” under the Collective Bargaining Agreement and, thus, subject to revenue sharing. The court overseeing former Dodgers owner Frank McCourt’s bankruptcy ruled that the value of the team’s new TV deal would be capped at $84 million. MLB contends that the Dodgers should contribute the full $280 million rights fee to the revenue-sharing program if the team bears no financial risk in its new arrangement with TWC.

The difference for MLB’s revenue-sharing coffers would be substantial. As I explained in this post in December, each team contributes 34% of its Net Local Revenue to the revenue-sharing program. Big-market teams contribute an additional amount above the 34%, based on a sliding scale called Performance Factors. If we assume the Dodgers’ overall revenue-sharing contribution each year is 40% of Net Local Revenue, the difference between an annual rights fee worth $84 million and one worth $280 million is $81.6 million. Over the 25-year life of the deal, that’s more than $2 billion. You can be sure the other 29 teams will make considerable noise in MLB’s Park Avenue offices before Commissioner Selig makes a final decision.

Monday’s announcement confirmed news reports that have been circulating for weeks of the Dodgers intent to launch their own local TV network. With the creation of SportsNetLA, the Dodgers will join the Yankees, Mets, Red Sox, and Orioles as teams with ownership control over a regional sports network. None of these teams receives annual rights fees more than $100 million. The Yankees receive $90 million a year, but that figure will rise significantly as a result of News Corporation’s purchase of 49% of YES, the Yankees Sports & Entertainment Network. Over the next several years, News Corp. will increase its equity stake to 80%, which will reduce the Yankees ownership interest, but result in more cash for the Bronx Bombers.

The Dodgers aren’t the first baseball team in the Los Angeles market with a local TV deal worth more than $100 million a year. In late 2011, the Los Angeles Angels entered into a new local TV contract with Fox Sports West. Under that 17-year deal, FSW pays the Angels $147 million per year and the Angels owns a 25% equity stake in the network. The Angels include the entirety of that $147 million in the Net Local Revenue for revenue-sharing purposes.

The explosion in local sports TV deals in recent years has experts wondering about an unsustainable bubble. Right now, local sports programming is the gold standard in value because it is DVR-proof. Viewers watch games live with no ability to skip over commercials. That makes the sports-watching audience more valuable than other TV viewers, and justifies higher ad rates. But ad revenue isn’t sufficient to cover the cost of these new deals. That puts pressure on the regional sports networks to charge higher and higher “carriage fees” — the amount the cable and satellite operators pay to carry the network. Those carriage fees are then passed on to consumers.

The New York Times reported last week that TWC subscribers can expect to see a $4 to $5 increase in their monthly cable bill as a result of its new deal with the Dodgers. That’s on top of the rate increase TWC imposed in the fall to pay for its new 20-year/$3 billion TV deal with the Los Angeles Lakers. Viewers who purchase cable or satellite TV for non-sports programming are starting to bristle over their skyrocketing bills. But a la carte programming — where viewers pay only for the channels they want — is still a ways off.

For now, the Guggenheim Group’s $2.3 billion purchase of the Dodgers appears justified by the launch of SportsNetLA. Even if MLB forces the Dodgers to share more than $84 million per year with the rest of the league, the new owners will enjoy a significant return on investment.

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Wendy writes about sports and the business of sports. She's been published most recently by Vice Sports, Deadspin and You can find her work at and follow her on Twitter @hangingsliders.

24 Responses to “Dodgers To Launch SportsNetLA In $7-Plus Billion TV Deal”

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  1. Joeyheynow says:

    Keep increasing that payroll

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    • DodgersKingsoftheGalaxy says:

      Ahhh….if you look back and see how cheap they’ve been the past 10+ years then the payroll isn’t ridiculous at all.

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  2. astrostl says:

    “Time Warner Cable (TWC) will carry the new network in Los Angeles and Hawaii and pay the Dodgers between $7 billion and $8 billion over 25 years for that privilege.”

    Which makes me wonder – what if a non-TWC form of media distribution ends up drinking TWC’s milkshake within oh, say, *the next 25 years*? If I owned the Dodgers, I wouldn’t relish the thought of holding the long-term player contract bag when the media income upon which it depended was suddenly vaporized. Of course, maybe it won’t happen. But maybe it will. 25 years is a long time, man.

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  3. Weznoth says:

    Who gets the cable subscription fees for the new channel? Dodgers or TWC? You mention TWC gets the ad revenue but a significant portion of revenue from cable is generated through subscription fees from cable distributors. I could see this new channel getting something like $.50-$.75 per cable subscriber. If it reaches 20 or so million homes that’s $10 million a month.

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    • Wendy Thurm says:

      I explained that in the para. beginning “The explosion in local sports TV deals . . . ” TWC gets all ad revenue AND carriage fees. The carriage fees are then passed onto the customer in the form of higher monthly cable or satellite bills.

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  4. Ben says:

    I’m not sure how we can be in anything but a bubble. Does anyone really expect the current TV model to last 25 years?

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    • fergie348 says:

      The cable behemoths are quite literally banking on it. It’ll probably blow up on them at some point, but for now they’re doing a heck of a job at stonewalling technological progress..

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      • Ben says:

        Kind of. But an entire generation is transitioning to living without cable, and even my parents are. Anecdotes don’t make a trend, but when my 50something dad is asking about “those Roku things” their models don’t sound like they’re in great shape.
        I wonder if the blackout lawsuit will blow up this whole thing real soon.

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    • hal p says:

      I think the cable companies are trying their best to leverage these deals into sustaining the current TV model for as long as they can. 25 years might be just long enough for people to hang onto their cable subscription (“for the [insert team]”) before everyone is forced to enter a new era of televised programming (be it a la carte, streaming or whatever). My guess is most of the value for these long-term deals is earned in the first 5-10 years, and the rest of the value is leverage either to (a) force people to stay with cable for longer than they otherwise would or (b) when we enter the next era, the cable cos are still getting a cut somehow (so no team can move to the “Louis CK”/direct-to-fan model without giving the rightsholder something for it).

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  5. DodgersKingsoftheGalaxy says:

    ” is still a ways off.” I loled, this is assuming we will EVER see a la carte. It’ll just be a dance between holding the price or risk more people cutting the subscription.

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  6. Antonio bananas says:

    Lol this is going to be hilarious in 5 years. People looking for cheaper ways to watch the exact shows they want with minimal ads. Cable companies answer? Pay entities an enormous amount of money over a quarter century and charge people more. Yea ill stick to my, proxies, Hulu, redbox, Netflix, and other means of entertainment. You can keep your 90% garbage package.

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    • If they did a la carte they would definitely get my business as you noted above. I don’t even pay for Cable anymore nor have any desire to ever, not with Netflix having on demand shows/movies commercial free for far cheaper prices.

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      • Antonio bananas says:

        And more importantly, you can watch whenever. Sports is a unique good in that, it loses its value drastically after it happened, but having all the negatives with cable and sports are not dependent on each other. The path of least resistance to most people under 40 for their video entertainment needs is probably not going to be cable. It will be dead in 25 years and have a big nasty tumor within 10.

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  7. pft says:

    Sounds good now, but after 25 years 280 million won’t buy you much more than a hill of beans. The inflation adjusted weighted average is more like 150-200 million less 34% revenue sharing, or 110-130 million per year.

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    • Antonio bananas says:

      True, and you only did, unless I’m mistaken, the normal rate of inflation. Baseball is much faster (for now).

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  8. Michael22 says:

    My big question is, when will they start hiring!

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  9. Me says:

    People keep bringing up the cable cutters when these deals happen, but what no one ever thinks of is if people keep streaming their tv and not paying for cable, the cable guys will just put in a data cap. You want unlimited data, pay for TV, otherwise you get 50 gb or whatever. That will really suck for the people on satellite unless an agreement is made though.

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  10. True North says:

    Correction. The Blue Jays are owned by Rogers Media which controls 4 regional sports networks up here in Canada.

    So include them on the list of teams which own a broadcaster. It’s widely assumed that Rogers buries revenue from its baseball operations into other aspects of its business which include magazines and is one of the countries largest cell phone and cable providers.

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  11. maqman says:

    Guggenheim Partners have now set a new paradigm for MLB team ownership and valuation, the other owners should kiss their feet. Now the deal is inked I would expect Dodgers player costs to start to deescalate. The additional major boost in exposure for the Dodger brand from the ancillary programing to the live game content and the increased distribution to places like Las Vegas and Hawaii is going to be significant. This also ups the stakes involved in the local blackout lawsuit.

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  12. Jerry says:

    Great idea but leaves out so many fans. What about those fans who do not live in the LA area and will not be able to take advantage of the new site. Maybe you should consider hooking up with DirecTv.

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