Time Warner Cable Inc said on Monday it will carry the new Los Angeles Dodgers television channel, outbidding Fox Sports, which held the rights to show Dodgers games for more than a decade.
The Dodgers ownership group will control the channel, becoming the latest sports franchise to own all or part of its own regional sports network, ensuring ongoing television profits in addition to the lucrative revenue from cable operators.
The channel, to be called SportsNet LA, is scheduled to begin airing Dodgers games at the start of the 2014 baseball season. The channel will be available in southern California and Hawaii.
Terms of the deal were not disclosed. The Los Angeles Times had reported the deal could be worth between $7 billion to $8 billion over more than 20 years. It is the latest in a string of expensive contracts with media and cable companies for the rights to carry popular sports events.
The trend showed no sign of slowing down, analysts said. "Live sports fare will continue to hit the ball out of the park. There is currently no end in sight to the ever-escalating cost of high demand live sporting events," said Magid Associates television consultant Steve Ridge.
The agreement came two months after Fox parent News Corp said it was buying a 49 percent stake in the YES Network, the regional home of New York Yankees baseball games.
Horizon Media analyst Brad Adgate said the Los Angeles and New York deals reflected the rising value of sports rights for top names in sports, but did not mean demand is the same in smaller sports markets.
"There's very much an appeal for live sports but in smaller markets like Kansas City or Pittsburgh, the deals will be a little more modest and affordable," Adgate said.
Regional sports channels broadcast games from teams that ESPN and other national sports networks do not always carry. The scramble for regional sports rights reflected the broader competition in the national and international sports markets as well.
On the national level, Fox and Turner Broadcasting signed an eight-year broadcast deal with Major League Baseball last October worth up to $7.4 billion.
Time Warner Cable will be the main distributor of the channel and control advertising sales and affiliate agreements, according to a statement. This means the cable company is permitted to sell the channel to pay TV competitors in Los Angeles, such as DirecTV, Dish Network Charter Communications, Verizon Communications Inc and Cox Cable.
Brean Capital analyst Todd Mitchell said Time Warner Cable is spending heavily to capture area sports teams because Los Angeles, one of its biggest markets, has faced significant competition from satellite operators such as DirecTV.
DirecTV's programming chief Dan York said in a statement that DirecTV wants to carry the Dodgers channel "in the future, but when the time comes, we will need to carefully evaluate the price/value relationship."
Cox Cable spokesman Todd Smith declined to comment on whether Cox would carry the channel. He said that only 5 percent of Cox's customers watch games on regional sports networks and said these new networks have become a "major problem" in terms of costs for distributors.
DISH and Charter did not immediately respond to a request for comment. Verizon declined to comment on whether it was talking to Time Warner Cable about carrying the channel.
Time Warner Cable has about 2 million subscribers in the area, while the next largest provider, DirecTV has about 1.2 million, according to SNL Kagan research.
The Dodgers group and Time Warner Cable said the agreement is subject to certain closing conditions.
The Dodgers were acquired for $2.15 billion in March 2012 by a group headed by executives of private investment firm Guggenheim Partners that included former basketball star Earvin "Magic" Johnson, Hollywood producer Peter Guber and Stan Kasten, a long-time baseball and basketball executive.
This is the second time that Time Warner Cable beat News Corp's Fox for L.A. sports rights. In 2011, it outbid Fox, agreeing on an estimated $3 billion, 20-year deal to carry Los Angeles Lakers basketball games on its newly minted Time Warner Cable Sports channel.
Time Warner Cable Sports, the regional sports network that carries Lakers games, has carriage agreements in place with several distributors including DirecTV, Cox Communications, Charter Communications, Verizon and AT&T Inc, which means it collects fees from them.
But Time Warner Cable, the country's second largest operator with more than 12 million subscribers, has also been a vocal critic of rising programming costs. Its executives have said that one reasons it is signing these expensive contracts is to guarantee access to sports programming at a reasonable cost over the long term.
Dodgers games currently air on Fox's Prime Ticket network, and Reuters reported that Fox had bid to renew its contract with the team.
Fox Sports and Time Warner Cable clashed last April, when the cable operator decided against paying the $3.95 per-subscriber monthly fee that Fox Sports San Diego charges cable and satellite operators to carry the channel. Fox controls the rights to San Diego Padres baseball games.
Lingering animosity between the two companies could carry over to likely negotiations between Fox and Time Warner Cable to extend the cable operator's contract to carry the Yankee Entertainment and Sports (YES) network, which holds the rights to Yankee baseball and Brooklyn Nets basketball games, according to one person with knowledge of the arrangement.
News Corp paid $500 million in November for a 49 percent stake in YES, and will operate the cable channel for partners that include team owners and other investors.
That deal puts Fox in a position to extract increased fees from Time Warner Cable when its deal to carry the channel expires in the first quarter of 2014, the person said.
Time Warner Cable could ease the conflict by agreeing to allow KTTV, Fox's local broadcast station in Los Angles, to broadcast some games that the Dodgers would offer to non-cable and satellite subscribers, the person added
The person said that neither the Dodgers nor Time Warner Cable have raised the subject with Fox.
(Reporting by Liana B. Baker in New York and Lisa Richwine and Ronald Grover in Los Angeles; Editing by Peter Lauria, Jeffrey Benkoe and Tim Dobbyn)