EXCLUSIVE: Fox Closing In On Dodgers’ TV Rights; ‘We’re Out’ If Not Done By Nov. 30

UPDATE: Not so fast. The deal didn’t get done and now Time Warner Cable is hot and heavy into the negotiating mix. Fox is pissed, to say the least.

EXCLUSIVE:  It seems strangely logical that the highest-priced sports team in the world is about to score the richest TV deal ever in pro sports history. Insiders tell me that Fox Sports is close to clinching the exclusive TV rights for the Los Angeles Dodgers by paying between $6 billion and $7 billion over 25 years to put the team on its regional sports network in Southern California and of course its national Fox Broadcasting Company. Fox already shows the games on its Prime Ticket local cable channel but also has Fox Sports West here.

The previous agreement expires at the end of next season, and saw Fox Sports paying only about $40 million per season for the Dodgers TV rights. There was speculation the final price would just go north of $150 million per season. This new deal soars to $280 million per season (the average for the life of the contract). The huge outlay by News Corp demonstrates the increasing value of sports to its bottom line, while the huge payday for Guggenheim offsets the record-setting $2.15 billion price paid for the Dodgers.

Related: Dodgers, Fox Sports Settle TV Rights Feud

But the sheer greed of Guggenheim’s ask on this new deal is staggering, especially when you consider it will all get passed down to the cable systems, advertisers, and ultimately consumers. The alternative for Guggenheim included higher ticket prices which would serve to only further alienate fans. Plus the new owners claim to need the money to bribe talented players to come to the mediocre Dodgers. And then there’s the sad fact that Major League Baseball teams are shifting from broadcast TV to cable networks – so fewer games will be available on free TV. Fox Sports expects to broadcast only one or two Major League Baseball games a week for the national audience next season.

Guggenheim and Fox Sports began preliminary talks in May. Then Fox Sports Media Group Co-President/COO Randy Freer enjoyed a 45-day exclusive negotiating window with Guggenheim Baseball Management’s Todd Boehly, the president of private equity firm Guggenheim Partners who was negotiating solo for the Dodgers owners. (Those owners also include former Los Angeles Lakers star turned mega-investor Magic Johnson, former Atlanta Braves and Washington Nationals president Stan Kasten and Mandalay Entertainment CEO Peter Guber.) Those talks began October 15th and are set to expire on November 30th. My insiders think, barring any unforeseen obstacles, the Fox-Dodgers deal could clinch by Tuesday. If it doesn’t get done by the 30th deadline, Boehly will have blown the negotiations bigtime.

Related: Magic Johnson’s Group Wins Bidding To Buy Dodgers

I’m told a deal came “very close” to being done about a week ago “and then it went a little bit south”. To rattle Guggenheim’s cages, Fox Sports delivered an ultimatum that a deal had to be done by the end of this month or else it would stop negotiating. (Terms like “It’s dead” and “We’re out” were used.) The Fox Sports gambit worked. Because it would have left Guggenheim in a terrible situation without multiple bidders and with little leverage for next-in-line Time Warner Cable since CBS, Comcast/NBC, ABC/ESPN and even the MSG Network (controlled by the owners of Cablevision) never materialized. Of course, Guggenheim could have opted for the Dodgers to start its own network, as the Mets and Yankees have done. But big rewards come with big risks.

Also, in the middle of the run-up to negotiations in early October, Guggenheim’s Boehly bought Dick Clark Productions and put on the table a “programming element” involving Fox Broadcasting Network and DCP. Specifically, it called for DCP to have “more inventory” i.e. more shows airing on Fox Networks, sources tell me. I’m told the provision has been “in and out and in” the deal over recent weeks but appears to be ‘in’ right now.

Freer really knows this business – he ran the Fox regional sports networks for nearly half a decade - and knows not to overpay. He’s not when you consider that the Dodgers will play 162 games when the season starts in April. And yet TV rights to the Lakers who play 82 games just sold to Time Warner Cable for $3B over 20 years. And Fox just paid $3B for 49% of the YES Network which owns TV rights to the New York Yankees for 20 years. Considering that Fox also has the right to own 80% of YES (and will surely exercise that option), then $6B-$7B for this Dodgers deal sounds about about right given the hyper-inflated finances of sports TV rights. In the era of DVR, Hulu, Netflix and other ways to watch TV, sports viewers (overwhelmingly male) watch live and therefore don’t always skip through ads.

This makes sports programming increasingly valuable. It also helps Rupert Murdoch move yet another step closer to that national sports channel which is his long-term play to rival ESPN – and as a result extract higher fees from cable and satellite companies. The deal also satisfies investor curiosity about what News Corp has planned for its $10B cash stockpiled last year to buy the remaining stake in British Sky Broadcasting - until that deal was scuttled because of Rupe’s tabloid phone hacking scandal.

I understand that News Corp Deputy Chief Operating Officer James Murdoch, who was key to the company’s YES Network bid, “helped a little” with the Dodgers deal. The scion is a big believer in the power of sports programming and in his newly expanded job James oversees News Corp’s television business, including its regional sports channels. Plus, News Corp is preparing to split off its troubled publishing assets into a separate publicly traded company from its entertainment giant which will continue to grow through acquisitions particularly in its regional sports and cable television businesses.

Fox Sports making this latest deal was both offensive and defensive. It’s not just ESPN whose the main rival. The last thing Fox Sports wants is to see Time Warner Cable snap up bigger pieces of local sports networks or national sports teams after it snagged the Lakers TV rights deal away from Fox for its new channel SportsNet. Indeed Time Warner Cable has stated publicly that “we absolutely plan to become competitive” in TV rights now that it’s launched both an English- and Spanish-language sports telecast.

Of course, it has to rile News Corp that it once owned the Dodgers from 1998 to 2004 after paying a mere $350 million for the team from the O’Malley family. Eventually, mismanagement took a $50 million a year toll on the team and owner, which then sold the Dodgers for $430 million to Frank McCourt, who earlier this year sold it to Guggenheim. At one time McCourt offered News Corp the team’s TV rights for a bargain basement price. Now, as one newspaper pundit put it, ”someone in News Corp’s accounting department with a long memory will probably be rolling his eyes”.

Whatever happens, TV rights prices won’t come down anytime soon unless ‘a la carte’ cable gets some semblance of traction in the courts or Congress and not just with consumers. And if that does ever happen, “the strong will survive, the weak will go,” one Big Media bigwig told me today very matter-of-factly.

Comments (49)

  • Hollyfuckdatalottamoney.

    Comment by tergle — Saturday November 24, 2012 @ 7:07pm PST  
  • Your story is good and a compelling one considering Murdoch’s large buy of the YES network. I would love to see another national sports channel beyond ESPN given the fact that they’ve turned it into the TMZ sports channel and choose personal opinion above objective journalism. Kinda like what you did. See what I did there?

    Grow up.

    Comment by stellapurdy — Saturday November 24, 2012 @ 7:25pm PST  
  • Fox simply had to kep the Dodgers and paid through the nose to do so. It’s got to be a blow to Time Warner Sports because after the Lakers are done playing the viewers will go away for 5 months. $280 million is an astronomical figure for the rights but if you pay $2 billion for a team you need to recoup the money somewhere.

    Comment by Ron — Saturday November 24, 2012 @ 7:38pm PST  
  • That breaks down to over $1.7 million dollars per game.
    Is News Corp. run by suckers?
    Answer: yes, if they pay that price.

    Comment by Casey — Saturday November 24, 2012 @ 7:47pm PST  
    • I must agree with Casey. We both know that the Dodgers’s fan will paid the price and the cost in the long run. You will need to work extra hours to afford the prices of watching sports on cable. Sport won’t be on free TV. Ex. channel 9/11.

      Comment by CHARLES DAVID HASKELL — Sunday November 25, 2012 @ 7:08am PST  
  • Who is paying for this?

    Comment by Roger C. — Saturday November 24, 2012 @ 8:04pm PST  
    • We are the cable customers will see a nice increase in bills,

      Comment by gary ratnick — Monday November 26, 2012 @ 5:09pm PST  
  • Oh, that’s right, the fans. Will anyone protest this nonsense? Why should people pay more in their cable bills for the Dodgers if they don’t even watch them?

    Comment by Roger C. — Saturday November 24, 2012 @ 8:05pm PST  
  • So the horribly average Dodgers TV rights are worth more to Fox than Star Wars?

    Comment by joel madden — Saturday November 24, 2012 @ 8:12pm PST  
  • I don’t understand the economics of this deal. Are the Dodgers as valuable a name as the Yankees, Sox, hm..Phillies? I’m not trying to be snarky, I just don’t get the particular value of the Dodgers as they haven’t been one of the more successful teams in MLB.

    Comment by Alexgk — Saturday November 24, 2012 @ 8:14pm PST  
    • Since moving to Los Angeles, Dodgers have won more games, more pennants, and more World Championships than any team other than the Yankees. They have more hall of famers than the Yankees. Are you that ignorant? The Dodgers have the all-time record for fan attendance. They are a marquee flagship brand. Just because they were sold to bad groups 20 years ago doesn’t negate their position in baseball lore. Taking a few years of recent Phillies success and actually thinking they are superior to the Dodgers? The Dodgers have triple the Phillies championships for starters. What a joke. Sorry, but your comment was so baseless and ignorant. The Dodgers are a jewel.

      Comment by Phil — Sunday November 25, 2012 @ 12:52pm PST  
    • Sorry, but the Phillies aren’t a MLB prime jewel and they don’t come close in tradition and history as the Dodger’s, Yankee’s, Red Sox, or the Cubs.

      Comment by Alan — Sunday November 25, 2012 @ 3:50pm PST  
    • Alexgk,
      You are nominated for 2012′s dumbest baseball post of the year. Congratulations.

      Comment by Bill — Monday December 3, 2012 @ 12:44am PST  
  • Suddenly, $2.1 Billion to buy the team doesn’t look like as awful a deal.

    Sports are one of the last programs that people watch live (and hence, don’t skip the commercials) so it makes a lot of sense to invest in local sports, which have a built in consumer base. $6-7 Billion does sound like an awful lot, though

    Comment by No One Of Consequence — Saturday November 24, 2012 @ 8:40pm PST  
  • Geez, snd. I thought basebsll was on its last legs…

    Comment by I like football — Saturday November 24, 2012 @ 9:34pm PST  
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