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)

  • Best sports media take I’ve read in a long time. Thank you Nikki.

    Comment by Stanley Mumford Myrtle — Saturday November 24, 2012 @ 9:42pm PST  
  • YES + Dodgers, very smart moves by FOX. Guggenheim partners score a homerun and make billions. The subscribers of course will get stuck with the bill of higher sports packages. The irony is FOX, re-purchasing the t.v rights of the Dodgers for billions more than what they had paid for the entire franchise. Just look at the history of the television sports business. CBS had the NFL, balked at the terms of a new contract. FOX moved in took the heat for paying the NFL price at that time. NFL is the king of all ratings and advertising revenue. Team owners in every league are loving these new deals. Perhaps the NHL will take this all in and see the light.

    Comment by tv guy — Saturday November 24, 2012 @ 9:51pm PST  
    • People watched sports because it was affordable. Now, more and more people are staying away. When I see parking for $45 at NFL games, I don’t bother anymore. It’s not worth that much to me. I can watch it on TV. If my cable gets expensive, there are other things that I can do. They can keep testing the public. I see what’s going on, and I want nothing to do with it.

      Comment by Roger C. — Saturday November 24, 2012 @ 11:03pm PST  
  • I hope that price tag includes Vin Scully and Ken Levine…..

    -RnsW

    Comment by Robert Not So Wise — Saturday November 24, 2012 @ 10:08pm PST  
  • The Dodgers are one of the lowest rated teams in MLB, averaging about a 1 rating, Yankees rate 4 to 5 times higher, Red Sox even more.

    The real sadness here is 100% of pay tv subscribers will pay an incremental $5 or so per month, just for the Dodgers, when only around 20% of pay tv subscribers actually watch the Dodgers on the Fox cable channel….

    Anyone else hear the phones ringing in LA Congressional offices?

    Comment by Sixthavenuesavant — Saturday November 24, 2012 @ 10:13pm PST  
    • Folks in LA are in the eye of the sports tv storm. All these new channels that only cost you more in the end. TW/Lakers, Dodgers, Pac-12. All jammed down your throats. Rise up I say! Fight back!

      Comment by Tony Almonte — Monday November 26, 2012 @ 5:22am PST  
  • Guys like to watch sports live until their team is eliminated from the playoffs. Or they realize they have bigger things to worry about besides Manny Being Manny.

    It’s upsetting knowing my cable bill is covering for all this greed from pro and college teams. They plead poverty as they steal bread off my plate.

    Comment by frank — Saturday November 24, 2012 @ 10:25pm PST  
  • Rip off. Fox is stupid, mediocre Dodgers will need every penny plowed back into them and more even with current talent roster, lame stadium, etc.

    Comment by PR guy — Saturday November 24, 2012 @ 10:35pm PST  
  • Go Cards! Dodgers suck…

    Comment by Binding Baby — Saturday November 24, 2012 @ 11:41pm PST  
  • Why didn’t they just buy the team?

    Comment by Jack — Sunday November 25, 2012 @ 4:30am PST  
    • Most astute comment on this entire post and thread.

      Comment by Tony Almonte — Monday November 26, 2012 @ 5:25am PST  
  • Somebody’s gotta pay for Beckett’s chicken!

    Comment by Jack — Sunday November 25, 2012 @ 5:15am PST  
  • The good in all of this is that Rupert Murdoch got fleeced by Major League Baseball an extra 5B dollars. We all forget the pawn on his chess board that was Frank McCourt who was going to sell the TV rights to Rupe at a fraction of this price. All a part of the original stake Rupe made in navigating McCourt’s leveraged swindle to get the team from the O’Malley’s so he could be Rupe’s lackey… Err… steward, until this last contract expired. But the wiley old Selig, and his money hungry partners who have a dying business, never liked the Aussie ownership, and certainly saw McCourt and his trashy wife for the carpet baggers they were. There was no way they were going to allow the 2nd most lucrative market’s TV rights to just get taken off the table. The problem for Selig and his vsionaries was ESPN didn’t need to cannibalize itself at any price, so there were no other buyers out there who could write the check they wanted. What to do, what to do. Why not let Rupe be the one to cannibalize himself; so they take over the team, sell it for a ridiculous price to an ownership group who not only wanted to own a big franchise for its other sports interests, while understanding the value of those TV rights which is what compelled them to make the August trade they did… A trade the Commissioner could easily have stopped in the best interests of Baseball but who certainly saw the concept of ‘best’ quite differently. Rupe was checkmated because he needed the rights in order to take on the Mouse House, even if it would cost him much more than he thought it would. He might be aggrieved by the inconvenience, the owners might be much wealthier because of revenue sharing, and the Guggenheim Group’s strategic play with Bud Selig as their wingman, has come up aces. Everybody gets rich… Except the fan who once again watches mediocre product and pays too much for the privelege. It’s all that’s right and wrong with capitalism in the 21st Century.

    Comment by AC — Sunday November 25, 2012 @ 5:51am PST  
    • There is a lot of conspiracy theories in this post – but none-the-less this was an awesome post.

      Comment by Anonymous — Tuesday November 27, 2012 @ 9:27pm PST  

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