Time Warner Cable has struck a massive deal with the Los Angeles Lakers to create two regional sports channels that will use the world champs as their backbone.
There had been rumblings recently that the Lakers were looking to either start their own channel or find a new partner. The 20-year agreement between the cable giant and the National Basketball Association powerhouse is a major blow to Fox Sports West and KCAL-TV, the two current rights holders for the Lakers. Starting with the 2012-13 season, all Lakers games except for national telecasts will be available on cable only. That includes preseason, regular season and playoff games.
One of the two as-yet unnamed cable channels will be Spanish-language network that will have its own prodcution team instead of just being a feed of the English-language channel.
The loss of games to KCAL means that no Lakers games will be available on free over-the-air television. KCAL, which is owned by CBS Corp., currently carries 41 games. Of the 5.67-million TV homes in the Los Angeles market, about 620,000 do not subscribe to any pay-TV provider.
Terms of the deal were not disclosed. Under its current deal with Fox Sports West, the Lakers were getting about $30 million a year in rights fees, people familiar with the situation said. Some industry observers pegged the 20-year pact at a value of $3 billion, a figure dismissed by Time Warner Cable.
In a statement, Fox Sports said it had made the Lakers an offer that “would have paid them one of the highest local TV rights fees in professional sports. We did not believe that going higher was in the best interest of our business or pay TV customers in Los Angeles, who will bear the cost of this deal for years to come.”
Time Warner Cable, which has about 2 million subscribers in Southern California, isn't looking to stop with the Lakers. In an interview, Melinda Witmer, executive vice president and chief programming officer of Time Warner Cable, said the company would be "looking at all available sports in the marketplace."
Next on their list could be the Dodgers. The team's current pact with Fox's Prime Ticket channel expires in 2013. The Angels also have a contract with Fox Sports West, but that arrangement has many years to run.
For Time Warner Cable, snagging the rights to the Lakers and creating two channels is a shift in strategy. While many cable operators including Comcast, Cox and Cablevision are major players in the regional sports channel business, Time Warner Cable has pretty much stuck to the sidelines.
However, Time Warner Cable's Witmer said the move to get into business with the Lakers is part of its overall desire to "control our economic destiny."
Consumers may feel some pain as a result of the deal. Regional Sports Networks (RSNs) are generally some of the most expensive programming for distributors. Typically, RSNs cost between north of $2.50 per month, per subscriber. Given the high cost of the Lakers, Time Warner Cable will likely be looking for north of $3.50.
The cable giant will need to strike carriage deals with other distributors in the region and may face tough negotiations. First stop will be DirecTV, which has about 1 million subscribers in the area. Other major distributors include Charter Communications and Cox Cable. That will likely lead to tough negotations.
At the same time, Fox Sports West will likely get pressure from Time Warner Cable and other distributors to lower the price of its channel now that will be losing the Lakers.
— Joe Flint
Photo: Kobe Bryant takes it to the hoop. Credit: Barbara Davidson / Los Angeles Times / MCT.