Dec. 9 (Bloomberg) -- The Los Angeles Dodgers can try to sell future television rights to the team’s baseball games months earlier than their current contract with Fox Sports allows, a judge ruled.
U.S. Bankruptcy Judge Kevin Gross in Wilmington, Delaware, yesterday overruled Fox’s objection to letting the team negotiate with Fox’s competitors early. The TV rights could be worth about $100 million a year, a consultant for Fox said in court.
Competition for sports programming is driving up the price companies are willing to pay for media rights, the consultant, Edwin Desser, president of Desser Sports Media Inc., said in court.
“Everyone agrees that times are pretty damn good right now and we think it is time to capture it,” said Bruce Bennett, an attorney for the Dodgers. He said the goal of accelerating negotiations for the TV rights is to increase the value of the team.
The team filed for bankruptcy in June with plans to sell the media rights to pay creditors and allow Frank McCourt to retain his ownership. McCourt later agreed to sell the team under a deal that ended a fight between Major League Baseball and the Dodgers.
New TV Contract
Gregory W. Werkheiser, an attorney for Fox, a unit of New York-based News Corp., said the company will appeal Gross’s ruling. In the next few days, Fox and the Dodgers will try to agree on whether negotiations for a new TV contract can begin immediately or must wait for an appeal.
“While we are disappointed in the judge’s decision, we understand the court process and will appeal this decision to protect our contractual rights,” Chris Bellitti, a Fox spokesman, said in an in e-mailed statement. “Those rights are material and valuable, and the current owner accepted them as binding when he purchased the team in 2004.”
Gross said he would take “a day or two” to write an opinion justifying his ruling.
“The telecast rights are one of the Dodgers’ primary assets and have enormous long-term value,” the team said in a statement after the ruling.
Time Warner Cable Inc. is likely to bid for the rights, partly because the company won the right to show future Los Angeles Lakers’ basketball games on a new regional sports network, Desser said. Desser helped the Lakers negotiate the new TV deal with Time Warner, which replaced Fox Sports.
In a bankruptcy court hearing, the team and Fox Sports Net West 2 LLC fought over the proposal to solicit bids for future TV rights. Fox Sports can broadcast games through the 2013 season and had an exclusive right to negotiate a new contract until Nov. 30, 2012, according to court records.
McCourt agreed to sell after the team ended its bankruptcy court fight with Major League Baseball. As part of that effort, the Dodgers needed court permission to solicit bids on a new media rights contract. The team may be worth about $1 billion, according to court records filed by the Dodgers.
The approval to open negotiations early doesn’t guarantee a sale of the rights.
Under the settlement between the Dodgers and MLB, no sale of the TV rights can go forward without approval from MLB, Gross and whoever wins the bidding for the team.
The former president of Fox Sports, Robert Thompson, said in court that removing the exclusive negotiating right, and other related terms, reduces the value of Fox’s current contract by $75 million. Those negotiating rights gave Fox an advantage over competitors, Thompson and Desser testified.
Fox argued in court papers that early negotiating would give it the right to file a damages claim against the Dodgers that would be so big the team’s other creditors wouldn’t be repaid in full.
“There isn’t going to be a material damages claim,” Bennett, the Dodgers’ attorney, said in court. “We are not taking on cataclysmic risk.”
Under the Dodgers’ TV rights proposal, Gross would decide how much, if any, money Fox is owed for early negotiations.
The early negotiating period would start with Fox getting 45 days to extend its current contract. That period began on Nov. 30, Bennett said. Should those negotiations fail, the team would seek other offers, according to court documents.
Werkheiser asked Gross to suspend the 45-day period until the issues related to the appeal could be worked out. Gross asked Fox and the Dodgers to meet.
“A pending appeal should have no impact on the marketing procedures the judge said he would approve,” Bennett said.
Selling the rights early would be good for McCourt and not necessarily good for a new buyer or Dodgers fans, said Marc Ganis, president of Chicago-based industry consultant Sportscorp Ltd. Money from the sale would go to McCourt, preventing a new owner from using it to upgrade the team’s roster or its stadium, Ganis said.
“There will be less money available for players, stadium renovation and security, and every other aspect of team operations,” Ganis said.
Fox made similar arguments in court, while a Dodgers attorney, Sidney Levinson, disputed the claim.
The case is In re Los Angeles Dodgers LLC, 11-12010, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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