Jan. 22 (Bloomberg) -- Time Warner Cable Inc. has struck a deal with the Los Angeles Dodgers to broadcast the Major League Baseball team’s games, two people familiar with the matter said.
An announcement of the agreement is imminent, although no deal has been signed, said the people, who asked not to be named because the decision isn’t yet public. The games will be carried on a new regional sports network developed by Guggenheim Partners, which bought the Dodgers for $2.15 billion last year. As a partner in the project, Time Warner Cable will run the network and sell the advertisements, although it won’t own the television rights outright, the people said.
The deal would snatch the rights away from News Corp., the media company controlled by Rupert Murdoch, which has been paying about $40 million a year to broadcast the games. The Dodgers negotiated with News Corp.’s Fox and Time Warner Cable for months before reaching an agreement. A lucrative new contract should help add luster to the team, said Lee Berke, head of a sports-focused media consulting firm.
“From a Dodgers standpoint, this puts them at the same rank as the Yankees, Red Sox and Giants,” Berke said. “Valuation is the name of the game. That’s what Guggenheim is going to achieve by developing a Dodgers network with Time Warner.”
Time Warner Cable may pay around $7 billion for the TV rights over the term of the contract, the Los Angeles Times said yesterday. The agreement would build on Time Warner Cable’s 20-year deal with the National Basketball Association’s Los Angeles Lakers. That partnership, formed in 2011, became the linchpin of two regional sports networks -- in English and Spanish.
Like that deal, the Dodgers contract will cover about 20 years, one of the people said. The partnership is expected to be announced in the next two days, according to the person.
Irene Esteves, chief financial officer at the New York-based cable company, said last year that Time Warner Cable is interested in sports rights as a way of avoiding high rate increases from other owners, including Fox and Comcast Corp.
Securing the Dodgers rights allows Time Warner Cable to charge other pay-TV companies, such as DirecTV and AT&T Inc.’s U-verse, to carry the network. Any provider that doesn’t offer the Dodgers channel risks immediately losing subscribers to competitors, said Ed Desser, a TV sports-rights consultant who advised the Lakers in their negotiations.
“It’s must-have programming,” Desser said. “There’s just not a lot of other stuff out there.”
Stan Kasten, president of the Dodgers, and Pat Courtney, a spokesman for Major League Baseball, declined to comment.
Time Warner Cable shares were little changed in New York trading, closing at $100.41. News Corp.’s stock fell 0.3 percent to $27.17.
Fox Sports started a business that became known as Prime Ticket to carry the Dodgers in 1997. Fox still has the rights to MLB’s Los Angeles Angels, the NBA’s Los Angeles Clippers, and the National Hockey League’s Los Angeles Kings and Anaheim Ducks.
Guggenheim Partners purchased the Dodgers in an auction after former owner Frank McCourt put the team into bankruptcy in June 2011, when a cash crunch threatened to prevent the company from making payroll. Before going into default, McCourt turned to Fox Sports for a financial lifeline. McCourt negotiated a 17-year, $3 billion contract extension of the Dodgers broadcast deal with a $385 million upfront payment that would have provided liquidity to the team and enabled him to pay a divorce settlement to satisfy personal debts.
MLB Commissioner Bud Selig rejected the deal, which would have paid the Dodgers $84 million in rights fees in its first year, saying in a letter that a desperation-driven contract “failed to fully maximize rights fees through a competitive process.” McCourt put the Dodgers into bankruptcy a week later.
Since then, other transactions have underscored the value of TV rights to major sports franchises, including the New York Yankees and the Cleveland Indians. In November, News Corp. purchased 49 percent of the YES Network, the cable channel that carries Yankees baseball games. The transaction valued the regional sports network at about $3 billion.
The Yankees deal puts News Corp. in position to extract higher payments from Time Warner Cable -- a situation the cable company is looking to avoid with the Dodgers. News Corp. will renegotiate its carriage fees with Time Warner Cable for the YES Network in the first quarter of 2014 and will probably ask for a significant increase, a person familiar with the matter said.
Time Warner Cable is the largest pay-TV provider in Manhattan. The YES Network charges an average of $3.20 per month per subscriber, according to research firm SNL Kagan.
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