Time Warner Cable bit off more than it can chew last year when it agreed to pay $8.35 billion for the exclusive rights to broadcast the Los Angeles Dodgers games on TV for the next 25 years. TWC’s get-rich quick scheme was simple: charge other pay-TV providers (e.g., DirecTV, Dish, Comcast, AT&T, etc.) a high package rate to carry the games provided by TWC’s new SportsNetLA. But DirecTV and almost every other pay-TV provider balked at the high package price TWC demanded. DirecTV decided that its subscribers wouldn’t want to pay another $4.00/month unless they were Dodgers fans, so its counter to TWC was to just charge those subscribers who wanted to see the games and were willing to pay a few bucks a month on an a la carte basis to do so. But TWC, realizing it couldn’t recoup the exorbitant fee it had agreed to pay the Dodgers with that slimmed down business model, said, “No.” It was all of DirecTV’s subscribers or nothing.
And so it has been nothing for 70 percent of the TV fans ever since. That means 70 percent of Dodgers fans missed seeing Clayton Kershaw pitch his first no-hitter. They missed seeing Matt Kemp’s triumphant return after rehabilitation. They are missing the team’s latest run for post-season play. And they are missing hearing the voice of Dodgers baseball, the legendary Vin Scully, whose days in the broadcast booth — after an incredible 65 years! — are numbered.
Let’s be clear: TWC’s ulterior motive no doubt included its belief that hordes of DirecTV customers and others would abandon their providers in favor of TWC and the Boys of Summer. But, DirecTV reports it lost only 2,000 subscribers who defected. TWC obviously badly misjudged the market. It made a very costly deal and is now trying to get bailed out by DirecTV’s subscribers.
Ten meddling members of Congress, no doubt reacting to angry letters from their constituents, along with the image problem-plagued FCC, are trying to broker binding arbitration in which outside parties determine what’s a fair price for TWC to charge and others to pay.
This is still a free market. TWC can charge whatever it wants, and buyers can decide whether or not they want to pay. Price is only part of the equation; even if a “fair” price is achieved, DirecTV should still have the right to decide whether or not it wants to carry the games (although it almost certainly would). Forcing the two sides to sit down and arbitrate the matter sends the wrong signal and will have a chilling effect on other, similarly situated companies. This is not an issue for Congress to decide. But there is one entity that does have skin in the game and can – and should – broker a deal.
The Dodgers need to step up to the plate.
As Vin Scully’s predecessor, the late, great Red Barber might have said, the Dodgers are in the high cotton. Meaning, they’re sitting on a large pile of TWC’s cash. So what do they care? Apparently, not at all – but they should, and soon. Because 70 percent of the Dodgers’ fans are angry, and their anger will soon be directed at the team if this matter is not soon resolved. It’s not like fans don’t have viable alternatives in their backyard: the Angels.
The team has issued the occasional, meaningless press release saying it hopes the two sides can work things out, but that’s laughable. If the Dodgers sit by and do nothing, they will soon be more reviled than the previous owner, Frank McCourt.
Here’s what they should do:
Give back some of the money. Unthinkable, right? But it will solve the crisis. The only reason TWC wants to charge as much as its demanding is because it has to pencil out a way to recover an $8 billion outlay of cash. If the payout to the Dodgers is reduced and the terms are renegotiated (including the length of the contract), it would be a win-win for all.
TWC would (presumably) offer terms more palatable to DirecTV and the other pay TV providers. DirecTV could offer Dodgers to its subscribers on an a la carte basis (much as it does with Big Ten football). TWC would make money – maybe not as much as it had hoped, but more than it would make if it goes bankrupt living with an $8 billion albatross around its neck. The Dodgers will still make money, although less than $8 billion.
And the Dodgers fans would be able to see the games.
When Arturo “Arte” Moreno first bought the Angels in 2003, the first thing he did was cut ticket and beer prices, which endeared him to the fans. The Dodgers, who are only further alienating their fans the longer this impasse continues, should take a page from Moreno’s book.
The Dodgers have a rare opportunity to take a home run trot in front of all their fans. As long as greed is reined in, the crisis can end and the Dodgers – not TWC, not DIRECTV, not meddling Congressmen, not the FCC – will be actual heroes with their fans.
For the love of baseball, and their fans, the Dodgers can and should take the initiative.