As per a media report, Time Warner Cable (TWC - Analyst Report) has agreed with Major League Baseball's Los Angeles Dodgers to broadcast their games for the next twenty years starting 2014. The second largest cable company in the U.S. has outbid Media giant News Corp.’s (NWSA - Analyst Report) sports arm Fox Sports in the process.
Per the deal, Time Warner Cable will run the new sports channel of Dodgers, create new programs and earn revenues through advertisements. Nevertheless, the ownership rights of the channel will remain with the baseball team. The deal, expected to close this week will cost Time Warner Cable around $7 billion.
Fox Sports’ contract with the Dodgers is set to expire after the current season. The media company agreed to pay more than $6 billion for Dodgers on its Prime Ticket sports network for a period of 25 years. However, Fox Sports lost the bidding after its exclusive negotiation period ended in Nov, last year thus paving the way for Time Warner Cable.
The new deal, once officially announced, will significantly improve the $40 million fees that Dodgers was receiving for selling its TV rights to Fox Sports. Notably, last year Guggenheim Partners and Magic Johnson bought the bankrupt team from its previous owner Frank McCourt for $2 billion.
The contract means that Time Warner Cable has secured two major sports right deals in the last three years after it snatched the right to broadcast LA Lakers basketball games for the next 20 years in 2011 by paying around $3 billion. Additionally, in Oct last year, Time Warner Cable launched two new regional sports channels to broadcast the LA Lakers basketball games.
Of late, sports entertainment has become a lucrative form to earn revenue for cable Multi Service Operators (MSOs) like Time Warner Cable, which charge high rate from customers to cover up their high cost of acquiring the rights.
We believe securing the Dodgers’ rights will allow the New York-based cable MSO to sell its right to pay-TV companies like DirecTV (DTV - Analyst Report), AT&T Inc.’s (T - Analyst Report) U-Verse and Verizon’s FiOS TV. The only downside for this deal is that it could increase the monthly cable bills of nearly 5 million inhabitants of LA, which in turn could lead to customer churn.
Time Warner Cable currently has a Zacks Rank #3 (Hold).