Few consumers are welcoming the new Los Angeles Dodgers/Time Warner Cable TV deal because they’re going to get screwed out of more hard-earned money per month. They can thank Guggenheim Partners which bought the Dodgers with an ownership group including Magic Johnson and Peter Guber for $2.15 billion last year. Guggenheim plans to carry the games on a new regional sports network it’ll own called SportsNetLA. It’s got Time Warner Cable doing the heavy lifting as its charter distributor, exclusive advertising and affiliate sales agent, and channel operations manager. But now there’s a problem: the January deal has yet even to be submitted to Major League Baseball for approval. The reason is that MLB wants to know exactly what its cut of the $7 billion, 25-year television deal will be. And Guggenheim looks like it’s trying to pitch curveballs to the league. Trust me, if you think Hollywood studios are greedy, you’ve never seen sports team owners or their leagues. So this is greed vs greedier vs greediest.
To summarize what’s in dispute, the current collective bargaining agreement’s base portion of the revenue-sharing plan calls on MLB teams to contribute 34% of net local revenue. But the way that figure gets calculated is becoming increasingly blurred by stuff like these regional sports networks and who owns them. Guggenheim’s deal is even blurrier. So now everything from rights fees, naming rights, guaranteed carriage money, and other revenue expected to go into Guggenheim’s wallet can be picked by MLB’s revenue-sharing plan. That’s the crux of the delay. Why didn’t Guggenheim forsee this? [ESPN on Thursday explained it very well here.] None of this would have been in dispute had Guggenheim taken the straightford but still gynormous Fox Sports deal on the table first.
News Corp wanted to continue in business with the Dodgers. At one point it owned the team and pays about $40 million a year to broadcast the games. But that contract expires this year. In fact, the Fox Sports offer was just $100M behind Time Warner Cable’s. But News Corp execs are still furious at Guggenheim’s Todd Boehly who conducted the Dodgers negotiations and according to insiders never seemed to know what he should do. (“He was the strangest man I’ve ever dealt with,” one exec puzzled.)
Boehly led the media giant into thinking it had a deal during an exclusive negotiating window, and then let News Corp twist in the wind. While Fox wanted the team for its new national sports network which starts August 17th to rival ESPN, Time Warner Cable needed the Dodgers more to pair with its 20-year LA Laker deal and as a hedge against retransmission fee hikes. In the end Boehly opted for the riskier SportsNetLA deal for Guggenheim - he’s a part-owner and expects more reward if the gamble pays off – than the sure thing with Fox Sports.
Problem is, no amount of big money can put the Dodgers at the same status level as, say, the Yankees. And then there’s the disgrace of what this deal is doing to consumers and their love of sports. Any day now enough viewers will hate on the Dodgers deal and give up watching to force an end to this price gouging.
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Guggenheim Partners today announced the hiring of a badly needed digital media CEO, presumably to put some fiscal diet discipline over its assets including The Hollywood Reporter‘s bloat. In the process it has removed the last remaining Prometheus Media equity owner managing THR after its 2010 purchase. Gone with the wind is Jimmy Finkelstein, who tried unsuccessfully to turn the publication into a profitable venture. Guggenheim announced that it has acquired the remaining stake in Prometheus Media from Pluribus Capital, which was founded by Finkelstein, who previously served as Chairman of Prometheus Media. So here’s what happened: it’s been well known that the disliked Finkelstein clashed often with Guggenheim, which for the past year installed its own bean-counters to monitor the celebrity sheet. And inexplicably in July Guggenheim placed Dottie Mattison in charge, even though she is known for loving the Red Carpet limelight more than overseeing the journalism of the job. Finkelstein had a reputation around the Reporter as a nasty piece of work, so there will be lots of dry eyes to see him go. He never understood that, to make the publication profitable, costs had to be slashed and not constantly soared, to Guggenheim’s horror. The fault lies with Guggenheim’s Todd Boehly, whose lousy idea it was to buy into Hollywood — and now can’t wait to get out so he can continue investing in sports. (His newly acquired Dick Clark Prods just effed-up Sunday’s Golden Globes production-wise.)
One of the problems was that Finkelstein, who owned legal trades years ago, overestimated his own ability to turn a profit in today’s crowded consumer media marketplace. Although it’s true that The Hollywood Reporter has enlarged its one-off traffic, it still is not widely consumed by the entertainment community. Instead Hollywood and the businesses that rely on it are addicted to lean and mean Deadline Hollywood, which focuses exclusively on showbiz instead of celebrity. THR‘s plan under original Prometheus Media CEO Richard Beckman was to publish a subscription-based magazine. That quickly fizzled, and the Reporter print edition is distributed free for the most part (and to zip codes like Florida). Beckman, who was hired in 2010, was demoted in 2011 and then kicked to the curb in June. Finkelstein would have met the same fate earlier except he was an equity owner in Prometheus Media and convinced naive Guggenheim to let him try to affect a turnaround. Now his removal paves the way for Guggenheim to finally sell the Hollywood trade, something the investor has wanted to do almost from the beginning of its asset acquisition which was always plotted as a fixer-upper to be flipped.
Meanwhile, Penkse Media Corp (owner of Deadline Hollywood) is still waging its lawsuit against The Hollywood Reporter for copyright infringement.
Here’s Guggenheim’s release today: Read More »
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