Time Warner Cable raised a lot of eyebrows when it paid $3B for TV rights to the LA Lakers for the next 20 years and then a record $8B for LA Dodgers rights for the next 25 years. When the Dodgers deal launches in 2014, the cable company will have four new networks for all that content. But the plan to partially pay for those new channels via boosting TWC customers’ fees — even from Southern California users who don’t want the channels and have no way to opt out of the bundles — apparently is not sitting well. Some of those customers filed a class action suit in LA Superior Court today targeting TWC, the Lakers and the Dodgers for restitution and injunctive relief for violating California Business & Professions Code 172000. The complaint (read it here) says unless restrained by the court, TWC will “pass these costs along to its total Southern California subscriber base, resulting, directly or indirectly, in additional fees passed onto subscribers beginning with the 2014 season of approximately $4-$5 per month per subscriber … which together add (or will if unrestrained) $100 per year to the subscriber’s TWC bill”.
The No. 2 cable operator took it on the chin this morning after telling analysts in a conference call that rising programming costs and the lack of political ads will ding profits more than many expected. The stock is down 10% at mid-day. The disclosures inevitably led some to wonder whether Time Warner Cable contributed to its problems, at least in Southern California, by agreeing to pay hefty amounts to help create a regional sport channels that carries the Los Angeles Lakers and become a charter distributor for one for the Dodgers. CEO Glenn Britt says he had little choice. “We do not pretend that these deals are inexpensive or cheap,” he said. But sports is must-have programming, and the agreements “minimize and stabilize the cost over a long time period….In both cases these rights were up for auction and were going to be expensive no matter what happened.”
Execs say it’s too early to calculate the hit it will take in 2014 when the Dodgers’ SportsNet LA launches. The upshot, though, is that the vow Britt made last month to draw the line on rising programming costs will mostly affect small channels that few people watch — including Ovation, which the cable company ditched at year end. Britt renewed his commitment to “drop or re-position channels that don’t add to price-value.” Time Warner’s programming costs jumped 32% over the last four years, he says, while the Consumer Price Index rose 9%.
UPDATE: AT&T U-Verse Joins Charter, Verizon To Carry Time Warner Cable’s New Lakers Channels As Others Balk At Price
3RD UPDATE, 2:40 PM SATURDAY: Time Warner Cable today annouced that AT&T U-verse had signed on in Southern California in time for the L.A. Lakers’ season debut. Starting Tuesday, October 30, AT&T U-verse TV will provide SportsNet and Deportes — the local TV homes for the LA Galaxy and Los Angeles Sparks games as well as the Lakers. TWC SportsNet will be available for U-verse TV customers in Southern California (Los Angeles, San Diego, Bakersfield and much of Fresno) with the U100 package and above on channel 1777 in HD and channel 777 in SD. TWC Deportes will be available in the U300 package or U-Latino package on channel 1778 in HD and channel 778 in SD.
2ND UPDATE, 6:25 PM Friday: Time Warner Cable has confirmed that it has agreed to terms on with Verizon’s FiOS system, with details in the coming days. (UPDATE: It was made official Monday. Time Warner Cable SportsNet will be available on FiOS TV Channel 78 in standard definition and on FiOS TV Channel 578 in high definition. Time Warner Cable Deportes will be available on FiOS TV Channel 79 in standard definition.)
1ST UPDATE, 4:40 PM: Charter Communications has just finalized a deal to carry the two networks in Southern California, with a launch targeted before the Lakers’ first game on the channels October 31. “Charter is committed to bring programming to our customers that mirror their interests,” said Allan Singer, Charter’s SVP Programming. “We are proud of Charter’s robust selection of sports programming. Charter is the first provider of this brand new programming in our service areas, and we know that the addition of these networks especially pleases our customers in Southern California.” No deal terms were announced.
PREVIOUS: 2:59 PM: The tipoff of the NBA’s regular season is a week away. But there’s a pretty good game going on right now between Time Warner Cable‘s just-launched regional sports channels — the new digs of the Los Angeles Lakers — and the cable and satellite companies that have yet to pick them up. That includes pretty much all the Southern California operators, from DirecTV and Dish Network to Verizon FiOS, AT&T U-verse, Charter and Cox Communications. At issue is TWC’s reported asking price of $3.95 per subscriber per month. That’s a steep price for a lineup that just includes the Lakers, Major League Soccer’s LA Galaxy and the WNBA’s LA Sparks. The king of per-subscriber sports fees, Disney’s ESPN, commands an average of $5.13 per sub each month, according to SNL Kagan. Among Time Warner Cable’s fellow RSNs, six receive more than $3 — and half of them are from Comcast, including the highest-price one Comcast SportsNet Washington at $4.02.
So far, the networks — Time Warner Cable SportsNet and Spanish-language Time Warner Cable Deportes, which are being shopped as a package — have carriage on only one system: Bright House Networks, which operates in the Bakersfield area. That leaves a majority of fans — ESPN Los Angeles put it at about 4.8 million Angelenos who pay for TV — shut out unless they have Time Warner Cable, which has about 2 million subs in LA. In the past week, DirecTV and Cox have criticized the TWC channels amid ongoing negotiations. They say TWC’s charging too much for networks with one marquee tenant that will show only 53 of the team’s 82 games. Both said they offered to carry the channels on a specialty tier that subs would have to pay for separately, according to the LA Times.