Time Warner Cable (NYSE: TWC) is simply demanding too much licensing money for its new SportsNet LA regional sports channel, and a lynchpin deal with DirecTV (NASDAQ: DTV) likely won't occur during the initial focal point of the new outlet, the 2014 Dodgers baseball season.
That is the conclusion of a Thursday Los Angeles Times story, which predicts only two scenarios in which a deal with DirecTV can occur: either the proposed $45.2 billion buyout of TWC by Comcast (NASDAQ: CMCSA) is approved by the federal government; or TWC slinks back to the Dodgers, renegotiates its 25-year, $8.35 billion deal with the team, then lowers the carriage fee for SportsNet LA.
Ostensibly speaking to individuals close to the negotiations, Times writer Joe Flint says TWC is demanding a carriage fee for SportsNet amounting to $4 a month per subscriber for the first year of the deal, with costs escalating each year thereafter.
Despite not carrying the channel more than two months into the Major League Baseball season, DirecTV--the No. 2 pay-TV service in L.A. next to TWC--has lost few of its 1.2 million subscribers. Since the satellite carrier competes with every other pay-TV service in the Southern California region, a deal with DirecTV is viewed as crucial to growing SportsNet LA's carriage base. So far, TWC hasn't been able to lock up any of the other services.
So if TWC can't come down in price because it's paying the Dodgers too much money, how will a deal get made? TWC will have to find something DirecTV wants, Flint notes.
The writer specifically outlines the carriage deal carved out several months ago between DirecTV and The Weather Channel. Talks were at a standstill until private equity firm the Blackston Group, which owns a big chunk of The Weather Channel, offered DirecTV access to another more coveted asset, the Hilton Worldwide hotel chain.
So what does TWC have that DirecTV might want? Well, not much, at least until the Comcast deal is potentially approved. Comcast, on the other hand, might be able to take assets, such as a handful of regional sports channels spread across Seattle, Denver and Pittsburgh, that DirecTV might be looking to unload as it seeks approval for its own merger with AT&T (NYSE: T).
Of course, any movement along those lines won't happen until long after the Dodgers have finished the 2014 season.
For more:
- see this Los Angeles Times story
Related links:
Time Warner Cable, L.A. Lakers sued by Spanish language announcer
DirecTV: Time Warner Cable Dodgers deal 'far above any rational view of the market'