Time Warner Cable (NYSE: TWC) significantly over-valued regional sports network TWC SportsNet LA and will have to write down a loss of nearly $1 billion in order to close its merger with Comcast.
This is according to a Tuesday report in the New York Post, which quotes anonymous sources close to the channel's negotiations as saying SportsNet's true market value is closer to $3 per subscriber than the $5 that TWC is currently seeking.
TWC is paying the channel's primary programmer, Major League Baseball's Los Angeles Dodgers, $8.35 billion over 25 years in licensing fees. With the regional sports network's economic model built around a $5-per-sub price point, TWC is going have to eat a loss totaling around $1 billion over the life of the deal, or about $700 million in present-day money.
"Comcast will be made whole," said one source, who said the write-down will need to happen as a condition of Comcast's $45.2 billion purchase of TWC.
SportsNet LA is entering its second season confined to carriage just on TWC, with other major distributors in the Southern California region, most notably DirecTV (NASDAQ: DTV), unwilling to pay the $5-per-sub price.
"Unless the deal closes, there will not be another [Dodgers] season shown outside of Time Warner Cable. I don't believe they're get carriage," a source told The Post.
It was reported two weeks ago that representatives from TWC, DirecTV and several other MVPDs were back at the bargaining table, and prospects had improved for Dodgers baseball to breakout from a carriage situation in which it is currently available in only 30 percent of Southern California homes.
Based on several anonymous leaks to the Post this week, it appears those negotiations aren't going too well.
- read this New York Post story
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Playing the SportsNet LA blame game: Include the fans and the team, too