Judge Denies Astros' Dismissal Request in CSN Houston Bankruptcy PetitionBut Court Authorizes Club Owner Crane to Try to Forge New Business Plan over Next Six Weeks 10/30/2013 10:18 PM Eastern
Houston Astros owner Jim Crane over the next six weeks is going to take some swings at affiliate sales for Houston Regional Sports Network, the partnership between the baseball club, the NBA’s Houston Rockets and Comcast/NBCU Universal that owns the financially troubled regional sports network, CSN Houston.
After two days of hearings, U.S. Bankruptcy Court Judge Marvin Isgur on Oct. 29 issued a three-page order authorizing the Astros to negotiate with third parties on a new business plan. As such, it enables the Astros to “investigate and negotiate the terms of carriage agreements, broadcast agreements, management agreements, lease agreements, equipment agreements, purchase and sale agreements and debt and equity investments and other matters pertaining to the formulation of a business plan.”
Crane said he will consult “with all the players — Fox, DirecTV, AT&T, Time Warner. I will work to try to get something favorable so that we can move on with or without Comcast in the deal.”
Comcast/NBCU issued the following statement: "Comcast/NBCUniversal and its affiliates are pleased with Judge Isgur's order, and believe that it preserves CSN Houston's assets and ability to provide its valuable programming. We welcome the Astros' efforts as lead negotiator to serve the network's best interests and look forward to an improved future for all partners."
Launched on Oct. 1, 2012, CSN Houston – owned by the Astros (46%), the NBA’s Houston Rockets (32%) and Comcast/NBCUniversal (22%) – has only managed to secure carriage deals with Comcast and a handful of smaller providers in the Houston DMA amid its five-state trading area. With leading providers DirecTV, Dish, Time Warner Cable, AT&T U-verse, Verizon FiOS and Suddenlink all sitting on the distribution sidelines, the RSN has not had the funds to pay rights fees and four Comcast affiliates – one of which loaned $100 million to the network for start-up costs and the building of studio -- petitioned for Chapter 11 protection on Sept. 27. With unanimity of vote required on key operating decisions – the teams have one apiece, while Comcast/NBCU has a pair – the RSN has been deadlocked in its negotiating attempts to gain more homes.
To that end, Comcast witnesses said that Crane blocked a proposed carriage agreement with DirecTV last spring that they said would have had a “cascading” effect in the RSN reaching pacts with other distributors. Internal reports, though, indicated that even with DirecTV in the fold, CSN Houston, which reportedly had been seeking monthly subscriber license fees of $3.40, wouldn’t become profitable for a number of years.
The Astros filed to dismiss the action on technical grounds regarding the validity and number of petitioners and threatened to pull their rights from the partnership, requests that Isgur denied with the ruling. The Rockets had sided with the Comcast affiliated companies on the bankruptcy petition, but averred that a responsible officer, not an interim trustee should be appointed to oversee the network.
Instead, Isgur decided to let Crane, who said he could do a better job in negotiating carriage deals than Comcast/NBCU, take his shot at talking to distributors and put his dismissal request on hold until after a Dec. 12 deadline. In the interim, Astros officials must hold weekly phone conference with Comcast and the Rockets, and Isgur set a Nov. 13 hearing to check in on the negotiations.
Crane on Oct. 28 said he had reached out to Twenty-First Century Fox president and COO Chase Carey earlier this year about returning the Astros games to previous rights-holder, FS Southwest, as CSN’s carriage problems persisted.
According to the court order, any agreements into which the Astros enter on the network’s behalf, including carriage deals or the sale of a portion of the partnership to a third party, are subject to the court’s approval. To spur conversations, the order absolves from liability any third party “that undertakes negotiations or investigations at the Astros’ request.” Similarly, the Astros would also be absolved of liability.