Finance

CSN Houston Faces Closing Chap. 11 Arguments on Oct. 28

DirecTV/AT&T Could Assume Control of NBC Sports-Operated RSN 10/24/2014 2:00 PM Eastern

Will CSN Houston’s Friday night coverage of the Houston Rockets-Dallas Mavericks NBA preseason game be the embattled regional sports network’s last live telecast?

 

Perhaps.

 

Closing arguments for the RSN’s year-long Chapter 11 bankruptcy case is set for Tuesday, Oct. 28, at which point Judge Marvin Isgur will be asked to approve a reorganization plan that sells CSN, which is owned by the Rockets, MLB’s Houston Astros and Comcast’s NBC Sports Group to DirecTV and AT&T U-verse. In turn, the DBS provider and the telco, which are awaiting federal approval of their proposed merger, would relaunch the service under the Roots Sports Houston banner with carriage from the owners and Comcast in the Houston DMA and beyond.

 

After hearing testimony from the parties on Wednesday Oct. 22 – the same day that CSN Houston personnel delivered their final live studio and news shows, as 96 of the service’s 141 employees will lose their jobs under the plan -- Isgur set next Tuesday for closing arguments.

 

The teams and DirecTV/AT&T hope the plan will be approved that day. That means the Rockets ‘ game against Utah on Oct. 29 would air on the new channel. (The team starts its season on Oct. 28 in Los Angeles against the Lakers with the contest airing nationally on TNT.)

 

However, Comcast opposes the plan for a number of reasons, and is still looking to reclaim some compensation for the $100 million loan it provided to the RSN for start-up costs, the studio build-out and early rights fee allotments; fair value for NBC Sports' 22% stake in the network that was valued at $700 million in 2010 and would be sold for just $5,000 to DirecTV/AT&T; and exculpation from creditors upon the transfer of the network.

 

Comcast/NBC Sports could also file an appeal that would further delay matters. If that were the case, it’s unclear whether other Rockets regional contests – their home opener versus the Boston Celtics is scheduled for Nov. 1 – would continue to air on CSN Houston. Bankruptcy protocol usually mandates that business/operations continue until case resolution. In the interim, CSN Houston is currently airing a mix of infomercials and other filler fare.

 

Under Isgur’s plan, the teams would not only lose their equity in the succeeding service, but abandon their claims to some $100 million in rights fees owed by CSN Houston.

 

Comcast/NBC Sports declined to comment.  DirecTV and AT&T declined to comment.

 

Launched in October 2012 and seeking a monthly subscriber fee in the $3.40 neighborhood, CSN Houston failed to gain distribution traction beyond Comcast and a few smaller providers in the Houston DMA, much less with DirecTV, AT&T U-verse, Time Warner Cable, Suddenlink, Charter and Verizon, among others, in its five-state TV territory that also stretches to Oklahoma, Arkansas, Louisiana and New Mexico.

 

As such, the RSN never generated nearly enough affiliate revenues to pay the teams their rights fees and meet its bills.

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