Time Warner Cable chairman and CEO addressed the elephant in the room on a conference call with analysts Thursday, adding that its recent regional sports network deal with the Los Angeles Dodgers will help the MSO manage escalating sports costs in the long term.
Time Warner Cable agreed to a 25-year deal to distribute the Dodger’s RSN (dubbed SportsNet LA) in the Los Angeles market earlier this week. Although terms of the deal were not disclosed, published reports estimate Time Warner Cable spent between $7 billion and $8 billion for the privilege of distributing the channel.
On a conference call with analysts to discuss its fourth quarter results, Britt said the MSO’s sports strategy in Los Angeles – last year it agreed to spend an estimated $3 billion to carry Los Angeles Lakers National Basketball Association games for 20 years and formed another RSN, Time Warner Cable SportsNet – has been to lock down its costs over a longer period of time.
“We do not pretend that these deals are inexpensive or cheap,” Britt said on the call. “Our sense is if we are going to carry these games, they are going to be expensive. We think what we’ve done with these deals is to minimize and stabilize the costs over a long time period. But we’re not trying to pretend that the first year is really, really cheap or anything.”
He added that the rights to both the Lakers and Dodger games were essentially up for auction, guaranteeing that a high price would be paid.
“In both cases these rights were up for auction in a sense and they were going to be expensive no matter what happened,” Britt said. “We think we’ve done the best of the alternatives.”
Time Warner Cable chief financial officer Irene Esteves added that the economics of the Dodger agreement are similar to its Lakers deal in that the MSO is guaranteed access to important sports programming over a long period of time.
“Our objective here as it was with the Lakers is to is to ensure that access to programming at a certain cost,” Esteves said. “We think over the long term this will be a lower cost alternative than if we had not guaranteed those rights for the 25 year period.”
She added that given the MSO’s experience with the Lakers, given the net cost of that deal compared to where sports programming costs are headed, it was the right thing to do.
“We’re confident that we made the right decision with the Lakers and we’re hopeful we’ll find the same with the Dodgers,” Esteves said.
Time Warner cable’s sports deals seem to fly in the face of another initiative by the company – to jettison what it believes are high cost networks that its customers don’t watch. TWC dropped its first channel on Dec. 31, arts and entertainment network Ovation.
Britt said on the call that Time Warner Cable will continue to scrutinize networks as they come up for carriage renewal, but acknowledged that it probably won’t have a big impact on costs or customers’ bills.
“The actions we’re taking are not going to dramatically change the trajectory of programming costs,” Britt said. “I do hope that we can over time improve the perceived price/value relationship though. Clearly consumers, particularly people who are under economic duress, are looking at these big packages and saying ‘It costs more than I can afford’ No. 1, and No. 2, ‘There are too many networks that I never watch and that I don’t care about.’” That’s what we are trying to address. Obviously sports and other popular programming keep getting more and more expensive and that’s where most of the money is. But these networks that hang on and think they have a birthright to carriage even though hardly anybody watches them, those are the ones we are going to be taking a look at.”