Time Warner Cable's surprising full-court pursuit of television rights for the Los Angeles Lakers, which will anchor two regional sports networks, came together rather quickly.
Through a 20-year deal that could be worth $3 billion or more in rights fees to the 16-time NBA champions, the nation's No. 2 cable operator will tip off a pair of wholly owned, high-definition RSNs, including a dedicated Spanish-language channel.
As a result, the Lakers will move their local games from KCAL (road) and News Corp-owned RSN Fox Sports West (home), the team's longtime area carriers, whose exclusive negotiating windows with the club ended last September and December, respectively.
"We've been going after the local over-the-air rights for a little longer," said Time Warner Cable executive vice president and chief programming officer Melinda Witmer. "Things became more intense the last several weeks. It was a whirlwind."
The road to building the RSNs, securing carriage deals and producing/acquiring other rights will take a lot longer, as the MSO prepares to launch them in time for the 2012-13 NBA season.
The lucrative, high-profile play -- FS West reportedly pays an average of $30 million in rights per
season -- with the legendary franchise, owned by Dr. Jerry Buss and seeking a title three-peat on the court led by Kobe Bryant, marks a departure from TWC's RSN strategy.
The MSO manages 34 local channels, nine of which are local sports nets, and with seven others featuring sports content. But they largely sport minor league and collegiate fare, carrying far lower rights fees, if any.
Calling the Lakers "one of the premiere teams in all of professional sports, one that is synonymous with the Southern California market," Witmer said the "timing, availability [of the rights] and chance to determine our own economic destiny" all coalesced.
"The Lakers are must-have content within our footprint," Witmer said during a phone interview from an L.A. hotel last week. "We need to have it one way or another, so you can buy it from someone else or buy it from ourselves. I'd rather buy wholesale than retail. This way we can manage long-term cost certainty."
The Lakers gambit doesn't necessarily signal that Time Warner Cable has changed its RSN playbook.
"We'll keep an eye on things, evaluate possibilities," she said.
Asked specifically whether TWC, which has an equity position in SNY would be interested in upping its stake in the RSN, if more of it were to become available as the New York Mets ownership faces financial woes linked to the Bernie Madoff Ponzi scandal, Witmer replied: "We have a great relationship with the Mets, We would certainly talk about opportunities."
She declined to comment about ESPN's University of Texas network and reports that Time Warner Cable might gain an equity stake in that service, which is slated to kick off next fall.
Back on the West Coast, Witmer said TWC has just "held the marriage, now we have to make the babies," referring to programming the networks.
One of the reasons, TWC succeeding in securing the rights was its "awareness of the market's appetite for more Lakers programming in the way of originals and magazine and news shows," she said, adding the MSO would reach out to the NBA, which holds the on-demand key for archival games and the digital rights for "TV Everywhere" multiplatform opportunities. "We're going to assess those situations and talk to the league," she said.
Citing TWC's other sports and news channel properties, she said, "We do know how to program locally," which in this case will also manifest in Southern California lifestyle fare.
Conventional wisdom says it's more effective to start an RSN, anchored by Major League Baseball's 162 game schedule, virtually twice that of NBA (82 games) or NHL (84) season. Lee Berke, president of LHB Sports, Entertainment and Media and a consultant on regional sports networks, doesn't think that's necessarily the case anymore. "[Time Warner Cable and the Lakers] is the continuation of the constant demand for developing more sports network," he said. "More distributors are chasing after a fixed number of properties. It's interesting more are launching around one team."
Asked whether TWC will take a swing at MLB's Los Angeles Dodgers, whose rights on Fox's Prime Ticket expire after the 2013 season, Witmer said: "To be clear, we have not had any conversations with anybody else at this point."
The market's other MLB team the Los Angeles Angels of Anaheim has a rights deal with FS West through the 2015 campaign.
Soccer and boxing properties also figure to be on TWC's radar, especially for the Spanish-language RSN.
"We're looking for year-round programming, to bring value to consumers and distributors," she said.
TWC has not yet announced its pricing strategies for the two services. FS West, which also rights to the NHL's Anaheim Ducks, carries an average license fee of around $2.35 per month, while Prime Ticket, featuring the NBA Clippers and the NHL Kings, commands $2.07, according to SNL Kagan estimates.
Fox issued the following statement after the TWC/Lakers deal was announced on Feb. 14: "Fox made an offer to the Lakers that would have paid them one of the highest local TV rights fees in professional sports. We did not believe that going higher was in the best interest of our business or pay TV customers in Los Angeles, who will bear the cost of this deal for years to come."
The as-yet-named networks will be available to all satellite, cable and telco distributors in Southern California, Nevada and Hawaii. In addition to Time Warner Cable, which has around 2 million homes in those markets, the Lakers networks will need carriage on the other major distributors in those areas: Charter, Cox, DirecTV, Dish and AT&T U-verse. All told, TWC said the Lakers TV territory encompasses some 6.5 million homes.
A Lakers spokesman expressed confidence that TWC would not only build a strong network, but one that will secure plenty of carriage over the next 18 months. "There are no concerns that Time Warner Cable will attain the same level of distribution, if not more," he said, adding that Buss was "ecstatic" about the formation of the Spanish-language service.
Witmer also believes there is great upside for that service. "The Spanish-language channel is a huge boost. The demographics are changing rapidly in the footprint," she said. "We conducted market research and not only do Latinos love the Lakers, they want Hispanic telecasts."
One TV sports executive questioned how valuable that channel can be. "First off, it's not for every home," he said. "Second, I think most of the Latinos who want to see the Lakers already have been watching the games on FS West and KCAL."
This season, Lakers games have generated a 4.8 household rating, 277,000 households and 410,000 viewers in the LA DMA.
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