POSTED: Sep 30, 2012 1:49 PM ET
LOS ANGELES (AP) — A few months ago, Time Warner Cable Inc. was crying foul at the high price it had to pay to air Knicks and Rangers games in New York. Now, the shoe is on the other foot.
The nation's No. 4 TV distributor bought the regional TV rights for the Los Angeles Lakers and pro soccer's LA Galaxy last year for an estimated $3 billion over 20 years. It's launching two new channels based on those rights on Monday. To help pay for them, it is demanding payment from other TV distributors like Dish Network Corp. and DirecTV.
Time Warner Cable is asking as much as $3.95 per subscriber per month from competitors in the L.A. area, said a person familiar with the situation. The person requested anonymity because the negotiations are confidential and the details were not yet final.
That would make it the second most expensive regional sports network in the nation behind Comcast SportsNet Washington, which charges $4.02 per subscriber per month, according to research firm SNL Kagan.
It hasn't secured deals yet and likely won't until the regular season starts on Oct. 30.
"We think the price we're asking our distribution partners to pay is one of the better value propositions out there," said Mark Shuken, senior vice president for TWC Sports Regional Networks. Shuken declined to discuss the rates Time Warner is seeking.
Bob Toevs, a spokesman for Dish, confirmed that talks are ongoing, but said "it will have to be a good value for us and, most importantly, for our customers." DirecTV said in a statement that it is "very engaged" in talks to carry the channels, but said it has a responsibility to its customers to "avoid any extraordinary increases" in their monthly bills.
The main reason to buy the rights is to contain rising sports costs, Shuken said. It's better to be a rights buyer, he said, rather than to haggle with other channel operators and be subject to "big bumps" in prices every few years.
That makes sense, according to Tom Eagan, an analyst with Canaccord Genuity, who estimates the deal will be break-even or slightly positive in the end, but give the company more certainty about its future costs.
"I think we've all been consistently amazed by the increasing costs of sports," Eagan said. "I think Time Warner Cable feels there's some value to owning the rights and the actual channels as well."
Time Warner Cable will bear production costs and has spent money on a new studio in the suburb of El Segundo. It has hired familiar on-air talent like former Laker James Worthy and reporter Chris McGee, who worked the sideline for Fox Sports West, which carried most of the Lakers' home games for more than a decade before this deal.
Offsetting those costs, Time Warner Cable will gain revenue by selling commercial time and the channels -- Time Warner Cable Sportsnet and the Spanish-language Time Warner Cable Deportes -- to other TV providers.
It's not unusual for a TV distributor to get into the business of buying sports rights directly.
Comcast Corp., the nation's largest TV provider, operates 11 regional sports networks, including one in Houston that will be the exclusive home of the NBA's Houston Rockets and also launches Monday. SNL's Kagan said there are about 40 regional sports networks across the country. Many are owned by cable TV companies.
Assuming that deals are reached with all of its competitors, the new Lakers channels will be available to almost all of the 4.8 million people who already pay for TV in Los Angeles, including the 1.7 million who get service through Time Warner Cable.
But Los Angeles also has around 686,000 homes that get their TV signals for free via antenna, the highest number of any market in the nation, according to SNL data.
That means that fans who were used to watching Lakers' away games for free on KCAL 9, a CBS Corp. TV station, will now have to pay for TV from a provider that carries the channel. Either that or hit the local sports bar when the Lakers are out of town.