Steinberg: High stakes television insanity in L.A.

For the second straight year, the most popular sports team in the nation’s second largest market is blacked out on television. The Los Angeles Dodgers games are not available to 70% of the market due to a dispute between Time Warner and other cable operators over the monthly pricing of the product.

SportsNet LA is a cable channel owned by the Los Angeles Dodgers, and Dodger games are the only content it provides. Time Warner purchased the rights to these games in a $8.35 billion 25-year deal, but its inability to make a deal with networks like Direct TV makes that purchase a massive money loser.

How did this happen, and why is a self-destructive course of business being allowed to continue?

Time Warner overestimated the willingness of Dodger fans to pressure the other cable operators into carrying the games. They also were caught in the backwash of a rebellion against the prices and services of cable television.

Many consumers are opting out of cable subscriptions in favor of using Netflix or Hulu as their platforms. Other consumers are opting for “skinny” packages of television channels. Direct TV, with 1.2 million subscribers in Southern California, reports that they have only lost 2,000 subscribers over the controversy.

Time Warner reportedly is asking a $4.99 monthly charge per home which would put SportsNet LA in the top three or four priced regional networks in the country. But, unlike the other networks, the only games available are Dodger baseball games.

Could there be some form of MLB intervention or binding arbitration to settle the dispute?

The problem is that both Direct TV and Time Warner are in the midst of being purchased and the current executives must feel that they cannot make concessions until the ultimate management teams arrive.

In 2013 the average viewership per Dodger game broadcast was 228,000. Last year, with only TW offering the games, viewership dropped to roughly 56,000 fans.

Southern California has some 15 million people who are potential customers. The Dodgers have always have had the deepest fan base in Southern California. They marketed Southern California like it was a small town in 1958 when they arrived. They had special nights for Little League, Rotary, and hundreds of organizations. They sold the concept of “going to a Dodger game,” not who they were playing or who was pitching. Now they risk long term maintenance of that base.

The lack of television has not affected attendance. The Dodgers drew 3.8 fans last year and sold over three million tickets this season prior to the first game. But the presumption has always been that television revenue would continually rise.

The “loss leader” aspect of bidding on rights for programming as a showcase for promoting Monday through Friday primetime viewing has held firm. The stalemate in Los Angeles is a vivid example of where a rights purchase is not yielding results.

For the future of sports television economics, hopefully this will be a cautionary tale of the necessity to line up buyers prior to a risky expenditure on rights fees and not a harbinger of things to come.

LEIGH STEINBERG is a renowned sports agent, author, advocate, speaker and humanitarian. Twitter: @steinbergsports.