Business Update with Mark Lacter

Some LA Laker fans still can't watch all televised games from the comfort of home

KPCC's business analyst Mark Lacter says negotiations are ongoing between Time Warner Cable and other broadcasters to carry Laker games.

Steve Julian: The Lakers have had a terrible start to their season, so it might not be such a bad thing the games are so hard to find on television.  Mark, it seems things are off to such a rocky start, they're using paper clips - not staples.

Mark Lacter: Steve, there's that not-so-terrific won-loss record, which led to the firing of Mike Brown after only five games, and which led to that strange turn of events over the weekend that had Phil Jackson likely to be hired... and then suddenly not hired.  But the thing that's really driving fans crazy - at least fans that have DirecTV - is that they still can't watch the vast majority of Laker games.  That's because Time Warner Cable has the TV rights to carry those games on its new SportsNet channel - and it's not been able to cut a distribution deal with DirecTV (also, no agreement with the Dish Network).  This is a problem because the Time Warner channel will be the only place that has most of the regular season games, both home and away.

Julian: What's the holdup?

Lacter: It's apparently due to DirecTV wanting to show the Lakers on a premium sports tier (meaning you have to pay extra to get it), and Time Warner wanting the Lakers shown on a basic tier, where advertising and subscription revenues are going to be higher.  Both sides have good arguments: Time Warner shelled out a lot of money for the TV rights to the Lakers, and it's looking for a decent return on its investment.

Julian: And DirecTV?

Lacter: DirecTV is not only worried about what it has to pay for the Lakers, which is pricey enough, but also what it might cost to carry the Dodgers once the team owners decide on a new TV deal.  The CEO of DirectTV says that programming costs, especially sports programming, have gotten way out of hand.  He obviously doesn't want to lose Laker fans by not offering the Time Warner channel, but he also doesn't want to alienate the rest of his customer base by raising prices.

Julian: My mom, who grew up walking distance from the Coliseum and watched every Rams and Trojans game in person, now can't watch her beloved USC football games for the same reason.  She can't get the PAC 12 channel.  She's in her 70s, and THAT's driving her crazy.  This is more than just a Lakers issue.

Lacter: That's right, the new Pac 12 Network isn't available on all cable and satellite systems.  The TV market has become so fragmented that live sports is one of the few reliable sources of programming.  And what we're seeing in the L.A. market is the growth of regional sports channels.  So far, you have Fox Sports, Prime Ticket, the Time Warner SportsNet Channel, and the Pac 12 channel.  That adds up to almost $10 per subscriber per month, according to Sports Business Journal, which is just slightly below what's being paid in the New York market.  But it does not include the upcoming TV rights deal for the Dodgers, which is certain to be huge -  whether the team decides to start its own TV channel (as the Yankees did), or possibly work out a deal with Fox or Time Warner.

Julian: Do cable companies work well as content providers?

Lacter: Usually not - that's a big part of it.  And eventually, all roads lead back to the sports franchises themselves.  The Lakers not only asked for a multi-billion-dollar deal, but wound up giving exclusive rights to a single cable service - Time Warner - that then would be free to charge its competitors whatever it wanted.  It was kind of asking for trouble, which is what they have with the DirecTV situation.

Julian: And the fans end up losing.

Lacter: So far yes.

Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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