Ticket Price Shock for New Dodgers Network

Sports networks are expensive. However, SportsNet LA, the new regional sports network offering around-the-clock coverage of the Los Angeles Dodgers, is more so than most.

USA Today reports that SportsNet LA is asking between $4.50 and $5 per subscriber per month from pay-TV providers that want to carry its content. So far, only Time Warner Cable Inc. (NYSE: TWC) has added the station to its line-up, which is not surprising because the cable company is already subsidizing the network to the tune of $8.35 billion shelled out to the Dodgers over the next 25 years.

TWC has an estimated 2 million customers in Los Angeles, representing about 45% of the TV market. DirecTV Group Inc. (NYSE: DTV), Verizon Communications Inc. (NYSE: VZ)'s FiOS, and AT&T Inc. (NYSE: T)'s U-Verse are among the providers that have balked at paying the price that SportsNet LA is pitching.

Cable companies repeatedly cite sports programming juggernaut ESPN as providing the most valuable content in their bundles for customer retention and acquisition. The results of an operator survey released this week by Beta Networks Corp. listed ESPN as the No. 1 network for perceived value among pay-TV providers for the 14th year in a row. Yet even ESPN charges no more than an estimated $5.40 per subscriber per month, and the network's sports coverage is far more extensive than a single team.

ESPN is also the most expensive content provider to date in cable bundles, although content rights fees are rising in other areas as well. CBS Corp. (NYSE: CBS) CEO Les Moonves has said he expects his company to generate $1 billion from retransmission and affiliate fees by 2017. (See CBS Financials Fuel Aereo Angst)

The price of programming is one big reason why the cable industry is consolidating. Service providers are hoping to wield more power in content negotiations by increasing their distribution footprints. Regional sports networks present a unique challenge, however, because their greatest viewing interest is contained in a very small geographic area.

The question is: How long will pay-TV providers be able to hold out against networks like SportNet LA in the face of fan demand? The answer may be a lot clearer come opening day of the baseball season at the end of March.

— Mari Silbey, special to Light Reading

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