Dodgers owner Frank McCourt wants the team's television rights to… (Brian van der Brug / Los Angeles…)
Reporting from Wilmington, Del. — The Dodgers' contract with Fox Sports restricts the team's ability to launch a regional sports network even after the contract expires, two people familiar with the agreement said Wednesday.
Fox and the Dodgers faced off in U.S. Bankruptcy Court on Wednesday over whether the team could hold an accelerated sale of television rights. The hearing is scheduled to conclude Thursday.
Fox is asking the court to enforce its contract as is, most notably a provision that forbids the Dodgers from negotiating with another media outlet for another year.
However, under a previously undisclosed provision, the contract also hampers the Dodgers' ability to form a regional sports network after the contract expires so long as Time Warner , Comcast or ESPN is an equity partner, according to the people familiar with the agreement.
Dodgers owner Frank McCourt had wanted to launch his own cable channel — dubbed "DTV: Dodger Television" — once the Fox contract expired in 2013, according to documents filed in his divorce trial. Fox would have had no recourse had McCourt partnered with any party beyond Time Warner, Comcast or ESPN.
The contract would not absolutely prohibit those Fox competitors from partnering in some form in a Dodgers cable channel, but what could be costly hurdles would in theory give the team an incentive to stick with Fox.
The power of those so-called "back end" contract rights was at issue Wednesday, as the Dodgers argued for the right to sell the television rights along with the team.
Under a settlement agreement with Major League Baseball filed with the court Tuesday, McCourt has agreed to sell the Dodgers by April 30.
Initial bids are due Jan. 13. The Dodgers want Fox's exclusive negotiating rights to end Jan. 14.
In the absence of a new deal with Fox, the Dodgers say they could maximize their sale value by offering prospective owners a package that could include the team, its stadium, its television rights and its parking lots, then inviting bidders to pair up according to their needs and interests.
For example, AEG and Time Warner Cable could form a joint venture to buy the Dodgers, giving AEG access to land that could be developed and Time Warner Carble access to Dodgers games for its new sports cable channels. AEG and Time Warner have declined comment on any interest in buying the Dodgers.
Under the current television contract, the Dodgers cannot negotiate with other media outlets until Nov. 30. By advancing that date to Jan. 14 — that is, before the team sale — Fox claims the Dodgers would materially breach the contract.
"The back-end rights in this contract are not being changed in this contract whatsoever," testified Tim Coleman, the investment banker brokering the Dodgers' sale. "The only difference is date."
Fox attorney Gregory Werkheiser said damages could be "massive" and said the company might not pay the eight-figure rights fee it owes the Dodgers in January.
Coleman said he believed the Dodgers would not be subject to any liability for damages, even when Fox attorney David Teklits asked about the prospect that early bidding could mean Fox would lose the Dodgers' rights and close Prime Ticket.
"I don't think that's a loss back at the team," Coleman said. "You lost in negotiations." email@example.com