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The must-see Lakers will mean must-pay fans under TV deal

Free, over-the-air access will end starting in 2012. Time Warner subscribers are expected to face more costly sports programming tier and other carriers must make up costs of carrying new networks.

February 15, 2011|By Lance Pugmire and Joe Flint
  • Lakers fans may not be so happy when they see their cable or satellite bill in a couple years.
Lakers fans may not be so happy when they see their cable or satellite bill… (Mark Boster / Los Angeles…)

Lakers fans have celebrated at the victory parades, partied at the local game-viewing gatherings and experienced the joy of following an NBA champion mostly free of charge.

Starting in the 2012-13 season, the price tag arrives.

The fallout from the 20-year deal between Time Warner Cable and the Lakers to create two regional sports networks — one in English and one in Spanish — will not only dramatically restrict the team from free over-the-air television but place them on satellite, cable and telephone carriers, asking fans to pay more to watch the NBA's most successful franchise.

"The Lakers are must-see, very popular programming and important to a wide swath of people not only in Southern California but across the country," Time Warner Cable spokeswoman Maureen Huff said Tuesday, a day after the deal was formally announced. "With the Lakers' broad and wide appeal, we hope to achieve as wide of an audience as we can."

The contract with the Lakers not only gives Time Warner Cable a grip on the most popular franchise in the region, but new clout to try to either lure subscribers away from competitors — including DirecTV, Verizon Fios and AT&T U-Verse — or get those competitors to pay big bucks to carry the still unnamed channels.

Harvey Schiller, former chairman of the New York Yankees' parent company YankeeNets who presided over the MSG regional sports network deal, said the Lakers added "dramatic value" to their franchise while Time Warner Cable stands to exact lavish profits.

Want to watch the Lakers as a Time Warner customer? Be braced to pay more for a sports programming tier that will factor in the company's investment, industry experts say.

"Given the size and length of this deal and importance of it to Time Warner Cable, they are going to attempt to earn it back, and one of the ways to do that is to price aggressively on subscriber fees," said Lee H. Berke, chief executive of media and sports consulting firm LHB Sports, Entertainment & Media Inc.

Another windfall will come if Time Warner Cable joins DirecTV's "League Pass" NBA package. DirecTV has an estimated 1 million customers in the greater Los Angeles region.

Regional sports networks are some of the more costly programming for distributors. Fox Sports West was getting $2.37 per month for the Lakers, per subscriber, according to SNL Kagan, an industry consulting firm. The new channel could easily top $3.

DirecTV officials declined to comment, but an authority on the satellite carrier's business not authorized to comment publicly previewed the coming tension. "There'll be a whole lot of hostile talk, elbows flying, but at the end of the day, it'll get done — it's too important of a brand with the Lakers' following in Southern California and beyond," this source said.

It's called "killer content," Schiller said. "Someone's selling you a major player everybody wants to see … you've got to get it," he said. "Yes, there's a lot of inventory on television, but having the inventory that people want is enhanced by selling advertising. Everyone involved knows that."

This season, Lakers games have attracted a staggering average of 456,000 viewers on KCAL-TV, in its 34th year of televising the team, while Fox Sports West has enjoyed average viewership of 410,000, according to the Nielsen Co.

On Jan. 12, Nielsen reported 723,000 watched on KCAL among a possible 5.7 million television homes in the greater Los Angeles area, stretching to western Riverside County and north to Inyo County.

For years, Time Warner Cable was one of the more vocal critics of the cost of regional sports networks. While other pay-television distributors such as Comcast Corp., Cox Communications and Cablevision Systems launched channels in their service areas, Time Warner Cable sat planted on the bench.

Now the cable operator, which has about 2 million subscribers in Southern California, has decided if it has to pay big money for sports, it might as well pay itself.

Neither the Lakers nor Time Warner Cable would discuss the terms, but industry executives estimated the deal's value at $3 billion, a figure Time Warner Cable dismissed. Fox Sports West pays $30 million a year for the Lakers games, according to people familiar with the partnership.

"The impact of the Lakers' departure is overstated," Chris Bellitti, Fox Sports vice president said in an e-mail. "Fox Sports West is a strong business today and will continue to be a strong business without the Lakers."

Time Warner's investment is "much more than a TV deal," said sports business expert Rick Burton. "It's a content deal, involving iPads, tweets, Facebook, on-demand content … follow the possible revenue streams. In the digital age, there are no time zones."

For Fox Sports, the challenge will be maintaining its subscriber fees despite losing the Lakers, and ensuring there is no exodus.

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