Billion Dollar TV Deal Saves Team For Buss Family

Yesterday Joe Flint of the LOS ANGELES TIMES and this morning John Ourand of SPORTS BUSINESS DAILY reported the Lakers have agreed to a 20-year local broadcast rights agreement with Time Warner Cable for an eye-popping $3 billion.

Mitch Kupchak, Jim Buss, Jerry Buss

(Jim Buss (ctr) helps run Lakers basketball ops with Mitch Kupchak (l))

Though Flint also reported that Time Warner officials “dismisssed” the $3 billion figure, I’ve been told by multiple sources with knowledge of the negotiations today that that number is accurate, with one source noting to me that the reported $3 billion number “may actually be conservative.”

So as of the 2012-13 season all Lakers game in Los Angeles, except for national telecasts, will air on cable. Currently, the games here in L.A. are broadcast on over-the-air station KCAL 9 (CBS) and cable channel Fox Sports West.

As the English and Spanish cable channels TWC will air the games on don’t yet exist, TWC still has to convince Direct TV, Dish Network and the Cox and Charter cable television operations to pick up those new sports channels at what Ourand reported Time Warner Cable Exec VP/Chief Programming Officer Melinda Witmer calling a “reasonable” financial basis:

“We are seeking to work with all of the distributors to find a reasonable basis to get full distribution of the network. We want the Lakers to be available to everyone regardless of who their provider is.”

Flint reports that in order for TWC to pay that enormous broadcast rights fee, it will have to charge a rate significantly higher than what Fox Sports West currently charges satellite and cable companies to broadcast Lakers games in Los Angeles:

Consumers may feel some pain as a result of the deal. Regional Sports Networks (RSNs) are generally some of the most expensive programming for distributors. Typically, RSNs cost between north of $2.50 per month, per subscriber. Given the high cost of the Lakers, Time Warner Cable will likely be looking for north of $3.50.

You can expect Cox, Charter, Dish and DTV to publicly balk at such a fee hike, but TWC apparently has a plan that it hopes will make them more amenable. From Flint:

Time Warner Cable, which has about 2 million subscribers in Southern California, isn’t looking to stop with the Lakers. In an interview, Melinda Witmer, executive vice president and chief programming officer of Time Warner Cable, said the company would be “looking at all available sports in the marketplace.”

Next on their list could be the Dodgers. The team’s current pact with Fox’s Prime Ticket channel expires in 2013.

In other words, if TWC were to have the Lakers and  Dodgers for its new sports channels, it’d essentially have a gun to the head of Cox, Charter, Dish and DTV. Though it is important to note that Fox Sports West has a favorable contractual arrangement with the Dodgers and, from what multiple sources within the team tell me, is more likely to retain those rights.

If this Lakers TV deal sounds unusual, it isn’t. There are other markets in which cable companies have jumped into the sports business, but this is TWC’s first foray.

While this is big news for Lakers fans, the more important part of this story is what it will mean to the ownership of the team.

From Flint:

Witmer said the move to get into business with the Lakers is part of its overall desire to “control our economic destiny.”

Translation: Lakers Owner Jerry Buss now officially has the financial wherewithal to transfer the franchise to his children - who currently run the team’s day-to-day operation.

In 2009, Buss told L.A. Times Magazine:

“It’s a severe economic issue for me. It’s an ongoing one, and I’m addressing it as best I can. I’m prepaying the taxes, and I’m keeping my fingers crossed that I live long enough to accomplish the whole thing.”

Ironic in that, god forbid, had Buss died in 2010 there would’ve been no inheritance tax. But since that loophole has now closed, Buss needed TWC’s enormous cash infusion to ensure the Lakers would stay in the Buss family.

With that in mind, if paying a little more for cable means the Lakers live on as a Buss production, most Lakers fans I know here in L.A. view that as a bargain.

But as we get closer to the 2012-13 season, expect Cox, Charter, Dish Network and Direct TV to throw a scare into Laker fans by, at least initially, refusing to submit to Time Warner Cable’s financial demands for carriage of the new sports channels.

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