Well, bully for DirecTV.
At a moment when every cable and telco system that matters in Southern California has decided that it can’t afford not to broker a deal with Time Warner Cable to carry its Lakers-loaded SportsNet and Deportes package – from Charter to Cox, from AT&T U-verse to Verizon FiOS, to a Campbell’s soup can and a fibrotic string – we’re down to the last two satellite providers standing.
Can they take the heat and dish it out at the same time?
DirecTV, 30 million strong nationwide with nearly 2 million in Southern California, appears to be digging in with a stance that it refuses to be bullied into taking the hottest regional sports channel on a basic-tier level with a hefty price tag just because everyone has it.
As DirecTV CEO Mike White said during a third-quarter earnings call with shareholders this week:
“Rising programming costs . . . is clearly the most significant issue facing distributors today. . . . Our customers bear the brunt of these exorbitant price increases and it’s just not sustainable. . . .
“In terms of Los Angeles, I think it’s another example of how broken this system is. People take the same content, package it up, bid it up for three times the national average on a per game basis and then try and stick it back to the other distributors in the geography. And I think that’s very unfortunate. . . .
“We are continuing to have active discussions about the Lakers network. We hope to have a deal on that content. But all of these new channels that everybody here wants, and they want to stick it into the bundle, is not right. . . . I think the regional sports network structure in the industry is broken.”
Thus, we’re at one of those interesting tipping points, where everyone else in the media world is monitoring to see which way this topples.
Having created a business model based on differentiating itself for cable-frustrated sports junkies by offering things such as “NFL Sunday Ticket” and upgraded customer service, DirecTV’s revived mantra of pushing for a new business model is one that not all are buying into.
Ed Desser, head of the Santa Monica-based Desser Sports Media, Inc., a sports media negotiator who set up the Lakers’ 20-year, $3.6 billion deal with TWC and had DirecTV as a client in the past, said Thursday he finds DirecTV’s current stance as “completely illogical.”
In his 35 years in the sports TV business, negotiating more than 50 deals on behalf of teams, Desser recognizes there are valid issues relating to costs, “but don’t you believe that had Fox renewed its deal with the Lakers, DirecTV wouldn’t have kept it and just passed along a big increase? They would have.”
“How is it a noble cause if they’re not serving their customers? Dish Network may not carry (TWC), but that’s their point in differentiation (with DirecTV). Now, with a network available on a blanket basis in all terrestrial carriers, this is an unattainable position for DirecTV to try to maintain. It tells me they’re still trying to haggle over the price.”
DirecTV does benefit from the current system with its ownership stake of the Root Sports channels in the Northwest, Rocky Mountains and Pittsburgh, with exclusive rights to teams such as the Mariners, Pirates, Penguins and Jazz that remain on basic tiers.
And in L.A., the current landscape is getting very pricy. A sports fan with TWC SportsNet and Deportes (at $3.95 per month), both Fox Sports West channels (a combined $5) and the new Pac-12 Network (80 cents) get stuck right away for $10 each billing cycle. Only New York’s TV market is similar in price and content.
The second part of this equation is the suspense leading up to how the Dodgers will sort out their TV existence after the 2013 season – do they stick with Fox Sports/Channel 9, jump to Time Warner or even start their own channel? And what are we all in for there?
Meanwhile, as it holds off TWC SportsNet and the Pac-12 Network in Southern California, DirecTV also has refused to pick up a new Comcast SportsNet Houston channel, home to the NBA’s Rockets and will be for the MLB’s Astros. However, DirecTV has the new Fox Sports San Diego regional channel launched last year, at a reported rate of more than $4 per subscriber, while Time Warner remains one of the last major holdouts.
“With all due respect, none of those teams are the Lakers,” said Desser, who advised the Rick Caruso-Joe Torre potential Dodger ownership group during the bankruptcy sale. “I would say not even the Dodgers.”
DirecTV sources say they receives plenty of response from non-Laker fans thanking them for not caving into the price demands that TWC is asking. The Lakers have also stopped running in-game ads for TWC’s SportsNet at Staples Center because of the fans’ increased booing.
As the Lakers are in a stretch of playing 12 straight games exclusive to TWC SportsNet, does it behoove DirecTV to risk customer defection as another day goes by without access? Will a moral high ground eventually yield to a business sense if customers start leaving?
“You don’t have to work hard to figure what the truth is here,” said Desser. “I’m aware this is a subject hotly discussed inside DirecTV, and people are pulling their hair out for the way DirecTV is approaching this.
“That’s their prerogative, and they have shareholders, and they need to appear to be sensative to their constituency. But they need to do something soon or there will be a terrible disruption to their business.
“The Lakers aren’t a fringe product. It’s not by accident that everyone else in town has signed up. The key thing here is that this is must-have programming. You simply cannot operate in the L.A. market and not have the Lakers. It has to recognize there are a majority of bars and restaurants losing business (with DirecTV), and they’re simply going to sign up with someone else sooner rather than later.”
Sources in and around the DirecTV offices still won’t talk much on the record about their strategy, other than to confirm they remain in negotiating with TWC.
These are two businesses situated just a couple miles down the street from each other in El Segundo.
Or, they might as well be a million miles apart.