Lakers Strike It Rich
The team leaves Fox Sports West, KCAL for 20-year deal with Time Warner Cable.
by Kyle Stack / @KyleStack
The NBA’s second-most valuable team has cashed in on a new TV deal that’s as lucrative as their $2,500 courtside seats. Of course, that’s only figuratively speaking; the 20-year pact with Time Warner Cable that the Los Angeles Lakers announced yesterday is likely a multi-billion dollar one.
Terms were not announced in a deal which will see Time Warner Cable broadcast all Lakers pre-season, regular season and post-season games beginning with the 2012-13 campaign. Time Warner Cable will launch two regional sports networks (RSNs) in HD, which includes a groundbreaking Spanish-language regional sports network, the first of its kind. According to the Southern California Association of Governments, Hispanics represent 40.6 percent of Southern California’s population, making it the largest ethnic group in the area. Access to both RSNs will reach beyond Southern California into Nevada and Hawaii.
Robert Boland, Clinical Associate Professor of Sports Management at New York University, noted the two regional sports networks made a 20-year term more necessary.
“The creation of new channels takes more time, dedicated resources and has more costs to be amortized than extending a deal with Fox Sports,” Boland wrote in an e-mail message.
In addition to Lakers games, the deal reportedly includes pre- and post-game shows, each produced in English and Spanish for the respective networks. A Lakers news and magazine show will run throughout the season, as will joint community relations initiatives between the networks and new online and on-demand content. The Lakers and Time Warner Cable declined to comment on any potential original programming.
Lakers games are currently broadcast on KCAL, owned by CBS Corp., and Fox Sports West, a regional sports network co-founded in 1985 by Lakers owner Jerry Buss. Fox Sports West reaches nearly seven million homes in Southern California, Nevada and Hawaii, and the Los Angeles Times noted the Lakers receive roughly $30 million per year from the network.
The Times also reported that sources told them the Lakers deal with Time Warner Cable could be worth $3 billion over the life of the contract, which would come out to $150 million per year. Boland estimated that’s likely the value of the deal, although he added having two stations could increase that per-year value. “The Spanish language platform has the potential to be very interesting because it would compete for advertising dollars in an under-served and under-reached population,” he wrote.
The most recent team from one of the three major sports leagues to sign a new TV deal is the Texas Rangers, which agreed to a 20-year, $3-billion broadcast contract with Fox Sports Southwest last September.
To make a cross-comparison between NBA and MLB teams isn’t a seamless one — for instance, MLB teams play 80 more games during the regular season, raising the broadcast value of a deal — but it provides an interesting gauge for what the two-time defending champion Lakers could get in one of the nation’s most populous regions.
In an e-mail to SLAMonline, Time Warner Cable spokesman Maureen Huff stated that while the network has over two million subscribers in Southern California, it will “be seeking distribution from all distributors for the RSNs consistent with how other RSNs are distributed.”
Lakers spokesman John Black wrote in an e-mail it was his understanding that Lakers games should reach just as many, if not more, homes as they have been on Fox Sports West and KCAL. Viewership has been strong, but there’s also room for the Lakers to improve.
Sports Business Journal recently came out with its first-half ratings for the 2010-11 NBA season. The Lakers led the NBA by averaging 278,000 for each of its games on Fox Sports West, nearly doubling the runner-up Chicago Bulls, who averaged 141,000 households per game on Comcast SportsNet Chicago. Yet the Lakers pulled in only the fourth-best average rating with a mark of 4.9, falling behind the Miami Heat (5.4, Sun Sports), Utah Jazz (6.0, Fox Sports Utah) and San Antonio Spurs (10.01, Fox Sports Southwest). (The rating represents the percentage of the total population of televisions in the area that are tuned into a game at any particular moment.)
So, there’s room for the Lakers to improve in ratings, and more revenue to be generated. Forbes estimated the Lakers’ franchise value to be at $643 million in its 2011 rankings, which put them just behind the New York Knicks ($655 million) for the top spot in the NBA. And only the Knicks’ $226 million in revenue in 2010 was greater than the Lakers’ $214 million figure.
The Lakers and Time Warner Cable expressed that their deal came together quickly, although each offered a different timeline for when talks began. Huff explained that the sides had been in “serious discussions” for several months; Black labeled it several weeks. What matters at this point is that the deal is finished. The Lakers will capitalize on their rabid fan interest with new broadcast networks that should significantly increase their revenue. And in a few years they may be able to pass the Knicks to become the NBA’s most valuable franchise.