What if you paid $4 billion for something that was invisible?
The Lakers' partnership with Time Warner Cable (let's call it TWC from here on out; we all know I'm not referring to The Weather Channel, right?) that will debut two Lakers-centric regional sports networks -- one in English, one in Spanish -- on Oct. 1 is not just a game-changer. It's an industry changer.
The Lakers' hegemony over the NBA has been a fact of life for their weary competitors for a long time, but their new deal with TWC threatens to cement L.A.'s already prohibitive financial advantage well into the next decade.
The problem for fans in the region is that no one outside of TWC viewers would currently be able to see it.
TWC has two million subscribers in Los Angeles. But another three to four million viewers in the area use one of the region's other cable or satellite providers. And none of them has yet reached a deal with TWC to carry the cable channel. That means those three or four million L.A.-area viewers currently will not see the Lakers kick off their preseason Oct. 7.
TWC Sports President David Rone said by telephone Sunday afternoon that it was "really hard to tell" whether a deal could be reached by the start of the preseason. But Rone said that TWC was "encouraged" by what he termed "deep discussions" with most of the holdout providers.
Time Warner Cable's new 24-hour all-Lakers TV channel will have unfiltered access to the team.
"As much as it matters to me and the Los Angeles Lakers, preseason basketball is a different story than regular-season basketball," Rone said. "It might be that the distributors continue to try and run this out, and it may go beyond October 7. But I feel very confident that by October 30, when the regular season is ready to go, we're going to be in a very good spot."
TWC is paying the Lakers somewhere between $2-$5 billion over the next 20 to 25 years -- there have been different estimates bandied about -- in the new endeavor. Whatever the actual amount is, it will dwarf anything that any other NBA team receives for its games. And that only increases the huge financial edge the Lakers have to acquire and keep players.
Luxury tax, schmuxury tax.
"We don't have a $100 million TV deal," a small-market executive moaned last week. "We can't charge the same for some things like other teams can."
Actually, the Lakers' deal is worth at least 20 times that $100 million.
TWC is convinced the investment will be worth it. With two decades of certainty, TWC will never have to worry about renegotiating a rights fees deal with a third party. There won't be a chance of a dispute like the one between the satellite provider Dish Network and the cable network AMC, which airs the hit shows "Mad Men", "The Walking Dead" and "Breaking Bad", among others; Dish took AMC and other networks off of its programming at the end of June and they haven't been on since.
"The company's goal overall is about the delivery of premium content to our customers in the best way possible. We want them to enjoy the things that they do better and better and better," Rone said. "... And when you look at the Southern California market, sports is so important to the customer base. And when you digress from there, you say, what is important in sports to them?...The Lakers are the crown jewel, by leaps and bounds. Our customers want to be sure that they're never interrupted from enjoying the Lakers in any way. The best way to ensure that was to enter into a partnership with the Lakers."
TWC will also broadcast the WNBA's Sparks, Major League Soccer's Galaxy, and Mountain West Conference football and basketball -- specifically concentrating on teams that fall within the network's satellite footprint, including UNLV, San Diego State and Fresno State. But it's the Lakers carrying the mail on this one.
The two TWC channels not only will have the usual pre- and post-game shows (Access SportsNet: Lakers), but will also have an interactive show featuring social media encounters (#LakeShow), rebroadcasts of both current Lakers games (Encore+, which will add social media commentary and footage not on the original broadcast) and historic Lakers games (Timeless Lakers). There will even be condensed one-hour rebroadcasts of recent games, similar to NFL Sunday Ticket's Short Cuts (Lakers Compacto).
And, of course, there will be the requisite reality show -- a behind-the-scenes look at the selection of this year's Lakers Girls squad. TWC basically has the run of the joint, so it will be the only place you can see things like Dwight Howard putting on a Lakers jersey for the first time.
"It may (not) be a proverbial hotline, but the fact is I have a decade-long relationship with Jeanie (Buss, the Lakers' Executive Vice President of Business Operations) and (Senior VP of Business Operations) Tim Harris," Rone said. "I brought that to bear in establishing the team that we've established here. We have been speaking with them for the last 15 months. We've been with them on a day-to-day basis, interacting with them daily, as you say, and even hourly ... it's not even reactive. It's very, very proactive."
Unique content is critical for TWC. Under the Lakers' old deals, there were, basically, games surrounded by pre- and post-game shows. But TWC has the team's permission to be anywhere it can fit a camera, not only to profile players and coaches, but Lakers' fans -- some of whom tend to be fairly famous.
The Lakers' new network will stretch as far north as Fresno, and go south to the Mexican border in Tijuana. It will also be available in Hawaii, where the Lakers had training camp for many years, and go east to Clark County, Nevada, which encompasses Las Vegas.
But the partnership may as well circle the globe, such is its potential impact.
With this kind of money filling its coffers, Los Angeles is simply in a different universe than any other team, including those also in major media markets like New York and Brooklyn and Chicago, or those who are also making mega-deals for their own RSNs, such as the Celtics did with Comcast SportsNet New England and the Rockets are doing in partnership with Major League Baseball's Astros on Comcast Sports Houston.
The only other team that can claim anything similar to the arrangement the Lakers have with TWC is the Yankees, whose YES Network dominates ratings in New York among sports cable companies.
The Los Angeles Times noted last week that if the Lakers re-sign Howard next summer for the expected five-year max deal -- starting at more than $20 million -- the team's 2013-14 payroll will be more than $100 million for just nine players. If they filled out the final spots on their roster with minimum-salaried guys, the final payroll would be somewhere in the $105 million area.
With the new, more punitive luxury tax penalties taking effect in 2013-14, the Lakers would be facing a huge tax bill. Assuming the tax threshold rises from its current $70.3 million to the league projected $73 million in '13, the Lakers would be around $32 million over the threshold. And the new tax on that $32 million would be an additional $94.5 million. That would make the Lakers' total bill for 2013-14 ...
A fifth of a billion dollars. For one team. For one year.
But that's next year. TWC has to deal with the present, and reaching an agreement with the cable or satellite companies -- Comcast, AT&T U-verse, Charter, Cox, Verizon FIOS, DirecTV and Dish Network -- that have L.A. customers. Negotiations with each are ongoing, but the clock is running.
At issue is how much TWC is demanding the cable and satellite providers pay it to carry the Lakers' channels. Such "carriage fees" are a crucial way a cable network makes money. ESPN's ability to leverage its enormous reach and programming into the biggest carriage fees in the industry -- currently $5.15 per subscriber per month, according to the media analyst SNL Kagan -- has helped make the Four-Letter Network a financial behemoth over the last two decades, the TV version of the Lakers, able to crush any challenger and bid on any sports property it wants.
TWC is seeking $3.95 per subscriber per month from the cable companies closest to Los Angeles, with those further away being asked to pay less, for both Lakers channels. Rone said those are increases for the cable and satellite companies, not to consumers, though he allowed such increases can be absorbed by consumers down the line.
"When you look at what other RSNs are charging distributors," he said, "and you look at the terms those networks are carrying, and the ratings and the resonance they have in those communities vis a vis the ratings and the resonance the Lakers and the Galaxy and the Sparks have in this community ... we feel very good about the value of our proposition."
There remains the question of how a network that's partners with the team it's covering will report the not-so-good stories that have been known to pop up from time to time on a professional sports team. Will TWC's broadcasters and analysts criticize players and coaches -- or management -- if they think they deserve criticism?
"We're going to cover everything," Rone said. "There's a level of what's going on that if it's part of the zeitgeist, we're all things Lakers and all things Galaxy, and we're going to cover it. But you know that people come at these things from different bents. And it's fair to say that we come at these things from a partner-oriented bent with these networks."