The ‘Dodgers tax’

Call it the “Dodgers tax.” Pay-TV analysts expect Guggenheim Baseball Management, the investment group that paid an astronomical sum for the Dodgers, to recover at least part of its investment by charging a sky-high fee for the right to broadcast the team’s games. With local stations and cable channels run by Time Warner Cable and News Corp. expected to get into a bidding war for those rights, the team is virtually guaranteed a multibillion-dollar contract — not unlike the one the Lakers won last year from Time Warner.

Those dollars have to come from somewhere. That’s where your monthly cable bill comes in. To recover its costs, the winning network is certain to demand more from cable operators, satellite TV and phone-based video services (and advertisers too, most likely). One estimate pegged the likely increase at $3.50 per home per month. That’s on top of the more than $10 that sports channels already collect, and the estimated $3.50 that Time Warner is expected to seek for its Lakers programming.

The insidious thing about these increases is that they’re applied to just about everyone’s pay-TV bill. The major sports networks are included in the same basic tier that offers the most popular advertiser-supported cable channels. Some consumer advocates have called for sports programming to be offered as a separate tier so the cost could be borne solely by sports fans, but the channels have fiercely resisted doing so because it would dramatically shrink their subscriber base. That, in turn, would yield less money to pay the likes of the new Dodgers owners and their star players.

But how long can TV services expect the millions of Angelenos who aren’t sports aficionados to pay a premium for channels they don’t watch? The demands from sports networks are outsize versions of the increases obtained by other channels; together, they’ve driven up the average monthly cable bill from $40 to nearly $80 over the last decade. That’s far faster than the rate of inflation.

This trend seems impossible to sustain. Like Yertle the Turtle’s throne, the ever-higher fees are being piled onto the backs of forced conscripts who have no real loyalty to the teams at the top. Viewers with little interest in sports have a growing number of alternatives when it comes to TV and movies, and as business models evolve online, those options will only get better. The risk for pay-TV services is that these customers will start moving to the alternatives at some point, and the ground underneath those rising pay-TV rates will cave in.