I caught up on the past couple episodes of the fantastic Padres and Pints podcast yesterday on my run and thought the discussion of the new Time Warner/FSSD deal was fascinating. It got me thinking about how the deal got done, and why it got done now. After all, it’s not like Tom Garfinkel and Jeff Moorad didn’t want to sign a deal with Time Warner. More subscribers equals more exposure to the team, and let’s not forget that the Padres own 20% of FSSD, so more subscribers equals more profit for the team. I’d seen Garfinkel on several occasions make the common sense argument that FSSD was asking for no more from Time Warner than what they agreed to with Cox, AT&T, DirecTV and Dish – that the asking price was by definition, the prevailing market rate for the network. From what I heard, I don’t think the team or the network (remember, they are one and the same ownership wise) was budging from that demand as it would be unfair to their other cable provider customers. On the other hand, Time Warner thought this “prevailing market rate” was unreasonably high, hence their refusal to pay it and carry FSSD the past two seasons. Classic stalemate. So what changed? And with nearly universal celebration over the deal, did the jubilation cover up the potential downsides of this deal?
Granted new ownership and management rolled into Petco with Mike Dee taking the reins. Within a few months, the deal is struck and Time Warner now carries FSSD. The press releases offered very little on the negotiation details, but it was stated that Time Warner signed a “reasonable” long term deal. It should be noted that the deal that led to the creation of Fox Sports San Diego is promising the Padres what has been estimated to start at $28 million and escalate to about $75 million in the 20th and final year. Here are my questions:
1. Does anyone really think Time Warner, after stiff-arming FSSD for 2 years, losing face with their customers that care about the Padres, and damaging their local brand just gave up on their demands on FSSD carriage at less than what Cox, DirecTV, etc. paid?
2. After considering #1, it seems to fair to assume that either Time Warner is paying less than the other carriers, or the Padres sweetened the deal with some type of unannounced payment/benefit/consideration that made the deal worthwhile to Time Warner, yes?
3. If Time Warner is paying less or receiving more than Cox, DirecTV, Dish, etc., then is it fair to assume that those partners will dig their heels in come renewal time for lower carriage rates?
4. If all other partners start negotiating the carrier fees lower and lower, then wouldn’t the Padres receive less money from the deal via carrier fees, lower the value of their ownership stake in FSSD, and lower their expected income from the network in the out years starting now?
5. Did Mike Dee and current management have incentive to just make a deal to show that the new ownership group cared about the fans?
I think it is somewhat likely that this Time Warner deal will lead to future contracts with the other cable/satellite providers to be negotiated lower, or to potentially turn into acrimonious, Time Warner-esque standoffs due to negotiations. I don’t care if the Padres don’t turn as much of a profit as projected except for the fact that it has a very direct impact on their bottom line, and thus their payroll, and thus their ability to put a winning team on the field. Obviously, I don’t expect the Padres, Time Warner or FSSD to publicly disclose the proprietary details of the deal, but I’m not sure that getting Time Warner on board at any cost is good for the team’s future, and I live in stupid Time Warner territory up here in Encinitas (of course I have made use of my proven techniques to get Padres games via iPad and MLB At Bat app)