The judge handling the bankruptcy of the LA Dodgers explained his reasons for giving the Major League Baseball team permission to sell future television rights to the team’s baseball games months earlier than their current contract with Fox Sports allows. U.S. Bankruptcy Judge Kevin Gross in Wilmington, DE overruled Fox’s objection to letting the team negotiate with Fox’s competitors early. The TV rights could be worth about $100 million a year, a consultant for Fox said in court.
The team filed for bankruptcy in June with plans to sell the media rights to pay creditors and allow Frank McCourt to retain his ownership. McCourt later agreed to sell the team under a deal that ended a fight between Major League Baseball and the Dodgers. In the bankruptcy court hearing, the team and Fox Sports Net West 2 LLC fought over the proposal to solicit bids for future TV rights.
Gross filed a 20-page opinion outlining the grounds for letting the Dodgers speed up the process: It is “disingenuous for Fox now to fight debtors’ marketing procedures which move exclusive, confidential and good faith negotiations to an earlier date. The court’s ruling will enable debtors to seek at present what they will be unable to obtain later, better telecast terms — first exclusively negotiated with Fox — in conjunction with the sale of the team, thereby maximizing the value of both”
Gross said Fox will have the opportunity later to argue that it is entitled to damages for breach of contract, and the Dodgers will be able to decide whether those damages, if any, make a media rights deal with someone else economically unwise.
Fox Sports opposes the plan to market the rights for the 2014 season and beyond, arguing that it can exclusively negotiate for them until December 2012 and the team can’t solicit offers from third parties until those exclusive negotiations end.
Fox Sports has a 45-day exclusive negotiating window, now ending Jan. 19, the same as under its current contract, just 10 and half months sooner, Gross said in the filing. Fox Sports appealed, seeking to overturn the ruling. Fox Sports is asking the district court judge to immediately halt the implementation of Gross’ order while he considers Fox’s appeal.
The Dodgers issued a statement 12/15 on the matter:
“As the media has been reporting, the market for telecast rights is vibrant. For potential new owners, those rights not only assure a steady and substantial revenue stream, but also enhance a team’s brand appeal and, ultimately, its competitiveness on the field.
Moreover, the formal opinion issued today by Judge Gross expands on his order approving the debtors’ amended telecast marketing rights motion enabling the Dodgers to move forward with the process to unlock the full potential value of one of the debtors’ primary assets. This process will also enhance the debtors’ ability to achieve a sales transaction of the Dodgers that will maximize the value of the debtors’ estate for the benefit of all parties.”
The Dodgers further said that, in response to Fox’s attempt to seek from the District Court a stay pending appeal of Judge Gross’ order, it has filed a letter with that court in which it makes clear that Fox’s request for an immediate stay should be denied, including that it is “… nothing more than an attempt to delay, and by doing so, derail, the carefully crafted marketing procedures approved by the Bankruptcy Court.”
In his ruling, Gross agreed with the Dodgers that Fox will maintain many of the same rights under the proposed sale process as it has under its existing contract, including the exclusive negotiating period. The judge said the only changes to the rights agreement with Fox were moving up the exclusive negotiating period by about 10 months, and a requirement that any deal between the Dodgers and Fox be approved not just by MLB, as in the contract, but any buyer of the team as well.