Revenue sharing still a major hurdle for Dodgers' television deal

Dodgers face of the franchise Magic Johnson can't smile about the team's TV deal yet. (US Presswire)

The Dodgers and Time Warner officially announced their new landmark television contract on Monday. The deal is historic both in terms of its size ($7 billion to $8 billion) and structure.

The team's new ownership group formed a company called American Media Productions, which plans to begin broadcasting games on the new SportsNet LA network in 2014. That company could be an issue for Major League Baseball with regards to the revenue-sharing program.

Bill Shaikin of the Los Angeles Times has the gory details, but here's the situation in English: As part of the team's sale last spring, MLB agreed the Dodgers could keep any TV money over $84 million (with a 4 percent increase annually) as long as the club took a "significant risk" in starting its own network. Since Time Warner has agreed to cover affiliate fees from cable distributors who refuse to carry SportsNet LA, as per the official release, the team is not taking on a significant risk. Instead, Time Warner has assumed the risk.

Based on this structure, MLB can charge the Dodgers additional revenue sharing on top of what they're already supposed to pay, which is approximately one-third of that predetermined fair-market value of $84 million (plus the annual increases). The league could also include in that revenue-sharing calculation the branding fee Time Warner is paying the Dodgers for SportsNet LA.

The deal could land the club back in bankruptcy court in hopes of a new interpretation of its fair-market value. The revenue-sharing issue is not expected to derail the agreement, but it is a significant hurdle that must be cleared.

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