Dodgers Settle With Fox Sports, Quash Media Rights Auction

Agreement removes final hurdle to the sale of the MLB franchise

The Los Angeles Dodgers and Fox Sports on Tuesday night settled their legal dispute, clearing the way for the sale of the Major League Baseball franchise.

According to the settlement filed with the U.S. Bankruptcy Court in Delaware, the Dodgers have agreed to abandon the proposed auction of its media rights, the sale of which would have violated the terms of its current contract with Fox’s Prime Ticket affiliate.

In exchange, Fox agreed to withdraw its objection to the settlement between MLB and outgoing Dodgers owner Frank McCourt, thereby removing the final impediment to the sale of the franchise.

Fox also retained the right to challenge the sale of the team to Time Warner Cable.

The cessation in hostilities arrived on the eve of a hearing that was almost certain to favor Fox. In late December, a federal judge granted Fox an emergency stay, preventing the Dodgers from putting the TV rights on the block until he’d made a ruling on the broadcaster’s appeal. Those arguments were scheduled to be heard on Jan. 12.

In a statement released Wednesday, Fox Sports said it was “pleased that these matters . . . have been resolved,” adding that the litigation had been an unfortunate necessity. “It was imperative that we protect our exclusive media rights . . . and we look forward to working with new ownership on future television rights discussions.”

With the legal wrangling put to rest, Fox’s Prime Ticket will continue to broadcast Dodgers games through the 2013 season. At the close of the 2012 MLB season, the Dodgers will honor Fox’s exclusive 45-day negotiating window.

If Fox had lost its exclusivity, Time Warner Cable was poised to swoop in with a competitive bid. The cable giant has already outbid Fox for the rights to the Los Angeles Lakers, signing a 20-year, $3 billion pact with the NBA franchise last February, and is hungry to round out its sports lineup with an MLB package.

Fox desperately needs to hold onto the Dodgers if it’s to keep operating the ATM that is Prime Ticket, which boasts an estimated $135 million in annual operating income. The Dodgers represent the last big-ticket sports franchise available to the RSN, after having lost the rights to the Lakers, UCLA and USC. (In December, Fox Sports West closed a $3 billion, 20-year pact to carry the MLB Los Angeles Angels games.)

When the time comes to hash out a new media rights contract, Fox can expect to dig deep. Given the price of recent sports rights deals in the same market, analysts expect Fox could pay as much as $3.8 billion for a package that runs from 2014 to 2033.

Meanwhile, the initial bids on the Dodgers franchise are due Jan. 23. Among those interested in buying the Dodgers are Dallas Mavericks owner Mark Cuban; Stanley Gold, president and CEO of Shamrock Holdings, Roy E. Disney’s private investment company; hedge-fund manager Steve Cohen of SAC Capital Advisors; a consortium that includes Los Angeles real estate developer Rick Caruso and former Yankees/Dodgers manager Joe Torre; and Mark Walter, CEO of Guggenheim Partners; and former Laker Magic Johnson.

Guggenheim Partners is a joint owner of Adweek parent company Prometheus Global Media.

Per an agreement between MLB and McCourt, the club must be sold on or before April 30.

The winning bid is expected to top out at $1 billion, a sum that would give the buyer the ball club and Dodgers Stadium (which is in dire need of renovation), and the 275 acres that surround it.