The Los Angeles Dodgers are taking a beating, and I am not talking about their uneven on-field performance. Yes, given that they have the most expensive roster in baseball history, you would think that they would be winning more games. But it's not the inconsistency of its players that is straining their organization. It's the Dodgers decision to sell exclusive distribution rights of their games to Time Warner Cable for $8.35 billion dollars over 25 years, and then expecting Time Warner Cable to easily partial out those rights to other distributors such as DirecTV and AT&T U-verse.
It hasn't worked thus far. At all. As a result, only about 30% of the homes in Los Angeles are able to see the Dodger games on television, leaving 70% of us in the dark. That includes most of the sports bars and restaurants in town.
The new Dodger management needed to sell the rights at the highest dollar value in order to recoup their investment and pay higher player salaries. Time Warner Cable wanted to buy at that exorbitant price to control the market while mistakenly thinking it could offset the huge price tag by selling the rights at inflated prices to the other distributors, who would in turn pass price increases to all of their subscribers, not just to those who watch Dodger baseball.
Just to be clear, this article is not about the Dodgers. It's about the bitch goddess of unintended consequences. So what are the consequences thus far?
The other distributors balked, stating that their customers pay enough already and could not absorb an added fee. DirecTV preferred an ala carte deal in which they would only charge those subscribers who wanted to watch the Dodgers, but Time Warner Cable said "no", that it was all or nothing. And so Time Warner Cable is on the hook for $8.35 billion and the Dodgers have a image crises.
Though initially invisible to the untrained eye, the results of unintended consequences can be devastating and long lasting. For the Dodgers, that may mean sacrificing the loyalty of its fan base, a drop in attendance, a decrease in merchandise sales, a reduction in player morale, and a humiliating, losing year. Most of the loyal Dodger fans did not see last weeks no-hitter by pitcher Josh Beckett. Oops...there goes some t-shirt sales. For Time Warner Cable, it could mean taking a tremendous financial hit that would not be offset by subscribers who switch to their service to watch the Dodgers. For the other distributors, it could mean losing some subscribers who flee to Time Warner Cable. For other teams around Los Angeles, most notably the Angels, it could mean an increase in fan base stemming from disenchanted Dodger fans. For sports bars and restaurants in Los Angeles, it could mean reduced patronage and income. For sports teams everywhere, it could mean not selling exclusive rights until you know that backend deals are in place. For all distributors, it could mean not buying exclusive rights without contingency plans. It could also mean that ala carte subscriptions are the wave of the future in which subscribers only pay for the channels they actually watch. This would decimate the financial well-being of nearly every channel and make it nearly impossible for smaller ones to gain entry and survive. For lawyers, it could be a boon in income as lawsuits fly back and forth faster than a throw from Dodger outfielder Yasiel Puig to home plate.
The results of unintended consequences are all around us. RIM, the company that introduced the once wildly popular BlackBerry smart phone, was slow to address the consumer market which gave Apple the opportunity it needed to launch the iPhone. Barnes & Noble and Borders did not foresee the full consequences of the online environment, and so Amazon entered. Unintended consequences go well beyond the business world. I suspect that the way our society has recently glamorized plus-sized models will give us implicit permission to remain overweight. I also wonder if the Roman Catholic Church's historic decision requiring its priests to be celibate increased the number of pedophiles who sought priesthood, allowing them to hide in plain sight. My research background has taught me that any time you create a screening criteria for membership, you sometimes get segments of the population that you did not intend (I have researched the celibacy issue to some extent, but conflicting studies and unreliable and false data has made this hard to pinpoint).
For every decision an organization makes, a strict process of critical thinking must be followed to insure that all potential, unintended consequences are thoroughly considered and intricately analyzed before decisions are implemented. That's the lesson here.
But by that measure, we have to call this one a swing and a miss for both Time Warner Cable and the Dodgers. There appears to have been little foresight and no contingency plans put into place if the other distributors refused to go along with their plans. You could say that the other distributors are playing the typical negotiation game to get better terms. That's very possible, and it reflects the same situation that occurred in 2012 when Time Warner Cable gained distribution rights for the Los Angeles Lakers. After some tough negotiations, the deal was done only weeks into the season.
Then again, the other distributors may have gladly and independently decided that the Dodger deal is Time Warner Cables Waterloo, a crushing defeat for having paid too much, and that the Dodgers crossed a line by sacrificing 70% of their loyal TV audience in order to recoup an investment that was far too large for anyone to swallow.
All of this because of one bad deal. Yes...unintended consequences can be a bitch. Then again, if the distributors reach a deal tomorrow, all of this will be forgotten...until the next bad deal.
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