ESPN LA: Dodgers launching sports TV network

The Los Angeles Dodgers announced Monday their plans to launch a regional sports network funded almost entirely by Time Warner Cable, a scenario one baseball source says is exactly the type of deal MLB had feared: A team setting up a shell company of sorts in order to pay less in revenue sharing.

The new ownership group, which bought the team out of bankruptcy court in April 2012 for a record $2.1 billion, said it has created a company called American Media Productions that will start broadcasting Dodgers games in 2014 on a channel called SportsNet LA. Time Warner Cable, the largest carrier in the area, will be the network’s first distributor.

MLB’s revenue-sharing rules allow teams to start their own broadcast networks and to keep anything above and beyond the fair-market value of the TV rights (set at $84 million per year for the Dodgers plus a 4% boost per year during the bankruptcy court negotiations), provided that the team is assuming significant risk in starting the network. This deal is structured in a way that essentially places all of the risk on TWC, with the Dodgers themselves assuming almost none - so the question to be resolved is whether and to what extent the additional revenue from the contract (reportedly $7 billion over 25 years) must be shared.