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Astros Can Shop New Network Deal

Bankruptcy Judge: Astros Allowed To Shop for New Broadcast Deal


The complex and contentious bankruptcy proceeding involving Comcast Sports Houston entered a new phase as the Astros were authorized to seek new network broadcast deals, with or without Comcast's carriage agreement.  For Astros' fans bewildered by the legal issues, they are only hoping that this means that Astros' broadcasts will be available throughout the region, and not just Comcast's cable area.  For Rockets' fans, it appears that the season will start without an immediate solution to their need for wider broadcasts.

The judge issued what he called a "pretty extraordinary order" that authorizes the Astros to take the lead in shopping for new carriage agreements for the network, which may or may not include the current Comcast carriage arrangement. However, in all liklihood, any new network broadcast partners would want to retain the Comcast carriage arrangement since it picks up 40 percent of the Astros' viewing area.  Any deals or network arrangements lined up by the Astros are subject to the bankruptcy court's approval.

What is the practical effect?  This means that the Astros can negotiate with other providers like DirecTV, AT&T U-verse, Time Warner, and Fox to develop a new network plan for making broadcasts available, without seeking the consent of Comcast.  At the end of the parties' arguments over the Astros' motion to dismiss the bankruptcy, Judge Marvin Isgur initially broached the idea of allowing the Astros to investigate what other media rights deals might be available to the Astros without interference from Comcast.  The parties then worked in closed door discussions to come up with an agreement to implement the judge's suggestions.

The result was an agreed order among Comcast, the Rockets, and the Astros.   The Astros have now been given the authority to be the lead negotiator with third parties, meaning they will find out if they have more success than Comcast in negotiating broadcast carriage agreements.  Judge Isgur insisted that the parties eliminate the unanimous consent requirement for assignment or assumption of media rights.  This allows the Astros, acting on behalf of the network, to shop media rights agreements to other carriers.  Furthermore, the order absolves the Astros and third party carriers of any liability in negotiating new business plans.  This means that third party competitors of Comcast don't have to worry about lawsuits alleging that they interfered in existing contractual arrangements.

The judge postponed a ruling on the Astros' motion to dismiss the bankruptcy, while the Astros shop for other deals.

The Astros’ counsel argued on Monday that the current partnership is not nearly as profitable as projected when Crane purchased the Astros.  This ultimately boils down to not receiving  carriage agreements with broadcasters such as DirectTV, AT&T U-Verse, or Dish, which would put the Astros and Rockets on the air throughout the region.  Former Astros' executive George Postolos testified before the judge that the network's Comcast name, itself, was a hindrance to obtaining deals from other carriers..  Over the course of the past year, Comcast  brought the Astros only one offer to carry CSN Houston, (rumored to be DirectTV).  However, the Astros said the offer was insufficient to maintain the profitability of the network, and would reduce the fees paid to the network by Comcast, which had a most favored nation contractual provision (which means that Comcast has to get as good a deal as other carriers). The Astros deemed that was not economically viable, so they vetoed that proposal, asserting that the arrangement would lead to negative cash flow of nearly $200 million for the network through 2019. Low ball carriage agreements covering 20 years could hamper the Astros ability to compete with the revenue streams of other AL West rivals.

Where does this leave us?  Jim Crane faces a tough task in trying to piece together alternative business arrangements for broadcasts, and he probably has a short period of time to accomplish it.  All that Astros fans can do is hope.  Hope that he can come up with arrangements that allow all fans to watch the Astros without undermining the Astros' efforts to compete effectively in the future.

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