The Houston Astros and NBC Universal will begin their court battle on Monday as U.S. Bankruptcy Judge Marvin Isgur will begin hearing the Astros motion to dismiss the involuntary Chapter 11 bankruptcy petition filed on behalf of NBC/Comcast regarding CSN Houston.
Some outside of the Houston area may not be aware of the implications of the court case, but local Houston sports fans will likely pay close attention to the Judge Isgur's ruling.
CSN Houston is a regional sports network that is the exclusive provider of the Astros and the Houston Rockets. The Astros are the majority owner, owning 46 percent of the network. The Rockets own 31 percent of CSN Houston, while NBC/Comcast owns the final 23 percent.
Regional sports networks charge high subscriber feeds to cable distributors, which creates lengthy contract disputes between the providers and the RSN. CSN Houston has been embroiled in a contract controversy since it's creation on Oct. 1, 2012. Comcast is the only cable provider that picked up the network; other cable providers have not been able to reach an agreement with the network on how much to pay in subscriber fees.
CSN Houston has been operating at a loss without the expected cable fees, with the Astros taking the majority of the hit. The Astros, however, are still holding out for higher carriage fees. Maury Brown of Forbes.com explains the logic behind the tactic:
The Astros believe they should get market value for CSN Houston after seeing what the Rangers, Angels, and Padres have garnered with their deals, while carriers believe rights fees should be lower. Even with the dire situation, the Astros are holding to their position due to the 20 year length of the agreement.
The Astros reportedly blocked a deal before the 2012-2013 NBA season that would have brought CSN Houston to DirecTV, believing that they could hold out for a better price before the baseball season began. CSN Houston, however, did not have as much leverage with Astros games, partially thanks to the club's 51-111 record in 2013.
The saga took a turn on Sept 27, when several creditors filed a petition to force CSN Houston into Chapter 11 bankruptcy. Clack of Crawfish Boxes explained how the bankruptcy works:
Chapter 11 provides for the potential reorganization of a failing business, permitting the business to continue to operate during the pendancy of the bankruptcy, and halting efforts by creditors to collect debts.
The creditors for NBC/Comcast are looking for a trustee to manage the RSN while Judge Isgor hears the case. If that occurs, the trustee could reach carriage deals with cable providers without the approval of the key stakeholders.
The Astros claim that NBC/Comcast is filing a bogus claim in a "transparent attempt to acquire the Network and gain control over their most valuable asset, the media rights to televise their own Major League Baseball games." Each of the creditors filing the claim is affiliated with Comcast. The club describes the conflict in their motion to dismiss the case as a " dispute among three partners, instead as a dire threat to third party creditors."
The Rockets have maintained public silence on the issue, and show no signs of breaking their silence. Patrick Harrel of The Dream Shake describes the difficult situation the Rockets find themselves in:
They are in the same boat as the Astros in terms of wanting to receive broadcast fees, but they have significantly less invested in the network. And they were apparently on board for a deal with DirecTV last year, so they seem to be on the side of Comcast in that respect.
Local fans of the Rockets and Astros have been the victims of the dispute between the teams. CSN Houston is only available to the 40 percent of households that use Comcast, leaving the majority of the area unable to watch their local sports teams.
Harrel argues that the best-case scenario for the fans is for Judge Isgur to appoint a trustee to negotiate the carriage deals, hopefully putting the Rockets on television sometime during the 2013-2014 season. If Isgur, however, sides with the Astros and not with the creditors, many fans in the Houston area may be no closer to watching their local teams on television.
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