HOUSTON (CBS Houston): “Our preferred option is no longer available at this time.”
Those are the words of Rockets CEO Tad Brown in court February 4, explaining to Judge Marvin Isgur at the CSN Houston Bankruptcy Hearing how he has been unable to secure a partner or a carriage agreement for once-promising fledgling network that is currently on life support.
Make no mistake, CSN Houston is gasping for breath. Judge Isgur’s desire to give the network every possible opportunity to survive is the only thing keeping it alive at present. Isgur’s decision to accept the network’s involuntary Chapter 11 Bankruptcy petition is a respirator. How long that respirator pumps could be determined by the fate of the Astros appeal of the decision to allow the bankruptcy to proceed.
While there are differing views of what the court proceedings can mean for each of the participants, here’s what it means for the fans: You’re still stuck, unable to watch your teams, unless you have Comcast.
Fans who haven’t been able to watch games since the network launched in October 2012 because they have been unable to secure carriage agreements with big local providers like Direct TV, Dish Network, AT&T U-Verse, etc. have even less reason to believe a deal is coming soon now.
Comcast representatives spent a year trying to get deals and failed, and that was without the cloud of bankruptcy hovering over them. Astros owner Jim Crane took over as lead negotiator October 30th last year and couldn’t get a deal done. Tad Brown and the Rockets took over the lead position December 12, and have had no success either. If the network couldn’t get a deal done as a ‘healthy company’, the prospect of getting it done in a bankruptcy setting with weaker leverage is less likely now than ever.
While those are challenges facing the network, here’s the rub on the fans: The bankruptcy is keeping the status quo when it comes to the fans ability to watch games. You can thank Comcast for this.
Comcast went to some of their affiliates to get an involuntary Chapter 11 Bankruptcy filing on CSN Houston to prevent the Astros from pulling their media rights after the network failed to pay the team the final 3 months of the season. The petition was filed September 27, 2013, right before the end of the MLB season. Guess who didn’t know it was coming – the Astros, who have the biggest equity stake in the network.
If the Astros had pulled their media rights, as they intended to do after the season, before the bankruptcy got in the way, two things would have happened: 1) The team could shop their rights to another network and have their games televised and 2) CSN Houston would be finished. The network cannot survive without the Astros, and all three parties know this.
The bankruptcy essentially forced the Astros to stay on the network that still doesn’t have any carriage deals in place to allow fans to watch the games. Judge Isgur doesn’t believe that the team has the right to pull their rights while the network is under bankruptcy protection. The Astros appealed this ruling Friday, and the appeal has not yet been decided.
Astros attorney Paul Basta believes the Astros have the right to terminate their rights agreement even in bankruptcy due to the language in the contract that refers to allowing the Astros to terminate for non payment, saying during Tuesday’s proceedings that “it is crystal clear we can terminate in bankruptcy.”
The Astros intentions are clear. If they win their appeal and get the bankruptcy dismissed, they will pull their rights and CSN Houston will be sent to the grave, barring a major cash influx from Rockets owner Les Alexander, Comcast, or a 3rd party who intends to buy the Astros out (all of which are unlikely). If they cannot get the bankruptcy dismissed, they will proceed to push their assertion that they still maintain their rights to terminate.
As a fan, if you want to watch games, you’re pulling for the Astros. Here’s why.
Crane has been working with MLB Network to create a plan to show Astros games on that network in the Astros 5 state territory until the team can find a new long term network to partner with. A spokesperson for MLB Network confirmed that the network could split signal along regional lines to allow for showing Astros games in the team’s territory and other program elsewhere, according to a story by David Barron of the Houston Chronicle. Essentially, fans could watch games, as MLB Network has widespread carriage.
Once the Astros leave CSN Houston, the Rockets have two choices. They can buy up the network (costly to them and difficult to manage without an MLB partner) or leave as well (more likely).
The latter position was furthered by Comcast attorney Craig Goldblatt in court Tuesday, when he said, “The Astros have said again today they intend to terminate their media rights agreement and license rights to a different entity. If that happens, the Rockets go with them in terms of their agreement. That would necessarily lead to the destruction of the network.” This is a big part of the reason why Comcast is fighting to reorganize. They put $100 million loan into CSN Houston start up costs and don’t want to find it gone 2 years later.
There’s bad blood between the Astros and Comcast. The team was blindsided by the bankruptcy, which it feels Comcast solicited the affiliates to push. Comcast is frustrated with Astros owner Jim Crane, who has been the dissenting voice rejecting every proposed deal they generated. However, before you point the finger of greed at Crane, keep this in mind: Judge Isgur said Tuesday that he did not blame Crane for rejecting the propositions that had been presented to him, calling them “rotten deals”.
When Judge Isgur, who really wants to give CSN Houston every opportunity to remain a viable entity, accepted the petition for bankruptcy Chapter 11 reorganization, he also ruled that the Rockets, Astros, and Comcast must present a fiduciary board to act in the best interest of the network, and not of their individual companies. Essentially one appointee from the Astros and Rockets, and 2 from Comcast, are to go into a room, play nice, and forget their loyalties to their own businesses. A situation where the Astros could be forced to accepting one of the “rotten deals” the judge had just credited Crane for rejecting earlier in the proceedings, hence another reason they have filed an appeal.
Asking the Astros to work with Comcast in a fiduciary role while they openly maintain Comcast went behind their backs acting in bad faith to force the bankruptcy is about as realistic as having a snowball fight in Houston in August. These two parties are now oil and water. A deal isn’t getting done because the Astros have no faith or trust in Comcast anymore. They want out of the network altogether.
The faster the Astros can get out of the deal, the faster they get their games on MLB Network (short term) and another network partner (long term) but he key fact is that the games will be televised. There’s even the possibility that the Astros and Rockets could collaborate on another network project – just without Comcast as a partner – should CSN Houston fail.
None of this can happen before the end of the NBA regular season, so the Rockets fans are already stuck. However, without CSN Houston’s bankruptcy locking them into an uncarried network partner, Rockets fans would be able to watch regular season games come the fall.
Under bankruptcy protection, the reorganization could take a year. It could take several years. Without the bankruptcy protection, the Astros have televised games as soon as April. Yes, this April.
While all the details about the case may be intriguing to some and boring to others, here’s whats really of importance to the fans who cannot get Comcast cable service: If the network is allowed to continue through bankruptcy protection, there’s no timetable on when those games get carried. They could be watching the Astros on Opening Day if CSN Houston fails.
Right now, the fans’ “preferred option” of being able to watch their teams on television “is not available at this time”. How long should they have to wait?
Patrick Creighton is the host of “Nate & Creight” with Nate Griffin, Sundays 2-5pm on Sportsradio 610 in Houston. Follow him on Twitter @PCreighton1. https://twitter.com/PCreighton1