CSN Updates Part 2

Well, I don't think that the Judge ever said that 3.40 per subscriber was out there either. Crane is going to have to compromise.

And again.....the point was whether or not this belonged in bankruptcy court and one of the first statements from the judge was he said it likely did and eventually ruled that it did. Obviously the Judge said he thought the deals were bad but he ruled along the lines he intitially stated that he was leaning toward.

 

This argument may be mute with Time Warner Comcast merger. That could easily add another 20 million per year to CSNH revenue. Still might not be best for Astros short term, but could be good long term.

 

Agreed and I hope that's what happens. Along with everyone getting paid for services rendered.

 

This post summarizes my thoughts exactly.

 

Yeah, but the Comcast-TW merger opens up a whole other can of worms for everyone who isn't primarily focused with watching the Astros on TV.

This is turning out to be quite the cautionary tale. It's a bit like doing business with Walmart, where you're getting in bed with a partner whose interest is driving your profits down as much as possible in order to undercut the rest of the market. All Comcast cares about is its MFN pricing, it could care less if CSN-H turns a profit. All Crane cares about is profit, because he overpaid for the media rights and the team (sidenote: anyone who buys a sports team to make money RIGHT NOW is an idiot). Neither give a crap about the fans, which is not a good thing when your job is to entertain us. The Rockets are stuck in the middle, per usual.

 

If this is what anyone is counting on, plan to wait a while. The merger will take many, many months if it even gets through FCC review. And even then, TWC has its own share of long-term contracts, so actually merging the companies themselves and turning TWC into Comcast and getting the channels in sync potentially could take far longer.

 

You seem to have completely missed the point that, thus far, there have been no workable deals to compromise on. You keep acting like the judge agreed with you and everyone is wrong - but you completely miss that the judge has also completely disagreed with you - you're as wrong as anyone else. He has pointed out that the Astros' version of events leading up to all this was essentially the correct one (you said Crane was a liar). He has said the Astros were right to reject the deals offered (you said Crane was stubborn for not accepting it). He has said no workable plans have been offered (thus, there was nothing to compromise on). You seem to completely ignore the fact that the judge has said the Astros did not act in bad faith - he thinks what the Astros are proposing going forward is in bad faith and rejected it, but he made pretty clear that he agreed with the Astros' decisions up until this point. You have been as wrong about the facts of this situation as any of the people you mock for being wrong.

 

I fully expect the bankruptcy reorganization with appeals to take many months. I was thinking if the FCC allows merger, TWC would be merged with Comcast within a year or two. If it is possible for CSNH to be reorganized into a profitable company capable of paying its bills, adding an extra twenty million on top of that wouldn't be half bad. I don't think the judge would approve a reorganization in which the Astros don't get paid this season or next allowing Astros to reacquire media rights or for Comcast to use legal procedure to prevent Astros from using their ability to regain media rights.

 

You do know people put forth cases that they know are very unlikely to succeed. I think they knew their only realistic shot at dismissal was that Comcast related-parties acted in bad faith when the filed the involuntary bankruptcy, which the judge agreed with, but he let the Rockets related parties make up for it.

At the end of the day, who has won in this Bankruptcy? The lawyers.

The Rockets, Astros, & Comcast have all looked bad.

 

Yep...I thought it would be dismissed based on the initial pleadings. Of course, the pleadings changed right before the hearing...and, as was said here repeatedly, there is no such thing as certainty in court; particularly when you're looking from the outside and aren't privy to the evidence that was to be presented. But even the attorneys involved in the case couldn't say with certainty what would happen heading into that hearing.

 

I am still not completely comfortable with this interpretation.

A lot of weight is being given to the notion that 'no workable deals have been given' for Crane to even accept.

While that may be factually true, the question which I have yet to see satisfactorily answered is this: How high would a carrier's offer have to BE in order for Crane to consider it to be 'workable'? Part of the murk here is this bizarre insistence on trying to keep the fees and costs 'secret', which just seems absurd to me.

And another thing. I think people are being strangely credulous regarding this claim that the only offer given 'would result in 200 million in losses over (ten years? I think that's what people have been saying). But I have seen nobody questioning this figure.

Where does that number even COME from? Do we just accept it as gospel truth, simply 'because Crane said so?' But why? The Astros made headlines last year for allegedly being the most profitable baseball team EVER. Now I understand much of those claims were debunked, but that doesn't change the fact that the Astros were (and will remain) rolling in money, especially because as their payroll slowly increases, so will their win total, and revenues should naturally rise as well.

So what is it? What causes these alleged losses anyway? Is the 200mil in losses SOLELY related to operating costs of the channel itself? Ok, well, that is assuming a lot. It almost sounds like federal government projections, which has as its main characteristic a complete disconnection from reality.

What I mean by all this is, if your business operates too expensively for the amount of revenue it brings in, THEN YOU ADJUST YOUR COSTS, YOU MAKE SOME CUTS SOMEWHERE. Nobody ever said everything that CSNH does is written in stone. For crying out loud.

Now I don't mean this to say that Crane should have just taken whatever lowball offer was out there.

I am just saying that, at least from what we have seen, he has been completely unwilling to lower his demands at all, and that is the sole and entire reason why this impasse exists at this time.

Had Crane and CSNH been willing to be flexible *from the beginning*, I believe that the carriers' offers would have edged upwards as the asking price edged downward, and the offers would have fairly quickly ended up in the 'workable' territory. This is what 'negotiation' actually means, at least to me, an admitted lay-person.

But because Crane appears to have been entirely inflexible in demanding the full original asking price, the carriers in return never felt any need to bother with making better offers - hence the notion of 'no workable deals were offered'.

That's why it just feels *wrong* to me to keep giving so much credence to that notion, because it gives the appearance of shifting responsibility for the situation from Crane (where I do feel it belongs) onto the carriers (who are not blameless either, but who are reacting to Crane, rather than being the source of the problem).

Again, if this is all wrong, so be it.

 

So why waste more time with an appeal when that is unlikely to succeed especially with the harsh comments the judge tossed Crane's way.

 

You are all over it. Good post.

Just to add 1 thing, the Judge was likely referring to the 1 deal that was in front of him not commenting on if other providers had followed with an offer. The 200M projection loss was only with Comcast and DTV. We don't know what the Judge would have said if offers from all other providers were on the table when he made those comments.

 

Nero, my understanding from the testimony is that Comcast was charged as the lead negotiator. They brought only one real offer for the Rockets and Astros to consider. Had they accepted that offer, it would have resulted in staggering losses. Barron indicated that Comcast affirmed that in testimony. Barron's tweets from the courtroom suggested that even if the other carriers offered that same rate and they were accepted, it would still result in staggering losses. The judge heard the testimony and said that he agrees with the Astros' account of issues arising before the bankruptcy petition was filed. The judge went on to say that the offer was lousy and should not have been accepted.

 

In reading Barron's last article he got some opinions from a local bankruptcy attorney, Randy Williams...a guy I don't know, personally, who is with Thompson and Knight.

That attorney said he was still confused with how they were going to strip the bargained for veto power away from the Astros in a bankruptcy process. Did you have any thoughts on that?

Here's the excerpt from the article:

http://www.houstonchronicle.com/spo...Houston-saga-5215912.php?t=92bbb712e68cb15e6e

Williams also said the Astros raise potentially valid points by saying they believe the CSN Houston partnership was designed in a way that gives them veto rights.

"They can argue that we bargained to be the biggest guys in the room, and what is there about bankruptcy law that allows you to change that?" he said.

He also said the Astros raise interesting points in arguing they alone should control their media rights, even though they granted a license for those rights to CSN Houston.

"Everyone knows the local teams get their local rights by agreement with the league. How can you override what the team wants to do with its rights when you knew that entering the deal?" he said. "They argue that they are the biggest part of this and you have to defer to us. People don't like that, but why were they given effective veto power, and can bankruptcy law override that?"

 

I will reiterate a point I made early on. The projected losses number is not being interpreted here correctly. It is similar to a misleading interpretation of a law lowering the federal deficit if spending begins in year 5 but taxes begin in year 1.

The judge would not be working to keep this thing together if it was so outrageously impossible to make it work. If the current offers were REALLY going to be projecting perpetual losses in the hundreds of millions this would not be a viable project.