Drayton McLane Suckered Jim Crane About CSN, and Now We're All Suffering
Jim Crane was suckered by Drayton McLane. That's why most of the city of Houston can't see CSN Houston. It's just that simple. Jim Crane didn't do his proper due diligence, and he fell hook, line and sinker for everything that McLane told him, including that bit about CSN Houston being set to earn a huge profit.
So now what?
And Crane bit to the sum of $680 million dollars, the amount he paid for the Astros. But CSN Houston, valued in 2010 at about $700 million -- of which the Astros were responsible for about $326 million -- isn't making a profit. It's a long, long way from making a profit. It can't get carriage on most of the cable and satellite distributors in the city, state, country. It can't even pay Crane the money the Astros are supposed to be receiving in rights fees.
Thus the bankruptcy filings and the Astros trying to back out of their contract with Comcast and the Houston Rockets -- don't believe what some people say; the Astros aren't being punished, they're simply being asked to fulfill a contract signed by all parties. The Astros haven't been happy with that contract and instead of operating in good faith, have apparently done everything possible to torpedo it so that Crane, suckered by McLane, can get a new deal with a new broadcast partner and get a much-needed cash infusion that will allow him to make up for some of the massive debt he incurred in purchasing the franchise.
The bankruptcy judge last week put the Astros in charge of negotiations for the Houston Regional Sports Network -- otherwise known as CSN Houston. This came about partly after Crane testified last week that he'd talked to Fox Sports Net officials over the summer about getting a new broadcast deal for the Astros. Crane also testified that CSN Houston refused to offer carriage deals for approval that would make the network profitable right away and which, in turn, would guarantee him cash, leaving him with no choice but to veto such deals, including one that had been negotiated with Direct TV. (The Houston Chronicle's David Barron did a nice job of summarizing the events last week.)
The Astros can sell their share of the network to someone else -- Comcast could buy it back, Fox Sports or Direct TV or U-verse could buy it (there is precedent for this as CSN Bay Area is owned jointly by Comcast, Fox Sports and the San Francisco Giants, and SportsNet New York is owned by the New York Mets, Comcast and Time Warner Cable). The Astros could negotiate a deal that sells the broadcast rights to their games and the Rockets games to Fox Sports or another entity. But the Astros must do a deal for everybody. And while Comcast and the Rockets can't veto any deal, they're not totally powerless. The judge has final approval over any deal negotiated by the Astros, and if the Rockets and Comcast don't like the deal, then they've just got to file an objection.
The Astros have until December 13 to work out a deal. At that point, it's back to the bankruptcy court, where the judge can either extend his order and keep the Astros in charge, or he can rule on the bankruptcy petition and appoint an outside party to run the network and negotiate a deal.
The bad news is there's still no Houston Rockets on most televisions. And more worse news is that there are a lot of people who work for CSN Houston who might end up unemployed since it's doubtful that the network will emerge unscathed -- if Fox or Direct end up as partners, expect less local programming and more programming shared by all of the networks. It's possible the Astros will sell their share of the network to another party, then sell their broadcast rights to someone like Fox Sports Net or Direct, leaving CSN Houston with just Rockets, Dynamo, and local high school and college programming. Or maybe the Astros will work out a deal in which the network as a whole is sold to Fox Sports or Direct TV or U-verse and the network is put completely out of its misery.
Jim Crane was suckered by Drayton McLane. And he's been punishing the people of Houston ever since by working to keep CSN Houston off of the air to most of Houston. As of now, the court is rewarding him for his stupidity, but the odds are he's going to find it's a bit more difficult negotiating deals on behalf of everyone, and who's willing to bet that Fox Sports Net will be a bit more difficult to deal with this time around?