By Katy Stech
Comcast Corp. (CMCSA) urged a Texas bankruptcy judge to allow
CSN Houston, the television network that broadcasts Houston Astros
baseball games and Houston Rockets basketball games, to stay in
bankruptcy, arguing the dismissal of its case would empower the
Astros owner to yank its media rights agreement with the
network.
That deal termination would trigger the network's "unnecessary"
collapse, Comcast lawyers argued Tuesday,
"All of its 130 employees will lose their jobs," Comcast lawyers
said in papers filed in U.S. Bankruptcy Court in Houston that
pushed Judge Marvin Isgur to allow the network to be sold or
reorganized through the bankruptcy process instead.
Judge Isgur set an Oct. 28 hearing to hear arguments over
whether the sports network, which is owned by both sports teams and
a Comcast affiliate, should move forward with Chapter 11
bankruptcy's reorganization process.
Houston Astros lawyers have argued that involuntary bankruptcy
case -- filed on Sept. 27 by Comcast affiliates -- has unfairly
gotten in the way of their contractual rights.
Astros officials would have had the power to terminate that
agreement several days later on Oct. 1, the first anniversary of
the network's creation. The Oct. 1 anniversary would have also
given the Astros and the Rockets the power to force Comcast to
accept broadcast deals with competitors DirecTV (DTV) and Dish
Network Corp. (DISH).
If Astros officials terminated the agreement, they could have
resold the broadcast rights, perhaps for a higher price. But in
Tuesday's court papers, Comcast officials said there is no need to
let the network collapse in the process of reassigning those rights
when a bankruptcy trustee could sell the network and the
media-rights agreements together.
CSN Houston is one of 12 regional networks that are part of the
sports division of Comcast 's NBCUniversal unit, and it pays
Comcast an annual fee for management oversight and other
operational help, according to court papers. The sports teams, as
part owners of the network, are paid a rights fee and are also able
to share in network profits.
Comcast said the network owes it more than $100 million,
stemming from funding it provided under the deal to create the
network, which broadcasts sports programming out of a 32,000
square-foot space in downtown Houston, according to its website. In
addition to showing Astros and Rockets games, the network
broadcasts Houston Dynamo soccer games, high-school football games
and sports talk shows.
The Houston network is available to Comcast subscribers but has
run into trouble persuading Comcast competitors such as DirecTV and
Dish Networks to carry the network in exchange for subscriber fees,
which some have said are too high. Cable and satellite providers
have faced pushback from customers when they have sought to pass on
the cost of high sports-rights fees in monthly bills.
Today, CSN Houston is available in less than half the region's
households. For that, Astros owner Jim Crane blamed Comcast for the
lack of deals with major outside distributors.
"They're experts at this," he said in an earlier Dow Jones
interview. "Their job was to bring those deals to the table."
Mr. Crane, a Texas businessman, bought the Astros for more than
$600 million in 2011 and began a major rebuilding program. After
dumping high-priced talent, the team finished with the worst record
in baseball this past season.
In Tuesday's court papers, however, Comcast lawyers said the
Astros "refused to permit the network to enter into carriage
agreements at the market-clearing prices, and rejected various
proposals that would have provided debt or equity funding (or both)
to the network."
"As a result, the network lacked the revenue it needed to pay
its bills," Comcast said.
--Patrick Fitzgerald contributed to this article.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Katy Stech at katy.stech@wsj.com
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