Astros owner Jim Crane is suing former team owner Drayton McClane for fraud, related to the sale of the Astros and McLane's stake in CSN Houston to Crane in 2011 for $615 million. Comcast and NBC Universal are also named in the suit.
The suit accuses McLane, who sold the Astros and his CSN Houston share to Crane in 2011 for $615 million, of selling “an asset (the network) they knew at the time to be overpriced and broken.” It also says Crane was “duped” when he bought McLane’s network interest based on what have been proved to be “knowing misrepresentations” and “falsely inflated subscription rates.”
Crane has a point. The projections for CSN Houston, which were already in place when Crane came into the picture, were excessively optimistic and caused the network to fall into Chapter 11 bankruptcy at the end of September. The network is still only available in roughly 40% of Houston households due to constant impasses with DirecTV, Dish, AT&T U-Verse, and Suddenlink.
Crane's lawsuit also accuses McLane and Rockets owner Leslie Alexander of setting the base subscriber rate too high in 2010 – something that Comcast told them and would prevent other carriers from picking up the network. Comcast eventually agreed to the high base rate in exchange for a most favored nation cause (which states that no other carrier will pay less than Comcast does for the network).
The Astros current owner also claims he wasn't aware of this situation until December of 2012, three months after the network's launch, and that McLane, Comcast, and NBC Universal concealed material information in his 2011 negotiations to purchase the team.
Crane is seeking repayment of the losses that he's suffered since the alleged breaches of contract, including the rights fees the Astros weren't paid in 2013 and what was called an "artificially inflated price" that was paid for McLane's share of CSN Houston. In 2010, the network was valued at a whopping $700 million – two years before it even launched.
This situation is getting ugly. Crane's accusations against McLane, Comcast, and NBC are strong, and borderline felonious if true. But Crane's been a marked man since the moment he set foot in Houston. He's been lambasted by Astros fans for not spending money on the team, conveniently ignoring the fact that this was a mediocre team that finished above .500 once after McLane hired Ed Wade as general manager, who started the proceedings to turn the Astros into the AAA affiliate of the Philadelphia Phillies. Once McLane got out of Dodge following the 2011 season, Crane was left with an awful farm system, an awful major league roster, and an awful television network built on false promises.
Something really needs to happen with this mess before the end of the year. CSN Houston, the Astros, and the Rockets are running into roadblocks wherever they turn, and the expected cash windfall from the network has instead turned into a drain on the resources of both clubs and their owners.