On Tuesday, the Astros filed a motion to dismiss Comcast's Chapter 11 filing and Comcast filed a motion for a trustee to oversee the Houston Regional Sports Network, which is the parent company of CSN Houston. Comcast is arguing that a trustee is needed because the four member board cannot agree unanimously on distribution agreements, while the Astros are replying that the need for a trustee is bogus because, “What Comcast now disparages as ‘dysfunction,’ ‘deadlock’ and ‘gridlock’ is nothing more than the Astros’ assertion of their bargained-for voting rights in this partnership.”
These statements are all nothing new – we've known those general basics since the news of the filing first came to light late last month. However, the Astros did reveal some new tidbits in their motion that could tip the scales of public opinion in their favor.
The Astros revealed that on the network's first anniversary, which was October 1st, the Astros and Rockets could force Comcast to accept carriage agreements with the major carriers in the Houston area – DirecTV, Dish, U-Verse, and Suddenlink. The bankruptcy filing came just days before that one-year anniversary, leaving the Astros and Rockets with no way to force Comcast into accepting any agreements. The filing is designed to give Comcast the power that the Astros and Rockets have under the initial agreement between the three.
Back in May, the Astros and Comcast made financial contributions to the network payable in three installments. The Astros made all of their payments, while Comcast declined to make their final payment unless all three partners helped fund the network. The Rockets never made a contribution, instead electing to have the network appraised. They have had no comment on the bankruptcy filing, and have stated that they will have no comment going forward. At the very least, it seems like the Astros have done more than their due diligence in keeping the network afloat compared to Comcast and the Rockets.
The Astros also claim that they made several proposals to Comcast about a restructuring of the network, and were negotiating that restructuring when they were blindsided with the Chapter 11 filing. Team owner Jim Crane also admitted that Chapter 11 was something the team proposed, but the team didn't hold back with comments about Comcast during their filing.
“Comcast’s allegations of conflicts and deadlock are a smokescreen, designed to hide what is really going on here,” the Astros said in their motion opposing appointment of a trustee. “Comcast orchestrated a collusive involuntary bankruptcy filing and is attempting to recast the valid exercise of bargained-for contract rights as a deadlock … (and) to facilitate its plan to acquire the Network’s assets and the Astros’ media rights without the Astros’ consent.”
Finally, the Astros are calling the potential appointment of a trustee "fruitless" because if a trustee is appointed, the team has the right to terminate their agreement with Comcast. The club also discussed the carriage deals offered by Comcast that they turned down.
“The Astros have always been, and continue to be, willing to entertain unprofitable affiliation agreements if limited to a short term so as to allow for the network to renegotiate longer term profitable deals,” the team said. “When, however, Comcast put forward proposals with terms – and, in particular, base rates – that would have resulted in the network not being profitable, the Astros exercised their consent right.”
Essentially, if the carriage deals were accepted, the network wouldn't be solvent. Last week, Crane said that the proposed deals were 40 to 50% lower than what was needed to keep the network solvent. Crane is also claiming that Comcast was willing to take those losses in rights fees – and eventually take equity in the network from the Astros and Rockets. Comcast is also claiming that the network cannot survive without the bankruptcy proceedings.
What a mess. From my viewpoint, it seems like Comcast is trying to engineer a takeover of the network and gain a majority stake at the expense of the Astros and Rockets, damaging both teams and increasing their profits. The Astros have gotten a lot of negative press related to their controversial (yet extremely effective, so far) rebuilding plan and the now-debunked Forbes article about their profitability, but throwing all of the blame for the CSN Houston mess at their feet isn't the right course of action. There's a lot to go around here.