By Tom Hals
WILMINGTON, Delaware (Reuters) - The judge overseeing the Los Angeles Dodgers bankruptcy said he will allow the team to begin a multibillion-dollar sale of future rights to broadcast the bankrupt team's games, dealing a blow to its current broadcaster, Fox Sports.
Fox Sports spent two days in Delaware's bankruptcy court trying to prove that the Dodgers' move could destroy their regional sports network in the country's No. 2 media market, which Fox argued was worth $1 billion.
Judge Kevin Gross said he would issue an opinion explaining his decision.
Fox's attorney Gregory Werkheiser said the company would appeal.
The Dodgers expect the sale of the media rights for games beginning in 2014 to boost the value of the team, which is being auctioned in the coming months.
The team argued Fox was unharmed and the Dodgers were merely starting the sale process 10 months earlier than stipulated in its current media contract.
The media rights sale was put in motion by last month's agreement by team owner Frank McCourt to put the Dodgers on the auction block to end a bitter feud with Major League Baseball. In return, MLB agreed to drop its opposition to the team selling its media rights.
Gross said he might issue a short stay of his ruling to give Fox time for an appeal.
With the judge's ruling, the Dodgers will enter an exclusive negotiating period with Fox, a unit of News Corp, until January 14. After that they will open negotiations to other parties.
The team is keen to drive up bidding for the media rights by pitting Fox against arch-rival Time Warner Cable, which recently snatched rights to Los Angeles Lakers basketball games from Fox.
At the same time, initial bids for the team are due next month in what could be one a $1 billion sale, making it one of the priciest in baseball history.
Potential bidders include basketball legend Magic Johnson, hedge-fund titan Steven Cohen, media mogul Mark Cuban, California financier Ron Burkle and sports agent and Los Angeles businessman Dennis Gilbert, sources have said.
The judge said it was a "tremendous irony" that just months ago Fox and the Dodgers were allies.
The two reached an agreement in June worth an estimated $3 billion to renew Fox Sports contract. That deal was rejected by baseball's commissioner, Bud Selig, and days later the team filed for bankruptcy, unable to make payroll.
Now the Dodgers want to use the latitude of bankruptcy to break its Fox contract to jumpstart the media rights sale and drive up the value of the business.
Robert Thompson, a former president of Fox Sport national networks, testified on Thursday that changing the sale timing was creating uncertainty among Fox's advertisers, production companies and talent.
The dispute comes as regional sports networks have become hot media properties thanks to the unique programming offered by sporting events.
If Fox lost the Dodgers, cable distributors such as Comcast might drop one of Fox's two Southern California networks, according to Thompson.
"It would have a broad impact on our business, not just in Southern California, but across the country," he said.
The Dodgers attacked Fox's contentions and argued their claims of harm fell away under questioning.
"Their grand, broad statements all disintegrated with the slightest pushing," said Bruce Bennett, the Dodgers attorney.
"All we're doing is shifting the timing."
The bankruptcy case is In re: Los Angeles Dodgers LLC, U.S. Bankruptcy Court, District of Delaware, No.11-12010.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Gary Hill)