Debate: The Nationals, the Orioles, Peter Angelos, and MASN All you need to know about the MASN contract situation

Setting the Situation

Justin,

The Nationals have a very unique television contract. The rights to the Nationals were actually sold by Major League Baseball, when they were the Expos/Nats owners, to the Mid-Atlantic Sports Network. The Baltimore Orioles/Peter Angelos started with 90% ownership of the network and allowed the Nationals organization to buy a minority share of 10% growing 1% every year until it reached 33% for 75 million dollars. One of the clauses in the contract was that the Nationals had to be paid a fair market rate that is renegotiated very fifth year. The two teams submitted their bid for the broadcast rights a few years ago and could not come to an agreement, so the negotiation was sent to MLB for arbitration. According to the report the Nationals are asking somewhere north of 100 million a year, which would put them in the ballpark of the top 10 MLB markets (Which DC is). MASN/O’s countered with 37 million plus an equity payment of 8 million which would put the Nats at # 13 in MLB for TV revenue. There is also a stipulation in the contract that the Os and Nats get the same rights fees. MLB has been sitting on this for over a year now, with no end in sight. The questions about this are numerous:

Is this a big deal or just a strange arrangement?

Is this deal MLB brokered with the O’s a fair one?

Are the O’s treating the Nationals fairly within the framework of the deal?

Does MLB have a long term plan?

What are the immediate and long term implications for both franchises?

The Baltimore Perspective

Justin: Wow. That’s a lot of questions. I’ll try to tackle these one by one.

1. Is this a big deal or just a strange arrangement?

The Orioles/Nationals MASN situation is very strange. I’ve been reading about the Nationals MASN dispute for over a year, and I still don’t really understand it. Peter Angelos and the Orioles don’t really want us to understand it. If the public really knew how much the Orioles made from MASN, everyone would be outraged. Nationals fans would be mad because that’s money their team should be getting. And Orioles fans would be mad because that’s money Peter Angelos isn’t spending on his own team. Angelos wants Orioles fans to think they’re small market, so he doesn’t have the pressure to sign expensive free agents.

2. Is this deal MLB brokered with the O’s a fair one?

You won’t like this answer. Yes, it’s fair. People forget that ten years ago, Washington D.C. didn’t even have a team. MASN was the price Washington D.C. paid to get baseball again. The Baltimore Orioles owned the rights to Washington DC. It’s only fair they split the profits on televising baseball in Washington Metro area.

3. Are the O’s treating the Nationals fairly within the framework of the deal?

The Orioles are negotiating. The Nationals are negotiating too. I don’t think “fair” is a good benchmark for either team. The Orioles are looking out for their best interests. It’s up to MLB to be “fair” since they’re the “neutral” arbiter.

4. Does MLB have a long term plan?

MLB can’t be happy with arrangement. It’s a complete headache. Also, it’s hard to imagine the Orioles owning the Nationals TV rights forever. My guess is that MLB is looking for a way to phase out this bizarre business partnership.

5. What are the immediate and long term implications for both franchises?

For the Nationals? Jordan Zimmermann and Ian Desmond. Both will probably get $100 million deals in the next two years, and the Nationals need money to do it. Beyond that horizon? Bryce Harper. It would be tragic if a team in a top 10 market had to act like small-market team because all their money is going north to Baltimore. For the Orioles? Peter Angelos selling the team. Baltimore has been waiting 15 years for Angelos to sell. But big business deals don’t happen in a sea of uncertainty. Best-case scenario for Orioles fans: MLB give the Orioles are quasi-favorable settlement; then Angelos cashes out and sells the team to a Cal Ripken-led ownership group. Worst case scenario for Orioles fans: MLB sides with the Nationals (or the Orioles perceive it that way), and Angelos uses it as an excuse not to invest in his team.

I’m assuming you disagree with at least some of this. Answer you own questions.

The Washington Nationals Perspective

 

1. Is this a big deal or just a strange arrangement?

I think this is going to be the answer that surprises you the most.  Yes it is strange, but the concepts are not entirely bad.  After looking over the numbers on a series of spreadsheets, I have a better understanding of MLB TV revenue; I think this is not as big of a deal as I once thought.  There are three components (actually four for some teams) to television revenue for a MLB team:

1. National rights payment: With the new deal MLB signed with Fox, each team is getting a reported 52 million a year.

2.  Revenue Sharing:  Each MLB team pays in 34% of their local rights into a pot and then that is spread evenly between the 30 major league clubs.  This helps to level the playing field between the large market teams like the Yankees and the team like the Braves and Marlins who are trapped in unfavorable TV contracts.  According to my math this is about 17 million a year once the big cable deal teams pitch in.

3.  The Rights fees paid to the team:  This is what the O’s and Nats are negotiating.  As it currently stands this only makes up a little over 1/3 of the total television revenue.

4.  The fourth way some teams make money is the equity ownership of regional sports networks. This is where the Red Sox and Yankees make their money.  About 1/3 of the teams are at least part owners of their own sports network and take profits from them.  This is the crux of the argument between the Nats anad O’s.  The O’s take 86% of the profits and would prefer to maximize those while the Nats see no reason to take a lower than market rate so the O’s can take the profits like they have been doing for the last 6 years.

Bottom line: Looking at the offer presented by both sides we are only negotiating about 20% of the teams total television revenue;  that 20% could be 35 million a year, but not under the current contract.  More likely under the current agreement, they are arguing over 20 million the Nats feel they are owed from MASN in the form of yearly as profit.  They want that in the form of TV rights.

Is this deal MLB brokered with the O’s a fair one?

Under the assumptions when it was brokered it is not an unfair deal.  One thing that needs to be made clear is that MLB negotiated with one of their fellow clubs on this deal. MLB proceed to flip the sale of the club and make huge amount of profit on the transaction.  MLB was trying to broker a deal that wasn’t so bad that the team couldn’t be sold, it was heavily weighted in the favor of Angelos for that reason.

It was brokered because MLB, by placing a franchise in a market the O’s had rights to the value of the team was decreased.  I think it is also fair to note that Washington DC is not Baltimore or even the same media market like San Francisco/Oakland, Chicago, LA and New York.  The two cities are distinct as far as radio, television and census data.  They are fairly close and some people live in between the two, but Washington is the bigger of the two.  In fact DC’s is 2.3 million TVs (9th) and Baltimore is  1.1 million (26th) in market size.  If Baltimore were the team of Washington, they would be in Washington.  They are not; they are a team that was fairly close to Washington and by default, picked up some of the hardcore baseball fans in the area. It is interesting to note that if you combine both cities they would be the 4th largest media market behind NY, LA, and Chicago (all have 2 teams).

The one aspect of the deal that makes it fair and actually advantageous to the Nats is the five year reset for the rights fee and the MLB arbitration.  Most of these TV contracts are locked in for many years, with the assumption that the value of the deal will favor the network in late years.  The Nats can take advantage of increasing rates by only being limited to the 5 year contract.  The other issue is MLB.  As long as MLB acts as a fair arbitrator, then there should be no issue.  So far they have refused to rule, so the Nats are stuck waiting for MLB to hold their side of the bargain they brokered.

Are the O’s treating the Nationals fairly within the framework of the deal?

There is no way the O’s think they are offering a fair deal.  They are engaging in hard nose negotiation.  I am using some of the numbers I have read from various sources to come up with my assessment of these offers.  Assuming that the Os are offering a 37 million rights fee and then 8 million equity at 14%.  We can assume then that MASN expects to make 57 million profit.  This means that Angelos’ plan is for the O’s to take 49 million in profit and share 8 million.  That makes the total take: 87 million for the O’s and 45 million for the Nats.  Or, a 1/3, 2/3 split.  One of the advantages of this plan is equity is not included in profit sharing with MLB so by keeping most of the TV value in MASN and not in the rights then both teams share less money.  I will break this down in much greater detail in the future.

The Nationals don’t think they should have to provide MASN any profit considering they will never have more than 33% of equity in the company and one of the items in the initial agreement is that the O’s assumed the risk of the venture.

A starting point for a fair deal would have been closer to the numbers Houston completed just last year they are in the number 10 TV market is getting 80 million from their deal.  The Cubs who also share a market are at 60 million on an older contract, heck Oakland gets 48 million.  Any of those numbers on a comp bases would have been fair.  Instead the O’s went with the low ball offer.  This caused the Nationals to go high as their initial offer.   The Nats offer by the way would force the O’s and Nat’s to pay some of their money back into MASN to keep the netork afloat, except the Nats would only need to put 14% of the needed money back in.  If you work out the numbers the Nationals are asking for a 2/3 take on MASN revenue.

Does MLB have a long term plan?

No, but the Nationals are trying to force their hand.  I don’t think the Nationals are actually serious about their offer either, I think they intend to force MLB to make the contract so unworkable that both sides tear it up and develop a new equitable agreement with the Nationals and O’s instead of MLB forcing an unworkable agreement on one of the sides.  Word leaked out that MLB was quietly approaching sports networks such as Fox and Comcast on buying MASN and getting out of this entire agreement.  The O’s don’t want to give up on the agreement and are going to require MLB to force them to, which they can through the arbitration process by awarding the Nationals a high but market based rights fee.  MLB does not like confrontation, especially when it is owner against owner (See Oakland’s move to San Jose and Houston’s move to the AL), that is why we are where we are.

What are the immediate and long term implications for both franchises?

The long term implication of this is that MLB is going to be setting the Nationals TV contract every 5 years unless the O’s decide to split MASN revenue 50/50 through paying most the channel profit to both teams in the form of rights fees or tearing up the thing and starting over.

One interesting thing to consider, with the current equity cut the O’s get from MASN they have to be one of the most profitable teams in baseball.  One thing that annoys me is that they get a competitive balance pick for being a small market team.  That pick was the key piece in the Bud Norris trade.

I think the more interesting questions have not touched on yet:

Is there anything wrong with MASN?

Can you envision a scenario where both teams can coexist without one team taking advantage of the other?

Follow up from Baltimore Perspctive

Jason, I’ll get to your questions in a minute, but I want to make one point.

The Orioles/Nationals MASN deal was made in 2004-05.  Since then, the Sports Television landscape has completely changed.  In many ways, this was a terrible business deal for the Orioles, because they committed themselves to a long-term contract, with no safeguards if the marketplace shifted.

I’ll explain.  Back in in 2004, MLB was dominated by the Yankees and the Red Sox, who both had their own cable TV networks, YES and NESN respectively.  By selling their networks to local cable distributors, these two teams brought in hundreds of millions of dollars per year, dwarfing every MLB team in terms of revenue.  In 2004, there were two leagues: the Yankees and Red Sox, and then the other 28 teams.  Oh, also, the Yankees and Red Sox were in the Orioles division.

I lived in Baltimore in 2004-05.  Things looked hopeless for the Orioles franchise back then.  Their two biggest division rivals had cash cow TV networks, two back-to-back ALCS appearances, a rolodex of bankable stars, and 20 times a year, the home team would get their brains beat in at a half-empty Camden Yard (the other half was filled with Red Sox or Yankee fans).  In 2005, the Orioles were entering their 8th straight losing season.  They probably felt closer to relegation than pennant contention.

Then, MLB decides to move the Expos into the Orioles backyard.  This probably felt like somebody twisting the knife after getting stabbed.

This was the landscape in 2005 when the MASN deal negotiated. Peter Angelos probably thought he NEEDED MASN to survive.  But then things started to change.  For reasons too complicated to explain here, the TV rights to live sporting events exploded in value.  The Rangers, Angles, Dodgers, and even the damn Padres signed multi-BILLION dollar deals.  Everyone was catching up to the Yankees and Red Sox.  More importantly, these teams were foregoing the team-owned TV network model and selling their rights directly to regional cable networks.

The Orioles thought the future was YES/NESN/MASN.  They were wrong.  And now the new marketplace threatens to blow up the MASN deal before its even 10 years old.

Now, your questions:

1.  Is there anything wrong with MASN?

I think MASN if fine.  The games are on TV and they’re in HD.  That’s all I care about.

It’s important to note the second reason MASN was created.  The first reason we’ve already addressed: keeping Nationals TV profits in Baltimore.  The second reason: keeping the Orioles on TV in DC.  The Orioles know how many fans they have in Washington DC and the surrounding suburbs.  The Orioles were the HOME TEAM for Washington DC for decades.  There are more DC baseball fans than you think who grew up watching Cal Ripken and will never switch allegiances.  It’s important to the Orioles to keep their games televised in DC.

Even if you hate the Orioles, as a baseball fan you have to enjoy having two games every night.  Not many markets have that.

Can you envision a scenario where both teams can coexist without one team taking advantage of the other?

Yogi Berra once said “predictions are hard, especially about the future.”  Seriously, things have changed so much in the last ten years, I imagine things will change even more in the next ten years.  For starters, Cable and Satellite TV is dying.  Ten years from now, we’re probably getting all our television programming from the Internet.  How this will work, I have no idea.

I also imagine a future where viewers have unlimited choice.  The idea of “local programming” is dead.  By that, I mean it’s just as easy to broadcast a Dodgers game in DC as it is a Nationals game.  In ten years, I’m hoping EVERY game is available in DC, and fans can watch whatever they want.  I’m less interested in keeping the Orioles out of DC than I am bringing the other 28 teams in.

From a Darwinian Capitalist standpoint, we should want the Nationals to feel threatened by the Orioles (and everyone else).  Competition makes people better.

What do you think about MASN?  You live outside the DC area, so you probably have a different perspective.

Follow Up from the Washington Nationals

Justin,

Pardon me for forgetting how hard the Orioles had it in the 90s and 00′s during the Yankees / Red Sox bubble.  I was too busy thinking about how MLB gutted the Expos/Nationals farm team, stripped the franchise of all its scouts and spring training facility.  MLB also cut the team’s payroll to the point they would not allow September call ups and not drafting players on talent, but on sign-ability.  The MASN deal was just another indignity heaped on the franchise.  The only problem now is that Mike Rizzo and the team has been able to outrun all those problems, except for maybe Spring Training (that is another post) but this idiotic MASN TV deal.  Allow me to explain:

1.  The whole concept doesn’t make logistical sense.  The network owns the rights to 2 baseball franchises.  These teams play virtually every day for 6 months of the year.  Their games are always in conflict with each other; this necessitated adding MASN 2 to carry the other game.  For the first few years some cable networks didn’t have MASN 2 so games couldn’t be watched.  A viewer has no idea which channel the game is going to be on every day, because in the name of “fairness” the teams are on MASN 1 an equal amount of time.  The rest of the time MASN 2 sits as a blank channel on my cable system.  The Dodgers are on SportsNet LA and the Angels are on FS West; the Cubs are on WGN and White Sox are on CSN Chicago, the Mets are on SNY, the Yankees are YES; the Giants are CSN Bay Area, the A’s are CSN California.  You see how that works, MLB and Angelos don’t.  More on the huge problem later.

2.  The content of the network doesn’t satisfy anyone except those that happen to follow all Baltimore and Washington sports team.  Jim Harbaugh keeps begging for Redskins fans to let the Ravens be their AFC team, but most Skins fans are not interested.  Same with the O’s, I am willing to bet people from Baltimore are even less interested in Nats news than vice-versa.

The game broadcasts are actually very good.  I like the pregame and post game show and the quality of presentation is as good as any in baseball.  I really like the talent on the station and their website.  The problem with the network is everything else.  I can’t watch MASN content because it pretends that I care about anything going on in Baltimore sports.  I am from Washington, I watch Washington teams.  There is plenty of demand for Baltimore Ravens and Orioles news in Baltimore, I don’t care about either team at all, and watching MASN broadcasts requires half the time being spent on those teams.  Don’t even get me started on the shared booth during the battle of the “beltways”.  I can honestly say that TV contract colors my feelings about the O’s.  If I knew the Nats were a partner in the network I would be more forgiving of the content.  MASN really wants to pretend it is the Baltimore/Washington market but these are two distinct cities.

3.  MASN actually creates less revenue the way it is currently constructed.  According to some the stories I have read, MASN gets a carriage deal of $2.28 a subscriber.  This makes sense; the average deal nationwide is $2.28, the Yankees get $3 and the Mets get $2.50, and those teams play in the same market. The problem with the MASN numbers is that 2 bucks is for two teams, so that is about 1 dollar per MLB team, which has to be the lowest rate per team average in baseball.  If the Nats and O’s rights were available separately, like in New York, they could take in more combined individually than the joint MASN package.  The O’s are leaving money on the table by insisting on having their own network.  Sharing revenue from the TV deal with Washington makes more sense.  Here is an idea, start MASN for the O’s games and get the rights to the Wizards; that way the network is guaranteed O’s games in DC during the summer.  It should be simple, 2 sports networks, one with the Nats/Caps, and one with the O’s /Wizards.  Those sport season complement each other, instead there is this mess.  Instead they (MLB and Angelos) opted for the monopoly model of business.  It is OK to make this mistake in the beginning, but to insist on keeping a deeply flawed arrangement is now just arrogance.

In order to better understand the financial situation both teams are dealing with under the 5 year reset, I developed a model to simulate different rights and equity payments.  I based my model on the research I was able to pull from the published reports about the new contact negotiations.  Assuming that MASN will continue to be the platform which delivers games in the Mid-Atlantic region,  It became pretty clear to me that this is an illustration of game theory.  If the O’s and Nats work together they can each make more money as a whole, but if they both work selfishly in their own self-interest they can hurt the other party.  Because right fees are subject to MLB profit-sharing, and channel equity is not, the teams have very separate interests at the negotiation table.  Since the O’s own 86% of MASN they take the lion’s share of the equity payments.  As it stands now, they make more in equity payments than rights fees.  With equity, they keep 100% of the money, with the rights fees they owe one-third back to the league.

If the Nationals get their way and get a fair market price for their broadcast right the O’s are penalized at a greater rate than if they were to simply award the Nats a great share of the network equity.  For example, again due to profit-sharing and the fact that whatever the rate the Nats get the O’s automatically get:

At 40 million each (not a crazy number and about what the O’s are offering) the O’s make 87 million and the Nats 51 after profit-sharing and before national TV rights. If that rights fee were to increase only 20 million to 60 million apiece (again not a crazy number) the O’s only make 66 million and the Nats 58 because the equity stake becomes less of a factor.  In this case about 15 million more go to MLB in the form of revenue sharing. So despite increasing their own rights fee 20 million the O’s loose 21 in the process and the Nats only gain 7.  This is why the O’s are desperate to keep the rights fee well below market rate.

Here is the problem for the O’s, by refusing to negotiate an accelerated equity growth for the Nats, they are in danger of losing significant TV money.  They allowed this to go to arbitration as per the contract. This is now in MLB’s hands, specifically the Mets, Pirates and Rays.  MLB wants higher rights fees because it wants to keep increasing the revenue from the regional sports networks, and the more MASN pays in rights, the more money is kicked into the revenue sharing.  The Nationals are already on the short end of this deal.  The O’s are the only ones with something to lose.  Instead of brokering an agreement that allows the Nats more TV revenue while they maintain their advantage, they are banking on the status quo being affirmed which has them the winner and the Nats the loser.

Remember, one of the key elements of the TV contract was that the Nats get fair market value for their rights, The Nationals have every right to expect that end of the contract be honored.

I know this can be complicated, do you have any further questions or comments.

The final arguments

Oh, I have comments.  I always have comments.

Before we open up final arguments I want to answer a few FAQ or misunderstandings:

“The O’s own the Nats TV rights” not technically true.  MASN owns the rights to broadcast Nats games, the O’s are just the majority shareholder in MASN.  The Nats still own a minority share of their rights.

“The Lerner’s knew about the contract when they bought the team, what right do they have to complain about it now” While technically true, any owner of the team would have to live with the contract; it just so happens that the Lerners are the current owners.  It doesn’t matter who owns the team the contract was put in place by the previous owners.  The fact that the previous owners were Major League Baseball is just a further complication.

Now the final arguments:

1.  Baltimore and Washington are one market, whether you like it or not.  I know you’re from Northern Virginia and don’t think about Baltimore very often, but have you ever been to Columbia, Maryland?  How about Annapolis?  What about the people who live in Baltimore and take the train to DC every day?  What about the thousands of DC residents who still root for the Orioles because they grew up rooting for the Orioles?  These two cities are more connected than you think they are.  I know you want MLB to draw a long red line halfway between Baltimore and DC, but that’s not going to happen.  This war won’t end with a 38th parallel.

I don’t disagree that the markets are close, and some towns are in between both cities and have split allegiances;.  My point is that if it were the same market like New York, Chicago, and the Bay Area then the cities would share media and they don’t.  Baltimore has its own media, and the O’s wear Baltimore on their chest.  They could have moved to DC, the bigger city, like the Bullets did, but they chose crab-cakes and the Inner Harbor over the Nation’s Capitol, hon.  Even if you are more correct, and it is now one big market, it is big enough to support 2 teams, the NFL sure thinks so.  Don’t take my word for it though, in the latest collective bargaining agreement MLB specifically named the big market cities.  The Nationals were on the list the O’s were not.  Every other 2 team city was on the list except Oakland who is exempted until they get their new stadium in San Jose built.  I have more on that list of big market teams and the impact on this MASN deal later.

2.  You seem to be pretty educated on the facts, but maybe you should take off the homer glasses to see the full picture.  The Nationals are trying to destroy the MASN deal by asking for $100 million.  They’re trying to burn down their house because they don’t want to live in it anymore.  Your analysis broke it down pretty well.  By asking for a higher annual annual payout, they’re making MASN less profitable, which hurts the Orioles far more than it hurts the Nationals.  The know Orioles won’t agree to that, because why would they?  And then MLB has to decide what to do, which is a giant conflict of interest because higher annual payouts actually benefits MLB because, as you pointed out, they are subject to revenue sharing.  It’s a disaster within a disaster, kind of like dumping a bunch of sharks inside a tornado.

Of course the Nats are trying to burn down the MASN house; it is a shoddy house for two teams to live in.  It is a bad deal for the Nats and a bad deal for MLB.  More importantly, if the deal is followed as it was intended and the Nats get fair market TV rights then the deal is even worse for the Os.  MASN does not generate enough revenue to pay two teams their market rate. The options are: hurt the Nationals or redraw the contract; there is not a fair solution under the current contract.

3.  Here’s my suggestion, and please tell me if this is too reasonable for the Lerners to consider.  Instead of trying to destroy MASN, maybe they should become partners.  After all, the Nationals are scheduled to eventually own a third of the network.  Maybe the Nationals could exchange lower annual payouts for a higher equity stake.  Then the two teams could work together to maximize profit for the network.  Perhaps that would be easier and far less time consuming than the slash and burn tactics demonstrated thus far.

The Nationals are proposing the only solution that they can under the current agreement.  Angelos does not want a partner, he wants to own the Nats broadcast rights.  They are allowed to renegotiate their rights fee, plain and simple.  If the O’s can’t afford to give them their market rate for their rights fee (which they can’t) the original contract needs to be ripped up and a new one put in place.  MLB doesn’t want to force that to happen, they want the O’s to start the process, that is why MLB went to FOX and Comcast to develop a buyout of MASN, giving Angelos a graceful exit from this MASN experiment.  The O’s and MASN roundly rejected the proposal and refused to engage in negotiation.  Remember, one of the crucial elements of the contract is that the O’s assumed the risk of the deal that was one of the selling points.  An increased equity for the Nats would be a better short term solution to the current negotiation, but it doesn’t solve the problem of the inherent flaws and inefficiencies in MASN that limit its total revenue. If the teams were to split the equity 50/50 the most the teams would make is around 70 million.  The Nats are the victims until the side of the agreement which allows them to renegotiate a fair market value of their rights is upheld by MLB and they are not forced to take whatever MASN give them.

4.  MASN can work.  Like you mentioned, it’s a pretty good product.  I like your idea of growing the network’s footprint by bidding on the Capitals and Wizards.  That would only make the network more valuable throughout the entire market, leading to a higher subscriber fees.  These are all common sense improvements to the business that can’t happen while the Nationals, Orioles and MLB all stare each other down like they’re in a terrible Western movie.

Here is the problem, the Nats are demanding change and the O’s are demanding statuesque.   As long as the Os insist on the old contract, but only the part they like , nothing is going to happen. MLB has to force the types of changes you are talking about.

5.  In any case, the current setup won’t work.  It makes ZERO sense to set up a regional sports network (where profit isn’t subject to revenue sharing) and then turn all the profit over as a rights-fee (which is subect to revenue sharing).  Essentially, the Nationals are proposing a solution that would blow up the whole network, which is probably their intention.  You portray the Nationals are poor little victims, but they’re really just maximizing their leverage to increase their profits.  That’s their right as a business, but don’t pretend the Orioles are trying to out-muscle them.  They’re both trying to out-muscle each other.  MLB needs to get them in a room and work out a new deal that makes sense.

Here is the problem with your “why can’t they get along routine,” The most recent CBA has forced the Nationals into a corner where the current contact no longer is good enough.  In the new CBA there is a new tier of revenue sharing called supplemental revenue sharing.  An additional 14% of team revenue is reallocated.  The catch is that large market teams are exempt from receiving this revenue sharing.  The Nats, Blue Jays, and Braves are the 3 large market teams that earn less than league average revenue.  The Nats and O’s make roughly the same revenue for accounting purposes, because MLB virtually mandated that through the MASN contact.  Because the O’s are considered a small market, they get extra draft picks (which the O’s used to trade for Bud Norris this year) and revenue sharing.  The Nats are -4.1% the league average compared to the O’s at -4.3%, I can only guess this is due to more club seats at Nats Park.  Bottom line, MLB lumps the Nats in the same category as NY, LA, Chicago, Boston and Philly, but does not allow the club the same revenue streams.  The irony in all this is that that the O’s are making a huge amount of money off the revenue sharing books in the form of their equity ownership in MASN that all the other big market teams are making,. By combining the new CBA and the MASN contract the O’s are treated as a small market team, but make the revenue of a large market team.   I am sure in the back of Angelos’ mind he justifies this, just like you have, because the O’s need to compete against the Yankees and Red Sox the two most profitable teams in baseball.  What he doesn’t consider is that the Mets and Phillies are 4 and 5 on the list.  

The best answer to this problem is for Angelos to sell the team to the Ripkens and a new more equitable contract is worked out that allows both teams to compete in the Baltimore/Washington market.  You are correct; if MASN is to stay, the teams need to solve the problem of the equity in the broadcast company.  If the Nats were allowed to either buy or accelerate their share of MASN, then one of the most pressing problems of this conflict is solved. AT 33% ownership of MASN and 37 million rights fee the Nats would make 60 million to the O’s 80 and both teams would still get TV revenue sharing from the other big market clubs.  Is that a good compromise…maybe, but it doesn’t solve the CBA penalty the Nats face as a “large market” club.  Also, is there anything you have seen from Peter Angelos that leads you to believe he is open to any compromise that would in his mind cost millions?

I guess that was a clown question bro.

 

 

http://www.fangraphs.com/blogs/marlins-mlb-revenue-sharing-syste/

 

Market Areas Ranked by TV Homes

Rank Designated Market Area (DMA) TV Homes

% of US

1 New York  7,433,820

6.50

2 Los Angeles  5,654,260

4.94

3 Chicago  3,492,850

3.05

Combined DC Baltimore Market 3,423,690
4 Philadelphia  2,950,220

2.58

5 Dallas-Ft. Worth  2,489,970

2.18

6 San Francisco-Oak-San Jose  2,476,450

2.16

7 Boston (Manchester)  2,409,080

2.11

8 Atlanta  2,369,780

2.07

9 Washington, DC (Hagrstwn)  2,321,610

2.03

10 Houston  2,106,210

1.84

11 Detroit  1,926,970

1.68

12 Phoenix (Prescott)  1,855,930

1.62

13 Tampa-St. Pete (Sarasota)  1,822,160

1.59

14 Seattle-Tacoma  1,819,970

1.59

15 Minneapolis-St. Paul  1,730,530

1.51

16 Miami-Ft. Lauderdale  1,546,920

1.35

17 Cleveland-Akron (Canton)  1,524,930

1.33

18 Denver  1,524,210

1.33

19 Orlando-Daytona Bch-Melbrn  1,466,420

1.28

20 Sacramnto-Stkton-Modesto  1,399,520

1.22

21 St. Louis  1,249,820

1.09

22 Portland, OR  1,175,100

1.03

23 Pittsburgh  1,156,460

1.01

24 Charlotte  1,122,860

0.98

25 Indianapolis  1,114,970

0.97

26 Baltimore  1,102,080

0.96

 

Notes:

The TV market does not necessarily match city population, but it seems to correlate.

If the DC and Baltimore markets were combined, it would be the 4th largest market behind New York, LA, and Chicago.

 

A team’s broadcast area stretches outside of its immediate city.  Washington and Baltimore share the same broadcast area, also called a blackout area.  This area stretches south through through North Carlolina and North through Maryland and up to Harrisburg PA.  This grows the potential subscriber base of MASN to include big markets like Richmond and Tidewater VA.  MASN has had trouble with cable systems in North Carolina.  Baseball fans in that market tend to root for the Braves.   One unintended consequence of the MASN contract is the Nats have no real incentive to grow their fan base outside of the immediate area that can attend games.   Since most of the TV revenue goes toward the O’s a Nats fan in lets say Richmond does not provide much direct revenue to the team.

 

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2 thoughts on “Debate: The Nationals, the Orioles, Peter Angelos, and MASN All you need to know about the MASN contract situation”

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