Did MLB’s MASN arbitration panel really rule “in favor” of the Nationals?

The Orioles and Nationals have been disputing the “market value” MASN is required to pay the Nationals annually to televise their games in the DC market. In 2011, when the original MASN contract called for a “reset” of the Nationals’ compensation from MASN, the Orioles and  Nationals were so far apart on the definition of “market value” the matter was referred to an arbitration panel to settle the conflict. The Orioles, it was reported, believed the “market value” for the Nationals TV rights to be around $35 million annually. The Nationals, it was also reported, believed the number to be somewhere in between $100 million and $120 million. You can see why the Orioles and the Nationals couldn’t reach a compromise.

The baseball world waited…and waited…and waited for a decision from the arbitration panel for over two years. On July 29, the Hollywood Reporter reported that the arbitration panel finally made a decision–in favor of the Nationals. The Orioles are now challenging that panel decision in court.

The Hollywood Reporter wrote:

Per the terms of the settlement, beginning in 2012 MASN had to pay the Nationals “fair market value.” The TV station balked, and so an arbitration hearing commenced in April before a panel comprising the chief operating officer of the New York Mets, the president of the Pittsburgh Pirates and the owner of the Tampa Bay Rays. Some of this has been previously reported. The Nationals reportedly got $29 million per year under the old TV contract and wanted it bumped up to somewhere between $100 million and $120 million per year.

What’s been kept under wraps until now is that on June 30, the MLB committee adjudicating the dispute issued its decision, which favored the Nationals. That prompted attorneys to swing into high gear and Commissioner Selig to attempt to get out in front of the situation.

The Washington Post–who were completely scooped in this matter by a non-competitor 3,000 miles away that doesn’t even cover sports–scrambled to catch up. They too, reported that MLB’s arbitration panel ruled in favor of the Nationals. 

The Post’s Adam Kilgore wrote, soon after the Hollywood Reporter story:

Major League Baseball’s arbitration panel ruled in favor of the Washington Nationals in their longstanding, contentious dispute with the Baltimore Orioles over television rights fees from the Mid-Atlantic Sports Network, a person familiar with the situation confirmed Tuesday afternoon.

The person would not reveal the terms of the June 30 ruling that might only begin a new, litigious chapter in the acrimonious, years-long squabble over profits from MASN. Last week in New York’s Supreme Court, the Nationals filed a motion against MASN, which is majority-owned by the Orioles; that case has been sealed. MLB, the Orioles and MASN acknowledged the dispute remains unsettled in official statements issued Tuesday.

But did the panel really rule “in favor” of the Nationals? It is true that the arbitration panel’s decision is under seal by the court, but the rest of the court documents are on the Supreme Court of New York’s website for anyone to read, and they contain enough clues to figure out exactly how the arbitration panel ruled.

In a letter dated July 3, 2014 on the Court’s website, an attorney for the Nationals wrote MASN asking for “an additional $10,037,204.50 in telecast rights fee payments” because a prior “payment of $9,818,358.50 failed to reflect the fair market value of the telecast rights licensed by the Nationals.” The letter made it clear this money demand was being made pursuant to the arbitration panel’s June 30 ruling.

Furthermore, elsewhere in the legal pleadings, it is stated “the Nationals receive quarterly payments of telecast rights fees”–that is, 4 times a year. If MASN paid the Nationals $9,818,358.50 and the Nationals are owed an additional $10,037,204.50 pursuant to the arbitration panel, that means the arbitration panel’s June 30 decision requires MASN to pay the Nats $19,855,563 every quarter. Over a calendar year, this means arbitration panel ruled the “fair market value” of the Nationals TV rights to be $79,422,252.

Legal pleadings filed August 13 by the Nationals attorneys argue “for just 2014, MASN to date has deprived the Nationals of $15,055,806.75 (not including interest). If MASN also fails, for the next (and final 2014) payment due on September 1, to pay the amounts required by the RSDC decision, MASN will have deprived the Nationals of $20,074,409.00 just for 2014.”

$20,074,409 divided by two equals exactly $10,037,204.50, the amount demanded by the Nationals in their July 3 letter. That $10,037,204.50 amount was likely payment for two quarters worth of extra rights fee payments. Using the new numbers, $9,818,358.50, the quarterly amount previously being paid by MASN to the Orioles plus the additional $20,074,409 ordered by the arbitration panel means the Nationals “fair market value” TV rights are valued at $59,347,843 annually by the arbitration panel.

Remember, the Nationals asked for over $100 million annually. Since the arbitration panel valued the Nats’ TV rights to be worth $79 $59 million, I’ll leave it to you to decide whether they really ruled “in favor” of the Nationals. To me, it sounds like a compromise between the Nationals and Orioles two demands.

Kilgore didn’t reveal his “person familiar with the situation” but perhaps it’s telling this person didn’t actually reveal the numbers in the arbitration panel’s decision, only the conclusion that it was “in favor” of the Nationals. If this “person familiar with the situation” worked for MASN or the Orioles, you can see why they’d want to keep Kilgore in the dark and let him print their conclusions as fact.

UPDATE: Legal pleadings filed late on August 13 suggest the number could be even less than the $79 million estimated above. Attorneys for the Nationals wrote “the fair market value of the Nationals’ telecast rights as awarded by the RSDC is on average $58.4 million less per year than the amount requested by the Nationals during the RSDC proceeding – while, at the same time, only $20.1 million more per year on average than the amount MASN advocated.” Without knowing the amount asked for before the arbitration panel, it’s impossible to know exactly how much they valued the “market value” of the Nats TV right. But it’s clear the amount is far below the $100+ the Nationals demanded.

 

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