What would a deal between Comcast and Leonsis mean for the Nationals, Orioles, and MASN?

The five-year old MASN dispute between the Nationals and Peter Angelos made news last week when the Orioles won a victory in the New York Supreme Court vacating the previous MLB arbitration decision awarding the Nats $60 million a year in TV rights fees. The victory was a temporary one for the O’s with only one major implication: this dispute is guaranteed to linger even longer than we originally thought. Fans hoping for a resolution to this mess will only have to wait.

In the aftermath of this decision came news this morning in the Washington Post Ted Leonsis’ Monumental Sports is negotiating a deal with ComcastSportsNet to own a piece of the Regional Sports Network (RSN). This development, if it comes to fruition, is notable to Nats fans for many reasons, and it raises some obvious questions.

First, Leonsis is now making a deal the Lerner family can only dream of making. Leonsis is following the industry trend in sports, where teams gain an equity share in a local RSN, a mutually beneficial arrangement for both parties. For the RSN, an equity partnership guarantees long-term rights to televise the team’s games, locking in live, local, and daily content, which is especially valuable in the DVR and “cord-cutting” era. For the team, an equity partnership ensures lucrative annual equity payments from the RSN and a protection against “carriage battles” (like MASN faced in 2005) since the RSN is owned by the cable provider.

By locking in Capitals and Wizards games long-term, CSN would make itself a valuable property in the foreseeable future. Were Leonsis to take his Capitals and Wizards broadcasts elsewhere, the network would likely shrivel up and die. It’s hard to imagine CSN surviving on DC United and Washington Kastles broadcast alone; they would need a flagship property among the four major sports to justify it’s carriage fee to cable subscribers. In return, Leonsis will see what promises to be high equity payments equal to a third of CSN’s revenue. This is huge for not only Leonsis’ personal wealth, it largely secures the financial security of his two teams.

Meanwhile, the Lerners are stuck in neutral in the middle of a nightmare scenario. The owners of the Nats lack to autonomy to strike a deal like the one Leonsis is making. Instead of getting equity in a large RSN like CSN, they have to settle for a smaller equity stake in MASN, plus a rights-fee which is currently the subject of litigation between the O’s and Nats. The biggest problem here, and one of the biggest complaints about MASN in general (besides Bob Carpenter), is that MASN leaves far too much money on the table with the way it is structured. The monthly per-subscriber carriage fee is generally believed to be much lower than what you would expect for a network carrying two valuable properties like the Orioles and Nationals. Put simply, baseball is the most valuable local television property simply because it’s live and it’s every day. Comparatively speaking, local baseball games rate very well in the right demographic advertisers are trying to reach. This isn’t my opinion, it’s fact reflected in the huge deals being struck around the country by baseball teams with local television providers.

The Orioles are fine with the fact MASN brings in less money than it otherwise could because they’re keeping the largest piece of the pie. They’d rather have the majority of smaller pot than risk a new financial arrangement where they would most assuredly be given a smaller piece considering how much smaller a market Baltimore is than Washington D.C. So the Orioles will fight and defend an outdated cable TV deal struck in 2004 before the Expos even moved to DC. The Nats can only sit and watch Leonsis take advantage of a new lucrative industry trend while Peter Angelos litigates in state court the right continue the trend of 10 years ago.

Prior to Leonsis striking a deal with Comcast, CSN likely represented the best compromise between the O’s and the Nats. CSN is carried in both Baltimore and Washington and they likely would have jumped at the chance to carry the Orioles and Nats, a move that would have instantly doubled the network’s value and made it a giant in the mid-Atlantic region. Now it’s fair to wonder if Leonsis has crowded the O’s and Nats out of the market place. It’s really hard to imagine CSN forming an equity partnership with Monumental, the O’s AND the Nats. Leonis got the table first, and now there’s no other RSN with the clout of Comcast to take its place. The O’s and Nats missed their opportunity back in 2014 when MLB tried to negotiate a sale of MASN to Comcast.

So Ted Leonsis is the winner. He not only secured his own financial future, he stuck it to a local competitor. For the Nats, it’s likely MASN today, MASN tomorrow, and MASN forever. Even if the Nats Houdini themselves out of the MASN deal, or Peter Angelos has an out-of-body experience and decides to compromise, there is one less option on the table. Comcast two years ago provided the Nats the easiest and most profitable way out of this MASN thicket. Now, as they watch the slow wheels of justice turn in the New York state court, the Lerners get to see the Comcast option taken by Ted Leonsis, a fellow sports owner lucky enough to never be forced to do business with Peter Angelos.

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