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JohnD

MASN dispute update

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9 hours ago, Frobby said:

Respectfully, I think you are way off base here.    The settlement agreement does not require MASN to pay dividends.    It merely determines the percentage of ownership of MASN owned by the Nats and Orioles.    Any limited partnership has discretion whether to retain its profits or pay some or all of the profits out as dividends.   The fact that they’ve paid a dividend 10 years in a row doesn’t preclude them from retaining the profits in the 11th year.     It’s all a matter of whether the decision was made by MASN’s management in its good faith business judgment, and the standard for proving that it wasn’t is very high.    There are lots of legitimate reasons to retain profits rather than pay dividends.    And remember, the O’s still own 75-80 of MASN, so a decision not to pay a dividend this year deprived the Orioles of a dividend that is 3-4 times larger than the dividend that would have been paid to the Nats.   In that circumstance, proving this was a bad faith decision will be very difficult, in my opinion.  

Particularly when there is significant dispute over what the rights fees to be paid out off the top are, something the Nats would be party to.

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On 11/30/2019 at 11:05 AM, Frobby said:

   I don’t remember it saying anything about discovery, but like I said, it’s been a while since I read it so my memory could be off.   

There’s little doubt the Nats will ask for discovery if it’s permitted.   
 

Yeah, I’m in the same boat.  It was dry reading the first time.  What’s interesting in all of this is how much are the two sides willing to spend on this.  The Lerner’s are insanely rich, and while willing to spend money on players, they are notoriously cheap everywhere else.  Especially when it comes to spending money on fans (playoff metro hours), and coaches.  
 

The old adage “it’s business,  not personal” should apply, but the Lerners are taking this very personally so I’m assuming if they think they can get a pound of flesh they will keep the faucets open.  Who knows what’s going on in Angelos mind right now.  We know he’s also taking this very personally, but is he willing to go all in just for points?

The amounts we are talking about are diminimus compared to the FMV dispute, and the current FMV which will have to go through the RSDC (again).

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On 11/30/2019 at 9:08 AM, Frobby said:

Respectfully, I think you are way off base here.    The settlement agreement does not require MASN to pay dividends.    It merely determines the percentage of ownership of MASN owned by the Nats and Orioles.    Any limited partnership has discretion whether to retain its profits or pay some or all of the profits out as dividends.   The fact that they’ve paid a dividend 10 years in a row doesn’t preclude them from retaining the profits in the 11th year.     It’s all a matter of whether the decision was made by MASN’s management in its good faith business judgment, and the standard for proving that it wasn’t is very high.    There are lots of legitimate reasons to retain profits rather than pay dividends.    And remember, the O’s still own 75-80 of MASN, so a decision not to pay a dividend this year deprived the Orioles of a dividend that is 3-4 times larger than the dividend that would have been paid to the Nats.   In that circumstance, proving this was a bad faith decision will be very difficult, in my opinion.  

Yeah I am not sure where people think partnerships have to pay dividends because they did so in the past.  My grandfather belong to a hunting club partnership.  They owned thousands of acres.  Well as all the partners died they subdivided the land and sold them to homeowners.  There was a point where the dividends were pretty regular and came every quarter or so.  and then they slowed down and then got to point where they got one every couple of years and then ended all together when last plot was sold.  
 

If any organization is distributing more money in dividends than they have cash from operations the only way to do that is by borrowing money or selling assets.   A business also needs money to operate.  I don’t see how any judge is going to force MASN to borrow money to pay dividends if they are not paying dividends for legitimate business reasons.

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3 hours ago, atomic said:

If any organization is distributing more money in dividends than they have cash from operations the only way to do that is by borrowing money or selling assets.   A business also needs money to operate.  I don’t see how any judge is going to force MASN to borrow money to pay dividends if they are not paying dividends for legitimate business reasons.

The whole issue is whether they have a legitimate business reason, and how hard will the arbitrators look behind that.     Probably not very hard.    Arbitrators are not inclined to second guess a business decision unless it’s quite obviously a pretext.    

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So I was re-reading the RSDC’s decision from earlier this year regarding the 2012-16 rights fees, and noticed some information that allowed me to calculate how much MASN paid out in dividends during that period.     It wasn’t disclosed directly but can be calculated with some simple algebra.    To make a long story short, in 2012-16 the O’s received $197.6 mm in right fees, and another $45 mm in dividends. The Nats received $197.6 mm in rights fees and $8 mm in dividends.     

I don’t by any means think that the $53 mm in dividends paid to the two teams represents all the excess cash generated by MASN during that period.    Because of the litigation over the rights fees, it would have been imprudent to pay out the additional sums that would be owed if the RSDC award was upheld.    So the dividends paid probably represent an amount MASN though it could safely pay and still have enough in reserve to pay out the rights fees if ordered to do so.

Also, in a decision last week that I haven’t seen reported, the lower court granted a stay of its decision affirming the RSDC rights fee award, while appeals are taken.    As a condition of the stay, the Orioles were ordered to pay $99.2 mm into an escrow account by December 9, and to perfect their appeal by December 31 and request an expedited ruling from the appellate court.   

In their application for the stay, MASN/the Orioles state that “MASN is trying to survive in the face of a paradigm shift in the cable television industry...MASN has lost over 2 million subscribers in the past eight years due to cable customer cord cutting and cord shaving.”    There is an exhibit to the court papers showing that in 2011, MASN had 9.2 million subscribers (5.9 mm in-market and 3.3 mm out-of-market), while in 2018 it had 6.7 million subscribers (4.7 mm in-market and 2.1 mm out-of-market).    Overall that’s a 1.2 mm subscriber loss in-market (21%) and 1.3 mm out-of-market (38%), a total of 2.5 mm lost subscribers, 27% of their 2011 total.   Ouch!

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MASN would probably have a lot more viewers if that stupid blackout didn't exist and they started an app for streaming. Don't understand why these folks are leaving good money on the table!

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