Grantland Front Page Article - Jonah Keri on Orioles, revenue factors, and the Quest for Greatness

[Redskins Rick]

I'm not sure why you are saying that the MASN dispute hasn't impacted the Orioles' ability to make money and bank it. Let's say MASN makes a profit of $130 mm before paying any rights fees. They pay out rights fees of $35 mm a team (approximately), so that leaves $60 mm in theoretical profits for MASN. Under normal circumstances, 83% of that, or about $50 mm, would go to the Orioles. But the Nats have exercised their right to "reset" the rights fees, which they claim should be about $100 mm. In that circumstance, the O's don't know if there will be any profits to distribute after rights fees are paid, so all they can really do is leave that money sitting within MASN until the rights fee issue is resolved. It is very much in their interest for the rights fees to be as low as possible, so they will fight hard on this issue. But I don't see how the profits of MASN can be paid out until the rights fee issue is decided.

You made good points.

In spite of the MASN issues, the team's profit for 2013 was over 30 million.

[Redskins Rick]

If Keri is right about anything in his article, it matters quite a bit to where the Orioles would have been the last two years. I can imagine that to a guy like Peter, this has been pretty much all consuming.

Ok, let's take this path for a minute. No Nationals in town, and MASN money pouring into Oriole pockets with no sharing with another team.

Do you honesty think Angelos would have allowed Duke to spend anymore than he did?

[weams]

Ok, let's take this path for a minute. No Nationals in town, and MASN money pouring into Oriole pockets with no sharing with another team.

Do you honesty think Angelos would have allowed Duke to spend anymore than he did?

I would assume so. I would assume so. I think Peter operates on a net basis.

[Redskins Rick]

I would assume so. I would assume so. I think Peter operates on a net basis.

I wish you was right, I really do.

Mussina walked away after 2000, the team was still over 3 million in attendance and no Nationals in Town.

The team had plenty of money then, so its hard to buy into your net basis theory.

[Frobby]

You made good points.

In spite of the MASN issues, the team's profit for 2013 was over 30 million.

Two things about that:

1. I assume this is coming from Forbes. I don't know where they get their data, but I take their figures with a grain of salt.

2. The figure you are giving is operating income, which is a little different than profit.

That said, I think your point is fair. If the O's aren't going to open their books, all we can do is rely on reports like Forbes' as the best information we have available. There certainly is evidence that the Orioles could spend more money, even putting MASN to one side.

[KurtCDavidson]

The thing that really cracked me up about the article is how all of the GMs went out of their way to refute the idea that Angelos is controlling. Then later, they recount specific instances in which Angelos was clearly controlling.

For example, MacPhail:

"The idea that Peter was meddling was the furthest thing from the truth."

Then later:

"We had an older team that wasn?t good enough to compete, and it was pointless to keep going the same way. Peter eventually agreed.?

"In January he?d see something he wanted, and he?d tell me to pursue it.?

Beattie:

"Beattie said Angelos never ordered him to chop payroll, nor did he issue any sweeping statements demanding that the co-GMs avoid spending for premium talent. When I asked Beattie if there was a player he wanted that the Orioles failed to acquire because of budget constraints, however, he didn?t hesitate.

'Vladimir Guerrero,' Beattie said."

So let me get this straight, the take home is he's not meddling, except for when he refuses to approve trades and pushes specific signings late in the offseason.

He's also not against spending for "premium talent," unless of course it won't fit "budget constraints." Give me a break.

[Can_of_corn]

The thing that really cracked me up about the article is how all of the GMs went out of their way to refute the idea that Angelos is controlling. Then later, they recount specific instances in which Angelos was clearly controlling.

For example, MacPhail:

Then later:

Beattie:

So let me get this straight, the take home is he's not meddling, except for when he refuses to approve trades and pushes specific signings late in the offseason.

He's also not against spending for "premium talent," unless of course it won't fit "budget constraints." Give me a break.

Pretty sure he was the main force behind signing Vlad a few years ago as well.

[hoosiers]

Just curious, why is this "as it should be?" That's not the deal that was negotiated at the time the Nats moved to DC. They were aware of the conditions necessary for their move and ostensibly signed off on them.

As far as the Lerners are concerned, the "conditions" included a local TV deal that offered a re-set to market rates. That is what they signed off on. Not a deal that is $70M below market.

Separately, these great big new local TV deals that other franchises are getting are being purchased/sold by RSNs/Comcast/etc at rates that I can only assume will provide those RSNs with a profit. PA chose to enter into the RSN business. It should have been run at a profit of at least $25M-$50M MORE than what MASN is already making right now. MASN SHOULD have created enormous profits to handle a payroll $25M-$50M more for the Orioles ALONE than what they receive currently. The Grantland article says the management of MASN might be described as "inept".

Again, the Orioles owners have a majority interest in the TV rights to two major league teams. They have created a RSN asset worth approx. half a billion dollars. It is utterly preposterous - through their "inept" management of MASN and greed as owners - for them to be "cautious" about any adverse decision regarding the Nats receiving market rates for their local TV rights. If the Nats received market rates on local TV rights, the RSN carrying them should profit accordingly.

PA should sell MASN. Take his portion of the half a billion and stick it in the bank. As part of the sale, the Nats should get market-based TV rights and should hand $10-$15M of that $ annually to the Orioles and that amount should be matched by MLB. Each franchise otherwise goes its separate ways and the Os get $20M-$30M more in revenue than their TV rights would otherwise generate.

[weams]

Two things about that:

1. I assume this is coming from Forbes. I don't know where they get their data, but I take their figures with a grain of salt.

2. The figure you are giving is operating income, which is a little different than profit.

That said, I think your point is fair. If the O's aren't going to open their books, all we can do is rely on reports like Forbes' as the best information we have available. There certainly is evidence that the Orioles could spend more money, even putting MASN to one side.

I agree that the Orioles could spend money. So could the Marlins, and the Rays. So could the Royals and the Astros. I think the Orioles should spend more money. I think the should have a 130 million dollar payroll. But I know that is not the case. If the Nationals dispute were resolved, maybe the vast wealth that Peter realized would get him to spend more on the team.

[hoosiers]

The thing that really cracked me up about the article is how all of the GMs went out of their way to refute the idea that Angelos is controlling. Then later, they recount specific instances in which Angelos was clearly controlling.

For example, MacPhail:

Then later:

Beattie:

So let me get this straight, the take home is he's not meddling, except for when he refuses to approve trades and pushes specific signings late in the offseason.

He's also not against spending for "premium talent," unless of course it won't fit "budget constraints." Give me a break.

Not sure you are getting the points being made by these GMs. These GMs are saying that, contrary to belief, PA was not a meddler. In other words, he did not get involved in day-to-day decisions. PA probably set a budget with his baseball people and they were largely left alone - that is the message - maybe one you don't want to hear.

Vlad was probably a budget-buster (certainly a long term commitment) and Beattie had to go to PA to get additional funds and was refused. One has to assume the owner is involved in SOME capacity.

It would have been nice to have signed Vlad. Just as it would have been nice to deal Ponson for Adrian Gonzalez as is rumored. However, it seems that for every major deal that PA nixed that might have been very favorable, there are one or two that PA was involved in which his refusal was a good thing.

[weams]

The thing that really cracked me up about the article is how all of the GMs went out of their way to refute the idea that Angelos is controlling. ... So let me get this straight, the take home is he's not meddling, except for when he refuses to approve trades and pushes specific signings late in the offseason.

He's also not against spending for "premium talent," unless of course it won't fit "budget constraints." Give me a break.

My theory is that none of these guys who are billionaires and have teams is much fun for Joe Everyman to hang around with.

[Frobby]

As far as the Lerners are concerned, the "conditions" included a local TV deal that offered a re-set to market rates. That is what they signed off on. Not a deal that is $70M below market.

To be clear, we don't know very much about what the criteria for the re-set are. You are saying that the rights are to be re-set to market rates, but I don't think we know that is the criterion. The Orioles have said there is a specific formula that governs how the reset is determined.

MASN, majority owned by the Orioles, argues the fee should be determined by a formula used for more than 15 years by MLB’s revenue sharing definitions committee. That formula takes into account factors such as local market size, geography, network revenue and expenses, and prior TV ratings to determine related-party broadcast rights fees for clubs that own equity in their television partners. The formula was developed with the aid of league consultant Bortz Media & Sports Group of Colorado and has been used for clubs such as the Boston Red Sox and NESN, the New York Yankees and YES, and the Toronto Blue Jays and Rogers SportsNet. Industry sources said the Orioles’ 2005 deal with MLB to allow the Montreal Expos to relocate to Washington, D.C., specifically calls for the use of the same, established structure.

The Nationals, conversely, are pointing more to current open-market conditions for baseball rights, which have grown by unprecedented degrees in the last two years. The Texas Rangers, playing in a market smaller than the combined Washington-Baltimore TV footprint, hold a 20-year deal with Fox Sports Net worth $3 billion. The San Diego Padres, playing in a market less than half the size of Washington alone and fifth-smallest in baseball and not fully distributed in their own market, recently signed a 20-year deal with FSN worth $1.2 billion.

http://www.bizjournals.com/washington/news/2012/06/25/mlb-television-formula-at-issue-in.html?page=all

So, that is the guts of the dispute, and without seeing the MASN contract, it's hard to evaluate who is correct. The wording of the contract is pretty critical here.

[BohKnowsBmore]

As far as the Lerners are concerned, the "conditions" included a local TV deal that offered a re-set to market rates. That is what they signed off on. Not a deal that is $70M below market.

Separately, these great big new local TV deals that other franchises are getting are being purchased/sold by RSNs/Comcast/etc at rates that I can only assume will provide those RSNs with a profit. PA chose to enter into the RSN business. It should have been run at a profit of at least $25M-$50M MORE than what MASN is already making right now. MASN SHOULD have created enormous profits to handle a payroll $25M-$50M more for the Orioles ALONE than what they receive currently. The Grantland article says the management of MASN might be described as "inept".

Again, the Orioles owners have a majority interest in the TV rights to two major league teams. They have created a RSN asset worth approx. half a billion dollars. It is utterly preposterous - through their "inept" management of MASN and greed as owners - for them to be "cautious" about any adverse decision regarding the Nats receiving market rates for their local TV rights. If the Nats received market rates on local TV rights, the RSN carrying them should profit accordingly.

PA should sell MASN. Take his portion of the half a billion and stick it in the bank. As part of the sale, the Nats should get market-based TV rights and should hand $10-$15M of that $ annually to the Orioles and that amount should be matched by MLB. Each franchise otherwise goes its separate ways and the Os get $20M-$30M more in revenue than their TV rights would otherwise generate.

As Frobby mentions above, none of us truly know what the reset provisions are, but I think its safe to assume that it is something less than pure down the middle or proportional sharing of the operating profits. That is my point, there is no reason that the Nats "should" get an even split with the O's.

[Orange]

I believe the reference was to Vlad in 2004 when he signed with Anaheim. 6/82, iirc. He was 29 at the time.

[KurtCDavidson]

Not sure you are getting the points being made by these GMs. These GMs are saying that, contrary to belief, PA was not a meddler.

They are trying to convince us that he is not meddling, YET (1) he had to be convinced to trade Bedard, (2) he specifically requests late offseason signings, and (3) he refused the Vlad signing for financial reasons.

We can quibble about the definition of "day-to-day decisions," but this is someone very clearly taking an active role in the personnel acquisitions of the franchise.

As a side note, I would like to point out that I actually don't mind Angelos. I think there is too much mythology at this point to get an accurate view of him. My opinion is from what we know, he's been right more times than not. Still, I'm not interested in swallowing more myths from these guys.

Also: why does it take a writer on Grantland to provide some palatable, rational analysis on the team/MASN financials? Instead of #HotTakes and elementary school arithmetic, why don't we get some of this from local writers, especially with regard to MASN?