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


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In light of the MASN debacle and it's attendant uncertain revenue streams for the future, could they afford to give a player a 7/20 M ? Maybe they could this year, but what about that commitment in 2018-20?

What is your source that there is a MASN debacle? The Nats want more money that does not make a debacle. As to can they afford 7/20 sure they can, they just have to be correct on who they give that money to.

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What is your source that there is a MASN debacle? The Nats want more money that does not make a debacle. As to can they afford 7/20 sure they can, they just have to be correct on who they give that money to.
I call it a debacle because it is in negotiations, involving the divergent interests of three parties, and has been for some time with out resolution. It would seem that some possible outcomes could be damaging to the O's revenue stream in the future. Why wouldn't it be prudent not to make long term big money commitments when the outcome is in doubt?
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Hooisers the rights are nowhere near 70 million undervalued. That is crazy talk. The deal currently providing the Nats just north of 56 million in value. 34 million in the direct fee. 22 million in distributible income of which they agreed to get 8 million of and the O's get the balance as compensation for the Nats entering the O's market. The 56 million is a FMV number. It is much more than Philly, and about the same as both Chicago teams. The Nats are trying to get more, no problem with that it is their job to do that. I think in this round it will be bumped up a little, 3-5 million. Remember the recent higher deals are antecedent to the reset date and are not relevant to the current round. When the next 5 year period ends there is going to be a significant increase in the fee component. If Philly gets a big deal then the Rights fee is going to increase in a big way, IMO.

Philly is about to enter a new deal in the next year. We'll see where it goes, but I expect it will be substantially higher than now. It is a poor example you are using - an old contract about to expire.

Also, you can't "double-count" the distributable income as both $ for the Os and the Nats. Really, it shouldn't even be included as the teams and MASN are separate entities. Simply, the Nats do not receive $56M.

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I call it a debacle because it is in negotiations, involving the divergent interests of three parties, and has been for some time with out resolution. It would seem that some possible outcomes could be damaging to the O's revenue stream in the future. Why wouldn't it be prudent not to make long term big money commitments when the outcome is in doubt?

I see no way that this is a debacle because PA is right. Unless he gives something away his revenues long term are only going to be minimally affected. PA does not give much away does he?

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Hooisers the rights are nowhere near 70 million undervalued. That is crazy talk. The deal currently providing the Nats just north of 56 million in value. 34 million in the direct fee. 22 million in distributible income of which they agreed to get 8 million of and the O's get the balance as compensation for the Nats entering the O's market. The 56 million is a FMV number. It is much more than Philly, and about the same as both Chicago teams. The Nats are trying to get more, no problem with that it is their job to do that. I think in this round it will be bumped up a little, 3-5 million. Remember the recent higher deals are antecedent to the reset date and are not relevant to the current round. When the next 5 year period ends there is going to be a significant increase in the fee component. If Philly gets a big deal then the Rights fee is going to increase in a big way, IMO.
you can't "double-count" the distributable income as both $ for the Os and the Nats. Really, it shouldn't even be included as the teams and MASN are separate entities. Simply, the Nats do not receive $56M.

Where is the figure "22 million in distributable income" coming from? I've never seen that number anywhere, and it makes no sense to me. The O's own 83% of MASN and that would be the share they'd get of any distributable income, while the Nats would get 17%. (Note that this number shifts by 1% in favor of the Nats each year, so it depedns what year you are talking about.) Also, the rights fee actually paid out in 2013 (as opposed to what the Nats are seeking) was $37 mm, not $34 mm.

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I see no way that this is a debacle because PA is right. Unless he gives something away his revenues long term are only going to be minimally affected. PA does not give much away does he?
Since you seem to have a problem with "debacle" lets call it a conundrum for MLB. They need to keep a team in DC and they also want to avoid going to court with PA. So they are trying to seek a compromise agreement is how I am understanding things. Any such agreement will result in loss of revenue. I doubt the situation is as simplistic as you seem to think it is.
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Philly is about to enter a new deal in the next year. We'll see where it goes, but I expect it will be substantially higher than now. It is a poor example you are using - an old contract about to expire.

Also, you can't "double-count" the distributable income as both $ for the Os and the Nats. Really, it shouldn't even be included as the teams and MASN are separate entities. Simply, the Nats do not receive $56M.

In most business situations you are correct, however this situation takes place in an artificial market. Created by MLBs antitrust exemption. Clubs have played this game for as long as there have been equity interests in RSNs by ML clubs. The profits are managed to meet the requirements of the clubs desire to manage revenue sharing and other agreements with MLB. PA is just doing what ML teams that own RSN's and that makes looking at the whole completely justifiable. All of the owners have agreed to these methods for a very long time. More importantly it is what the Learner's signed up for when they joined the Billionaire's club known as MLB owners. PA is fighting back on having to compete with the MFYs and Red Suxs. For all of the things PA does wrong the MASN deal is one thing in his ledger column that he got right.

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Where is the figure "22 million in distributable income" coming from? I've never seen that number anywhere, and it makes no sense to me. The O's own 83% of MASN and that would be the share they'd get of any distributable income, while the Nats would get 17%. (Note that this number shifts by 1% in favor of the Nats each year, so it depedns what year you are talking about.) Also, the rights fee actually paid out in 2013 (as opposed to what the Nats are seeking) was $37 mm, not $34 mm.

It has been reported that the Nats got 8 million in an equity distribution last year. I calculated the 22 million has half of 44 million that using 18% stake 8 million equate to. I used the wrong ownership stake maybe it should be 17% which works in PAs favor, just like if the Rights for the year in question are increased by 3 million it again works in PAs favor. Both of those changes put the Nats rights value over 60 million. But we are not privy to the actual details but I believe I have presented a fair ball park number.

PA is if nothing more a shrewd deal maker and has taken a position that he "knows" will win in front of an arbitration judge. I mean win in that his position will not materially change. He may have to pay the Nats something but it will not materially change the deal, IMO. Now a negotiated settlement may come out of this but PA will end up with a better deal if that happens not a worse deal. I could see the O's and Nats becoming 50/50 partners in MASN with a TV rights still tied together after a LARGE lump sum payment. This would be more attractive to the Nats in they would get a much larger return on growing the combined market.

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Since you seem to have a problem with "debacle" lets call it a conundrum for MLB. They need to keep a team in DC and they also want to avoid going to court with PA. So they are trying to seek a compromise agreement is how I am understanding things. Any such agreement will result in loss of revenue. I doubt the situation is as simplistic as you seem to think it is.

I think it really is that simple. The O's, MLB and the Nats made a deal. The Nats want to change it, MLB want the Nats to suceed, PA says I bargained for the deal we have. PA is not going to give away his deal and the terms are not an accident. PA is not going to give up the joint market IMO. For all of the posters that think PA is in the practice of hording money, this situation shows something very different. PA could put a very large sum of money in his pocket to the detriment of the long term financial positioning of the Baltimore Orioles if he wanted to. He is electing not to take that payment in order to ensure the O's are in good shape going forward. The value of the MASN deal will continue long after PA is no longer in need of money on this earth.

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I totally agree with this generally and PA now has an asset in MASN worth $500M that he did not own when he purchased the franchise. If MASN always remains with the Orioles, it will give the Os a revenue bump above the natural market that is Baltimore.

However, now, between the profits of the Os, the profits at MASN, the under-payment of rights fees, PA making gobs of $ - perhaps in the $70M neighborhood between the Os and MASN. Plus, in 2014, the Os get a $25M bump in national TV revenues.

Each person has their own level of acceptance of PA's profitability, but this is too much. It is greedy. PA could buy two $20M guys and still make north of $50M between the Os and MASN - and might collection some of that investment in the new players back through better attendance, viewership, possibly even playoff $. That PA is generating those kind of $ and yet we have to hear about the need to be cautious because of an adverse ruling with the Nats is, frankly, bullsnot. This team could be comfortably run with a $125M payroll and plenty of $ for the owner - and with another 1M in attendance, a payroll near $150M could be supported.

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I'm not bashing the writer ...but a some of this article just isn't true. Angelos has clearly restricted contracts to free agents. GMs are judged by winning and I won't believe they haven't signed free agents because they don't want them. I believe Pete is scared of being made to write a check to the Nats ...which is why he should've never been stupid enough to move them to DC in the first place.

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I think it really is that simple. The O's, MLB and the Nats made a deal. The Nats want to change it, MLB want the Nats to suceed, PA says I bargained for the deal we have. PA is not going to give away his deal and the terms are not an accident. PA is not going to give up the joint market IMO. For all of the posters that think PA is in the practice of hording money, this situation shows something very different. PA could put a very large sum of money in his pocket to the detriment of the long term financial positioning of the Baltimore Orioles if he wanted to. He is electing not to take that payment in order to ensure the O's are in good shape going forward. The value of the MASN deal will continue long after PA is no longer in need of money on this earth.
Interesting this would be my opinion as well. However since I am not a lawyer specializing in contract law, and do not have the MASN contract in front of me, and that the out come of this, shall we say "situation" so as not to ruffle any more feathers, will be determined by the interpretation of said contract, I can't say for certain who is in the right here, unlike apparently you.
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I'm not bashing the writer ...but a some of this article just isn't true. Angelos has clearly restricted contracts to free agents. GMs are judged by winning and I won't believe they haven't signed free agents because they don't want them. I believe Pete is scared of being made to write a check to the Nats ...which is why he should've never been stupid enough to move them to DC in the first place.
I would tend to agree that he restricts FA contracts, but I could say it's clear, I have no proof of that. I would be interested in seeing your proof.
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Interesting this would be my opinion as well. However since I am not a lawyer specializing in contract law, and do not have the MASN contract in front of me, and that the out come of this, shall we say "situation" so as not to ruffle any more feathers, will be determined by the interpretation of said contract, I can't say for certain who is in the right here, unlike apparently you.

They did all have an agreement. The Nats believe the agreement calls for a re-set of local TV rights toward, I believe, market value. I don't think it is appropriate to hint the Nats are "changing" the deal until we know more about the deal. I will say that, based on the fact that MLB is trying various ways to resolve the situation and because MLB is paying $ to the Nats as some sort of local TV rights supplement, that the Lerners have a decent claim.

PA could cash in the MASN chip or he could continue to pocket the majority of approx. $50M in MASN profits. He makes out like a bandit either way and I would not be so quick to give him credit for "ensuring the Os are in good shape going forward." The man is making a mint off the team and has not advanced payroll in a meaningful way in many years.

The final reminder is that MASN is very poorly run and is leaving a tremendous amount of $ on the table. If MASN were properly run and if it generated another $40-$80M, then this discussion would probably be very different. PA is in charge of MASN and it is poorly run and that impacts both the Nats and the Os.

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I guess I can only tell you that the people who worked for him say he did not meddle, but if you want to interpret their stories as if he were a meddler, go ahead.

That said, I am not sure what your expectations of ownership involvement in dealing the team's best player (Bedard) or signing a long term commitment (Vlad), but my expectations are that there would be some involvement from a large, large majority of major league owners.

They have no reason to lie. None.
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