HHP: MASN/Nats/Orioles case (Inside the Courtroom)

[TonySoprano]

Another point is that many corporations don't distribute all the profits, but use it to invest in expansion, new equipment, etc. It's not ncessarily the case that the $54 mm is being paid out to the Orioles' owners, though it could be.

I'd be willing to be a large percentage of the rights fees goes toward investment, thereby preserving the profits for the investors.

[Mayor McCheese]

Xfinity pays MASN $14MM/month ($168MM Annually)

[\QUOTE]

What's your source for that? I'm very skeptical that this is correct, considering that several different sources have reported that MASN's revenues are under $200 mm.

I have read several articles that they are under $200MM annually. I have never seen an exact breakdown of the 10 year deal back in 05/06 and i doubt we will ever see a number written in stone but here is just one article:

MASN receives roughly $14 million a month (yes, a MONTH) from Xfinity (nee Comcast) according to a source familiar with the financial agreement between those two. That $168 million alone would be more than enough for MASN to generate nearly a $70 million profit according to the source. Add in payments from Verizon, DirectTV and other cable carriers in the Mid-Atlantic and the sports network could be pocketing more than $100 million in annual profits.

http://wnst.net/baltimore-orioles/masn-has-gobs-of-money-but-they-dont-want-to-give-any-of-it-to-the-nationals/

[Frobby]

http://wnst.net/baltimore-orioles/masn-has-gobs-of-money-but-they-dont-want-to-give-any-of-it-to-the-nationals/

I will take anything WNST says with a huge grain of salt. I do not believe that MASN gets that much from Xfinity, which is just one of numerous service providers in the MASN market.

[Roll Tide]

Your math is off. The $45 mm they get includes the $8 mm in equity, plus a $37 mm rights fee. The Orioles' (owners') share of the profits is more like $54 mm, not $60 mm, and you add that to the $37 mm rights fee, not the $45 mm. So, that suggests the O's (and/or their owners) get $91 mm, not $105 mm. Mind you, the rights fees already show up on the Orioles' balance sheet, so it's really the MASN profits we are talking about as possible extra resources.

Another point is that many corporations don't distribute all the profits, but use it to invest in expansion, new equipment, etc. It's not ncessarily the case that the $54 mm is being paid out to the Orioles' owners, though it could be.

got it thanks...my point is there is plenty of extra resources that could be ingested in the team.

[Frobby]

got it thanks...my point is there is plenty of extra resources that could be ingested in the team.

It certainly seems that way -- and has for several years now.

[hoosiers]

A few things: The TV (rights) fees show up on the P&L or income statement for the Os - not the Balance Sheet.

Second, I think the implication is quite clear that the distribution of the $8M represents an annual profit distribution to the Nats owners for MASN profits.

Third, any "investment" by MASN in itself would reduce net income and, consequently, distributions to its owners. I imagine it is possible, even likely, that MASN has costs/protected employees of the owners that reduce net income and distributions to owners - which would be taxable, but we really don't know how tightly MASN is run.

Four, there appear to be several issues in play regarding the rights fees. The Nats just want to be compensated for their market - and I believe the contract attempts to do just that with a provision that resets the rights fees every five years. The problem, based on the information provided, is that the MASN profits distributed to the owners would not support an increase in rights fees to $110M for each team - in fact, it doesn't appear to support an increase to $110M for one of the teams. And if that much were distributed, suddenly the profits shrink considerably based on the current revenue stream and PA's 83% ownership stake goes to down in value considerably. To keep MASN profits up and to keep making large distributions to the Nats and Os, the part of the equation that must change is the revenue stream - and there is evidence in this thread that current fees paid to MASN are well-below market value. Frankly, if that is the case, it would be PA's fault (generosity?) and problem and would be another reason why the Nats would be upset with the arrangement.

[sangar]

Another point is that many corporations don't distribute all the profits, but use it to invest in expansion, new equipment, etc. It's not ncessarily the case that the $54 mm is being paid out to the Orioles' owners, though it could be.

Beat me to it. I'm guessing the 8m is 13% of the dividend, not the profit.

[Mayor McCheese]

I will take anything WNST says with a huge grain of salt. I do not believe that MASN gets that much from Xfinity, which is just one of numerous service providers in the MASN market.

According to Nielsen, Washington, D.C. is the 8th-largest television market with 2.36 million TV homes and Baltimore is ranked 27th with 1.1 million.

MASN charges carriers an average of $2.14 per subscriber, per month

I agree with you, those numbers we will never know... MASN / Angelos will never say because most people can do simple math and find out how much he is pocketing.

2.36MM + 1.1MM (Baltimore/Washington MASN subscribers @ $2.14 per subscriber = $7.4MM * 12 = $88.8MM annually.

Then you have to factor in Verizon, DirectTV, and other regional networks (which probably pay much higher fees than $2.14)... then yes I would think MASN would generate $140-$160 annually.

However, if they are really making much less.... and the Nats fees go up to $100MM... This would essentially mean they would have to pay $200MM in fees and would bankrupt MASN?

[TradeAngelos]

This is another informative article. PA is pulling north of $50M annually in pure profit from MASN .... How is it possible any of this $ is going into the team?

I will throw out some big numbers, but if MASN were to charge market rates, pull in better ratings and advertising $, it would not surprise me if the revenue capability of MASN would be closer to $250M-$350M with the same programming costs. Assuming the market is 60/40 split between Nats/Os, again big numbers, it hints that the Nats alone could generate something like $150M-$200M+ on their own - and now you get an idea of why the Nats are so incensed. A long term TV deal for a first place team in a top market could easily generate $90M-$125M in annual rights fees, leave $50M for programming costs and still leave a handsome profit.

I am glad to see the Os generate $ from the Nats, but I fail to see how we keep putting out a $90M payroll product without the owner making a fricking boatload between the team and MASN. As more numbers come out, it is difficult to draw any other conclusion.

You fail to see it? Don't worry, you aren't alone.

Just ask the experts around here they will tell you.

That money doesn't exist, it is just a figment of our feeble imagination.

These numbers have been out for YEARS, yet the "we are broke crew" around here refuses to believe what is staring them right in the face.

We have had about 5 threads like this before, that lay out the money situation, but still some believe that it is all an "illusion" and that we are constrained to this ridiculous $90 million payroll.

And that was just for ONE year up until 2011, go back and look at the numbers since 2006. It isn't even CLOSE to $90 million, and where did all that money go?? If you can't figure it out you are a fool.

[Brendan25]

So if their ownership is worth $8 million for 13%. And by the original agreement they get $45. Even if the Orioles side gets $45 million they are benefitting from the 86% equity...or the 87% stake held by almost $60 million on top of the $45 would be worth $105 million. And we cant afford a 25 million per year player and a $110-$130 million payroll. Utter nonsense.

I guess that every single thread this offseason is going to turn into stupid comments like this from you. I'm not sure how many times you need to be told that noone has said that we can't afford that payroll. It's just an awful business decision to have that payroll just because you can afford it.

[ChaosLex]

I guess that every single thread this offseason is going to turn into stupid comments like this from you. I'm not sure how many times you need to be told that noone has said that we can't afford that payroll. It's just an awful business decision to have that payroll just because you can afford it.

I'm going to be so thankful once Hamilton signs with another team.

[Dark Helmet]

I guess that every single thread this offseason is going to turn into stupid comments like this from you. I'm not sure how many times you need to be told that noone has said that we can't afford that payroll. It's just an awful business decision to have that payroll just because you can afford it.

Im not sure why everytime someone gives their opinion, in that they want to see a top FA brought in for once, they get ridiculed and called "stupid". We've had a gaping hole in LF and in the middle of the order for a decade. The fact that the O's have completely ignored that hole, is what should be ridiculed. Money aside, you cant tell me having McLouth, Jones,Wieters batting 3,4,5 vs Jones,Hamilton,Wieters is the better choice. And please dont bring up that Hamilton will cost too much. The fact is, none of us know what he'll get. But, its appearing he will be closer to the 4-5 year deal around 100m as opposed to the 8/160m many were suggesting. If the O's arent in on Hamilton for 5/100m, then thats a bad business descision imo.

[Frobby]

I guess that every single thread this offseason is going to turn into stupid comments like this from you. I'm not sure how many times you need to be told that noone has said that we can't afford that payroll. It's just an awful business decision to have that payroll just because you can afford it.

Obviously, the business decision to have an $80-90 mm payroll looks one way when the team is barely breaking even or slightly profitable, and looks very different when the team is pocketing large profits (or in this case, parking them in their RSN). I think it is fair to ask why the Orioles choose to keep their payroll at that level. No, you don't spend money just because you can; but if you have the money to spend, it's fair to ask why you aren't spending it when there are players available who would improve your team. And, it is also fair to question why the Orioles portray things as if they can't afford to spend more because of the market they are in, when it seems like that may not really be the case.

[weams]

OK...maybe I'm missing something here.

I thought that this deal between the Nats and MASN was pretty much agreed to by MLB back in the day because the Orioles' market was being infringed upon? This deal was somewhat of a "sweetener" to Angelos to assure that he (and/or the Orioles) would get the majority of the money from MASN due to the fact that the Nats were going to be "stealing" some of the O's fanbase.

I'm having a hard time feeling any compassion for the Nats in this case if the agreed upon contract is being questioned.

The deal was a contingency of the Orioles not legally fighting the move of the Expos. It should stand legal tests. The reset was built into the process, with a board to arbitrate any issues. The problem is the dramatic change in rights fees across the board since them.

[Frobby]

We've had a gaping hole in LF and in the middle of the order for a decade. The fact that the O's have completely ignored that hole, is what should be ridiculed. Money aside, you cant tell me having McLouth, Jones,Wieters batting 3,4,5 vs Jones,Hamilton,Wieters is the better choice. And please dont bring up that Hamilton will cost too much. The fact is, none of us know what he'll get. But, its appearing he will be closer to the 4-5 year deal around 100m as opposed to the 8/160m many were suggesting. If the O's arent in on Hamilton for 5/100m, then thats a bad business descision imo.

The O's have had occasional success in LF, but it certainly has been a sore spot. OPS in left field, 2003-12:

2003: .862 (Mora and Bigbie)

2004: .788 (Bigbie and Surhoff)

2005: .671 (Bigbie, Surhoff and Byrnes)

2006: .682 (Conine and Fahey)

2007: .631 (Payton and Gibbons)

2008: .805 (Scott and Payton)

2009: .779 (Reimold and Pie)

2010: .672 (Pie and Patterson)

2011: .638 (Reimold, Scott and Pie)

2012: .694 (McLouth and a cast of thousands)

That's six years out of ten with a sub-.700 OPS in LF. That truly is awful.

That said, I'd be willing to ride with McLouth, Reimold and Hoes/Avery/Robinson in 2012. I think a McLouth/Reimold combo would be very effective, if they can stay healthy, and the other 3 are a decent backup plan.

That said, you wouldn't hear me complaining if we signed Hamilton for 5/$100 mm. That's about my limit on him, though, and I suspect he'll get more than that.