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

[weams]

$55M is less than what the Padres received - on average.

Seattle's new deal is at $117M average. The Phillies $100M average.

Keep in mind these are these are very long term deals so that "average" fees might not be received until halfway through the deal. I would guess these deals probably start at about 80% of the average and end around 120% of the average. So perhaps Seattle is receiving around $90M or so in year one and the Phillies around $80M. The Padres are probably near $48M in Year 1 of their deal. Remember also that most of these deals also grant equity to the teams - so presumably these deals are expected to be profitable - thought profits are not shared with MLB (unlike the TV rights fees) and that teams could probably get BETTER deals if they passed on the equity.

The size of these deals makes one wonder at what point MASN rates will get to market value because the network does not appear to be generating revenue growth to support the market value of the TV rights and generate a sufficient profit.

Finally, I understand the Nats eagerness to get out from under MASN (in the absence of a more equitable ownership arrangement including true market rights on the TV deal), but if they were patient and let the rights fees get to market rates over time, MASN could be in for big problems since it has to give the same fees to the Orioles. That could cause MASN to operate at a loss or a very small profit - the burden of which would fall disproportionately to the Os MASN owners.

I'm of the opinion that the Orioles deal that they got from selling access to their market in the complex Expos move prevents the Mad Max scenario because it uses the accepted formula. Not an actual rights explosion extrapolation.

[DrungoHazewood]

Seattle's new deal is at $117M average.

Remember that Seattle's territory reaches quite literally from the Russian border to the Dakotas to Utah, Nevada, and California, and includes Portland, Idaho, and all of Montana. If you live in Glendive, Montana, a 15-hour drive from Safeco field, MLB expects you to have the Mariners on your cable package. Same with Wainwright, Alaska, which would take a lengthy bush plane flight and 44-hour drive across Canada to get to Safeco. That may have some impact on their rights fees.

(Truthfully, I have no idea if that vast swath of territory has more people than the O's/Nats do.)

[schittenden]

$55M is less than what the Padres received - on average.

Seattle's new deal is at $117M average. The Phillies $100M average.

Keep in mind these are these are very long term deals so that "average" fees might not be received until halfway through the deal. I would guess these deals probably start at about 80% of the average and end around 120% of the average. So perhaps Seattle is receiving around $90M or so in year one and the Phillies around $80M. The Padres are probably near $48M in Year 1 of their deal. Remember also that most of these deals also grant equity to the teams - so presumably these deals are expected to be profitable - thought profits are not shared with MLB (unlike the TV rights fees) and that teams could probably get BETTER deals if they passed on the equity.

The size of these deals makes one wonder at what point MASN rates will get to market value because the network does not appear to be generating revenue growth to support the market value of the TV rights and generate a sufficient profit.

Finally, I understand the Nats eagerness to get out from under MASN (in the absence of a more equitable ownership arrangement including true market rights on the TV deal), but if they were patient and let the rights fees get to market rates over time, MASN could be in for big problems since it has to give the same fees to the Orioles. That could cause MASN to operate at a loss or a very small profit - the burden of which would fall disproportionately to the Os MASN owners.

I think the more relevant data points are the deals for the Yankees/Mets and wSox/Cubs. The most relevant would seem to be wSox/Cubs given the shared ownership structure of the network. The Os and Nats share a market, much like these two sets of teams, but the market is much bigger in each of those cases. So, I would expect rights fees for the Nats/Os to fall significantly below that of any of those teams. I don't know what the right answer is, but the $100+ million clearly seems wrong to me. The arbitration award seems more reasonable, and if you consider that the arrangement is supposed to compensate the Os, then the Orioles position seems decent.

[MrOrange82]

Remember that Seattle's territory reaches quite literally from the Russian border to the Dakotas to Utah, Nevada, and California, and includes Portland, Idaho, and all of Montana. If you live in Glendive, Montana, a 15-hour drive from Safeco field, MLB expects you to have the Mariners on your cable package. Same with Wainwright, Alaska, which would take a lengthy bush plane flight and 44-hour drive across Canada to get to Safeco. That may have some impact on their rights fees.

(Truthfully, I have no idea if that vast swath of territory has more people than the O's/Nats do.)

The population of the entire state of Montana is about 1.005 million. The population of Washington, DC (the city, not the DC/Metro area, NoVA, etc.) is about 632,000. It wouldn't surprise me if the Mariners reach more homes, but I doubt the margin is huge, and it's probably not made clear by geographic coverage alone.

[hoosiers]

I'm of the opinion that the Orioles deal that they got from selling access to their market in the complex Expos move prevents the Mad Max scenario because it uses the accepted formula. Not an actual rights explosion extrapolation.

I have tried to find out more about that formula on-line, but could not. The key question is whether the formula eventually gets to a true fair market value or always remains at, a discount to FMV. It would not surprise me if the formula did eventually get to FMV or something close. I mean, shouldn't the Nats get something in line with Philly or Seattle or better. Those deals will probably pay those teams about $100M annually within the next 10-15 years. It's out there, but it's out there.

Also, keep in mind the CBA has a provision where the top 15 markets will no longer receive their portion of the shared local TV rights fees starting in 2016. The Os are going to see their portion about double, while the Nats will go to $0. You can see why the Lerners are so upset .... and also why PA is going to keep laughing all the way to the bank for at least the next few years - higher attendance, higher local TV rights fees, higher national tv contract, continued exorbitant MASN profits, perhaps host some playoff games, etc.

[weams]

I have tried to find out more about that formula on-line, but could not. The key question is whether the formula eventually gets to a true fair market value or always remains at, a discount to FMV. It would not surprise me if the formula did eventually get to FMV or something close. I mean, shouldn't the Nats get something in line with Philly or Seattle or better. Those deals will probably pay those teams about $100M annually within the next 10-15 years. It's out there, but it's out there.

Also, keep in mind the CBA has a provision where the top 15 markets will no longer receive their portion of the shared local TV rights fees starting in 2016. The Os are going to see their portion about double, while the Nats will go to $0. You can see why the Lerners are so upset .... and also why PA is going to keep laughing all the way to the bank for at least the next few years - higher attendance, higher local TV rights fees, higher national tv contract, continued exorbitant MASN profits, perhaps host some playoff games, etc.

It always remains at a discount to FMV. It was the prevailing method used to assess market rights at the time of the agreement and to my understanding stays in place forever. The other stuff is not even relevant to the Orioles agreement. And MLB thought Bud's threat would keep this out of court. HE did not have the ability to pose sanctions on MASN.

Shoulds, Should Haves, or Should Be's have nothing to do with the fact that the Nationals franchise does not own the distribution rights to their product. They sold that off to get the franchise in the first place.

[Mondo Trasho]

I honestly don't know what the right answer is for this. Since I live in Northern Virginia I know some Nats fans who are not happy about the MASN thing and they aren't happy about characterizing the situation as Angelos "letting" DC have a team. They feel like DC had a team before and should be able to have one instead of having to root for the O's. I can understand that position, though it wasn't until I was 17 that the Nationals even existed, so I pretty much grew up having never known DC to have a team (I knew that the Senators had existed in the past obviously).

At the same time it is very true that the Nationals moving to DC put a dent in Angelos' bottom line. A lot of people who had gone to Camden Yards now go to Nationals Park (in my experience these aren't converted O's fans, they're just people who like baseball and would go to the closest game in town). Plus, the stores down here who used to sell O's gear, now everything is Nationals stuff, store sponsorships, etc. That obviously damages the Orioles brand name long term.

Finally, I think MLB really screwed up with how they handled the Expos and the move to DC from 2001-2004. If anyone should bear the blame for the status quo, it's MLB. Angelos is just protecting himself and the brand name, the Nationals and their fans only want a deal that they can live with, but MLB had a much bigger hand in this than they are getting credit for.

[weams]

I honestly don't know what the right answer is for this. Since I live in Northern Virginia I know some Nats fans who are not happy about the MASN thing and they aren't happy about characterizing the situation as Angelos "letting" DC have a team. They feel like DC had a team before and should be able to have one instead of having to root for the O's. I can understand that position, though it wasn't until I was 17 that the Nationals even existed, so I pretty much grew up having never known DC to have a team (I knew that the Senators had existed in the past obviously).

At the same time it is very true that the Nationals moving to DC put a dent in Angelos' bottom line. A lot of people who had gone to Camden Yards now go to Nationals Park (in my experience these aren't converted O's fans, they're just people who like baseball and would go to the closest game in town). Plus, the stores down here who used to sell O's gear, now everything is Nationals stuff, store sponsorships, etc. That obviously damages the Orioles brand name long term.

Finally, I think MLB really screwed up with how they handled the Expos and the move to DC from 2001-2004. If anyone should bear the blame for the status quo, it's MLB. Angelos is just protecting himself and the brand name, the Nationals and their fans only want a deal that they can live with, but MLB had a much bigger hand in this than they are getting credit for.

Yeah, it's too bad that the Senators and MLB screwed that all up long before Peter Angelos ever bought those rights at auction. . They had a team ( the Orioles). They wanted another. They got it. With caveats. It's the way it will be. They probably with turn their chip into something positive in a couple decades. Won't that be funny? DC with the chip

[gmelson26]

I have tried to find out more about that formula on-line, but could not. The key question is whether the formula eventually gets to a true fair market value or always remains at, a discount to FMV. It would not surprise me if the formula did eventually get to FMV or something close. I mean, shouldn't the Nats get something in line with Philly or Seattle or better. Those deals will probably pay those teams about $100M annually within the next 10-15 years. It's out there, but it's out there.

Also, keep in mind the CBA has a provision where the top 15 markets will no longer receive their portion of the shared local TV rights fees starting in 2016. The Os are going to see their portion about double, while the Nats will go to $0. You can see why the Lerners are so upset .... and also why PA is going to keep laughing all the way to the bank for at least the next few years - higher attendance, higher local TV rights fees, higher national tv contract, continued exorbitant MASN profits, perhaps host some playoff games, etc.

To an extent, wasn't the Nats not getting their absolute fair share of the tv revenues the cost to move to DC.. in the middle of O's country? Why was that an acceptable consolation then but not now?

[weams]

To an extent, wasn't the Nats not getting their absolute fair share of the tv revenues the cost to move to DC.. in the middle of O's country? Why was that an acceptable consolation then but not now?

The Nationals were aware that they did not own the rights to show their product. They just did not know the ramifications.

They are trying to bust a move. Dragging their feet through the Baltimore O.

[Mondo Trasho]

To an extent, wasn't the Nats not getting their absolute fair share of the tv revenues the cost to move to DC.. in the middle of O's country? Why was that an acceptable consolation then but not now?

To their fans or to the Lerners? With the Lerners it's obviously money. But to the fans I think they feel like there shouldn't have been a "cost" to get their team. DC and NoVa are "not Baltimore" in their minds. A lot of the sports talk people talk about this issue from time to time.

If the situation were reversed I'd probably feel the same way. Sometimes it helps to understand multiple sides of an issue, even while disagreeing with those other sides.

[Redskins Rick]

The Nationals were aware that they did not own the rights to show their product. They just did not know the ramifications.

They are trying to bust a move. Dragging their feet through the Baltimore O.

Different ownership group now, more aware of the situation and mess they purchased.

[weams]

To their fans or to the Lerners? With the Lerners it's obviously money. But to the fans I think they feel like there shouldn't have been a "cost" to get their team. DC and NoVa are "not Baltimore" in their minds. A lot of the sports talk people talk about this issue from time to time.

If the situation were reversed I'd probably feel the same way. Sometimes it helps to understand multiple sides of an issue, even while disagreeing with those other sides.

I want a Burger King Whopper. There is none allowed near me, so I pay someone to go get me one. I then complain that it is cold when I get it.

[weams]

Different ownership group now, more aware of the situation and mess they purchased.

I thought it was always the Lerners? Different management. Same ownership.

[Mondo Trasho]

I want a Burger King Whopper. There is none allowed near me, so I pay someone to go get me one. I then complain that it is cold when I get it.

Did Colts fans feel obliged to root for the Redskins when the Colts moved to Indianapolis? Did they feel like the Redskins were "Baltimore's team"? Did they feel like they owed something to the Redskins in exchange for getting a team?

As much as I like mocking the Natinals, it's perfectly fine to try to understand where they're coming from as fans rather than react with derision.