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

[BrunoCherrytown]

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.

Watch out. You are starting to lean toward my side of the argument here. It's a slippery slope towards lunacy now.

Now that you are a member of the "Angelos isn't reinvesting MASN money into the team" conspiracy club, what size of a tin foil hat do you prefer? I've found the CIA and martians have stopped reading my thoughts now that I've got one of these hats.

[Frobby]

Watch out. You are starting to lean toward my side of the argument here. It's a slippery slope towards lunacy now.

Now that you are a member of the "Angelos isn't reinvesting MASN money into the team" conspiracy club, what size of a tin foil hat do you prefer? I've found the CIA and martians have stopped reading my thoughts now that I've got one of these hats.

I've always suspected that the Orioles could spend more than they do, it's just a matter of how much more. Some people (not saying you) seem to think we could match NY and Boston if we really wanted to. I know for sure we couldn't match NY, and I doubt we could be in Boston's league.

I just declded, a long time ago, to keep my sanity by accepting that the Orioles were keeping their budget at a certain level, and focusing my attention on what decisions were intelligent or stupid given that reality. I don't know for sure exactly how much the Orioles could spend (still way too many things we don't know), so I concentrate on what realistically might happen. I don't have any grudge against those posters who like to spend a lot of time complaining about Angelos being cheap or speculating on what we should do by increasing payroll to $120 mm or whatever, but for me, it's like spitting into the wind.

[Mayor McCheese]

I've always suspected that the Orioles could spend more than they do, it's just a matter of how much more. Some people (not saying you) seem to think we could match NY and Boston if we really wanted to. I know for sure we couldn't match NY, and I doubt we could be in Boston's league.

Boston is around $92.2MM for 2013. Projected to be at $120MM, if the Os wanted to they could top that :eektf:

[BrunoCherrytown]

I've always suspected that the Orioles could spend more than they do, it's just a matter of how much more. Some people (not saying you) seem to think we could match NY and Boston if we really wanted to. I know for sure we couldn't match NY, and I doubt we could be in Boston's league.

I just declded, a long time ago, to keep my sanity by accepting that the Orioles were keeping their budget at a certain level, and focusing my attention on what decisions were intelligent or stupid given that reality. I don't know for sure exactly how much the Orioles could spend (still way too many things we don't know), so I concentrate on what realistically might happen. I don't have any grudge against those posters who like to spend a lot of time complaining about Angelos being cheap or speculating on what we should do by increasing payroll to $120 mm or whatever, but for me, it's like spitting into the wind.

I definitely agree that it's spitting into the wind but so is most of the stuff we talk about on here. We all have our pet O's causes. You are definitely one of the smartest posters on here I wasn't breaking your juevos on that.

And I definitely think we have the potential to have a ballpark (not extreme) Red Sox payroll but not Yankees one. Bmore+DC = +1million TV households over Boston. Surrounding MASN DMAs much larger than surrounding NESN DMAs (not that Bangor Maine isn't a TV hotbed). Os own lion's share of their regional TV competitor's rights. Sox have to compete with Yankees for theirs.

Only difference is our owner thinks its up to the fans to spend even when the product is inferior and then "big maybe" he'll honor us by spending appropriately. Red Sox say we'll instead follow business 101 and put a quality product out and build a customer base.

Fortunately, last season our GM was able to work within that absurd belief system of Angelos'.

[TonySoprano]

I've always suspected that the Orioles could spend more than they do, it's just a matter of how much more. Some people (not saying you) seem to think we could match NY and Boston if we really wanted to. I know for sure we couldn't match NY, and I doubt we could be in Boston's league.

I haven't seen anyone make the case that we can have a payroll comparable to the $200M Yankees. Six years ago, Angelos told us the MASN money would help to close the gap.

In answer to your question, now that we have an RSN and we can move forward with it…that is going get us on a more even plane with Boston and New York, and that was the purpose. It was even more desperately needed when a team dropped right into the area you have been drawing a very substantial number of fans from for many years.

source - Peter Angelos, Sept 14, 2006

Here are the payroll numbers ($M) before and after that statement:

2000 83.10

2001 74.28

2002 60.49

2003 73.88

2004 51.62

2005 73.91

2006 72.59

2007 93.55

2008 67.20

2009 67.10

2010 73.81

2011 86.94

2012 84.10

Even if you add in the outlier that is 2007, the average payroll for the last six years is $78.8M. We spent more than that in 2000, and spent at least $70M in 2001, 2003, 2005, 2006. This raises several questions, the foremost of which is how have the Orioles benefited from MASN dollars? How did we manage a $93M payroll in 2007 when MASN was just getting started and one assumes profits weren't where they are today? Given Angelos' statement, and if MASN is making a $54M profit in 2012 for Angelos et.al, how much, if any of that went back into the team?

I agree with you and others that the Orioles shouldn't spend money to be spending money. However, why are we still acting as if we have the same constraints we had pre-MASN?

[hoosiers]

Well, the Os have been suffering an attendance decline for a long time - so that is significant revenue lost - something like 1.5M to 2M fans.

Now, however, we are see multiple reports of:

- Os playoff $ revenue

- increased attendance in 2012

- other new revenue streams for mlb

- large increases in the annual value of tv rights for mlb as a whole coming very soon

- large increases in the annual value of tv rights of individual teams

Some of this may be one-time, but it appears the Os could be well on their way to record revenues even if attendance is flat.

No one wants the Os to spend $ foolishly, but it is becoming increasingly apparent that our payroll capacity is significantly above what is spent today.

I have been promising, at some point, to consolidate all the information we have been receiving about Orioles finances into a single thread and we are getting to the point where enough information is being provided/estimated to put some better color into what our payroll capacity is and how much our owner is pocketing.

[Frobby]

I haven't seen anyone make the case that we can have a payroll comparable to the $200M Yankees. Six years ago, Angelos told us the MASN money would help to close the gap.

source - Peter Angelos, Sept 14, 2006

Here are the payroll numbers ($M) before and after that statement:

2000 83.10

2001 74.28

2002 60.49

2003 73.88

2004 51.62

2005 73.91

2006 72.59

2007 93.55

2008 67.20

2009 67.10

2010 73.81

2011 86.94

2012 84.10

Even if you add in the outlier that is 2007, the average payroll for the last six years is $78.8M. We spent more than that in 2000, and spent at least $70M in 2001, 2003, 2005, 2006. This raises several questions, the foremost of which is how have the Orioles benefited from MASN dollars? How did we manage a $93M payroll in 2007 when MASN was just getting started and one assumes profits weren't where they are today? Given Angelos' statement, and if MASN is making a $54M profit in 2012 for Angelos et.al, how much, if any of that went back into the team?

I agree with you and others that the Orioles shouldn't spend money to be spending money. However, why are we still acting as if we have the same constraints we had pre-MASN?

The $93 mm payroll in 2007 with lousy results is what got Flanagan replaced as GM mid-season. I think the low payroll of 2004 was a result of some back-loading on the big deals signed that winter and the $93 mm payroll was in effect funded with the money saved in 2004.

There's not much question that payroll has not noticeably increased since MASN was formed. Let's not forget that attendance has been in decline for most of that period, though. And, MASN may not have been generating as much revenue in 2007-08 as it is now (and, note that payroll has gone up in 2011-12 from what it was in any year you listed except for '07). I am not saying this to disagree with your point, just to ameliorate it a bit.

[Brendan25]

I haven't seen anyone make the case that we can have a payroll comparable to the $200M Yankees. Six years ago, Angelos told us the MASN money would help to close the gap.

source - Peter Angelos, Sept 14, 2006

Here are the payroll numbers ($M) before and after that statement:

2000 83.10

2001 74.28

2002 60.49

2003 73.88

2004 51.62

2005 73.91

2006 72.59

2007 93.55

2008 67.20

2009 67.10

2010 73.81

2011 86.94

2012 84.10

Even if you add in the outlier that is 2007, the average payroll for the last six years is $78.8M. We spent more than that in 2000, and spent at least $70M in 2001, 2003, 2005, 2006. This raises several questions, the foremost of which is how have the Orioles benefited from MASN dollars? How did we manage a $93M payroll in 2007 when MASN was just getting started and one assumes profits weren't where they are today? Given Angelos' statement, and if MASN is making a $54M profit in 2012 for Angelos et.al, how much, if any of that went back into the team?

I agree with you and others that the Orioles shouldn't spend money to be spending money. However, why are we still acting as if we have the same constraints we had pre-MASN?

This is a good post Tony. Very well put out.

My argument to this would be that attendance has been way down, and the team has not been close to competing. Why would the O's up their payroll to 150M when they don't feel like they are close to competing and fans aren't coming to games. It's a very fine line.

And the same line is being drawn this year. I think we can afford a higher payroll. I think we could afford 150M if it made sense. I am not neg-spend money like everyone thinks I am. I was a huge advocate for Prince Fielder. I was a huge advocate for Adam Dunn. I am not pro-spend money just to spend money. I am not pro-have a 150M payroll just because we can afford it. I'd rather go into next year with a 100M payroll and the same team then go in with a much higher payroll with players that may hurt us financially in the future and the benefits on the field aren't worth that hurt. If Prince was available again this year, I'd be preaching for the same 6 year, 150M deal I was preaching for last year. Hamilton just scares me, and I'm not willing to spend just because we can like some are.

[Frobby]

I have been promising, at some point, to consolidate all the information we have been receiving about Orioles finances into a single thread and we are getting to the point where enough information is being provided/estimated to put some better color into what our payroll capacity is and how much our owner is pocketing.

I think the Forbes report that comes out in March will be pretty interesting this year.

[BrunoCherrytown]

I think the Forbes report that comes out in March will be pretty interesting this year.

It doesn't give a full picture view of MASN's value as an asset since it isn't owned by the Orioles but the Orioles' owners so chances are it'll still just include the rights fees in Forbes' calcs.

[waroriole]

Do other teams with an RSN count it as a separate entity? Maybe that is why Angelos fought so hard for it; because he could keep it separate from the Orioles and enjoy pure profit.

[hoosiers]

It doesn't give a full picture view of MASN's value as an asset since it isn't owned by the Orioles but the Orioles' owners so chances are it'll still just include the rights fees in Forbes' calcs.

There have been articles before that hinted that MASN's value could/would exceed the Os.

[eddie83]

Here is an article that just came out about local TV money. There is a breakdown of all 30 teams. http://www.fangraphs.com/blogs/index.php/dodgers-send-shock-waves-through-local-tv-landscape/

[weams]

Watch out. You are starting to lean toward my side of the argument here. It's a slippery slope towards lunacy now.

Now that you are a member of the "Angelos isn't reinvesting MASN money into the team" conspiracy club, what size of a tin foil hat do you prefer? I've found the CIA and martians have stopped reading my thoughts now that I've got one of these hats.

I am convinced that The Angelos family only thinks that the money that is paid in rights fees is, and should be, Oriole property. So I guess I am on that slope with you guys as well.

[Oriolidae85]

This to me is much more interesting than which value players we'll sign this offseason.

The $160m figure is definitely what it all comes down to. When its reported it's an estimate like anything else. But you can see where the reporters get the numbers behind it.

For example - and this is 10 minutes of work so it's got all kinds of errors and assumptions in it but it works for just general thinking.

I'm not going to officially be a Marylander again for 1.5 more months, so I don't get billed on MASN on my cable bill. But I've heard it's $2.00 a month right?

Now how much of that goes to Comcast and other providers is where this all becomes the gray area.

So let's say it's $2.00 a month across the board in all MASN viewing areas just for raw data crunching. Once again, just general thinking.

So here are the larger DMA's that MASN reaches. Some of these areas don't have 100% penetration I imagine, but also I'm leaving out some areas too probably. So it may even out or it may not. Depending on income level cable access ranges from very high 60s for lower income brackets to about 90% for highest. So using 80% across the board for monthly dues. (I'm going to guess this doesn't format very well)

DMA TV Households 80% Cable Access Monthly MASN Dues Yearly MASN Dues

DC 2,359,160.00 1,887,328.00 $3,774,656.00 $45,295,872.00

Raleigh-Durham 1,150,350.00 920,280.00 $1,840,560.00 $22,086,720.00

Charlotte 1,136,420.00 909,136.00 $1,818,272.00 $21,819,264.00

Baltimore 1,085,070.00 868,056.00 $1,736,112.00 $20,833,344.00

Asheville 846,030.00 676,824.00 $1,353,648.00 $16,243,776.00

Harrisburg 716,990.00 573,592.00 $1,147,184.00 $13,766,208.00

Norfolk 709,730.00 567,784.00 $1,135,568.00 $13,626,816.00

Greensboro 695,100.00 556,080.00 $1,112,160.00 $13,345,920.00

Richmond 553,390.00 442,712.00 $885,424.00 $10,625,088.00

Roanoke 445,470.00 356,376.00 $712,752.00 $8,553,024.00

Salisbury 157,830.00 126,264.00 $252,528.00 $3,030,336.00

Total 9,855,540.00 7,884,432.00 $15,768,864.00 $189,226,368.00

So we've got about 3.3% ballpark of all American cable viewing TV households paying a monthly kickback to Peter Angelos. Not bad for a small sports station.

Possibly $189 million and in change just in gross revenue from monthly cable dues - now how much goes to Comcast? How much goes to MASN directly? That's a major point. And then how much do they make in advertising? We know the ratings have been low in the BMore/D.C. DMA's but it's still most likely tens and tens of millions a year. Possibly 9-digits.

How a reporter would figure that out would just be to get a media kit from MASN and have a discussion on rates for different dayparts, shows, etc and start extrapolating.

So I could see anywhere from $130 million - $200 million maybe an overly generous $230 million being an educated ballpark depending on how positive or negative the reporter's estimates are.

All of it still makes the $110 m a year Nats request absurd unless I'm missing a revenue stream somewhere.

Nice breakout of information! The NC revenue is probably significantly less (roughly 10-20%) due to current blocking of service by the Turner cable entities (ongoing litigation about NC not being a DMV baseball market) and other providers not offering MASN in their basic packages. Still would not be surprised to see MASN's overall revenue close to your estimate range.

A couple of things have piqued my interest on this subject that carry residual context:

* Comcast/Infinity took legal action against the formation of MASN and MLB's deal with Angelos to allow the formation of the Nationals. MASN now receives a below market share of cable subscriber fees from this entity (that controls CSN).

* Both the Nationals and Orioles have fielded some of the worst teams in MLB over the last 6 years (not counting this wonderful 2012). It's a bit hard for MASN to demand, on the open market, excessive subscriber rates in these conditions (as the Nationals are currently demanding from MASN).

*The Nationals are playing victim in all of this, yet they have agreed to the circumstances of which they now complain. I agree that they (and the O's) should get more annual fees...but their actions are intent on breaking the agreement that allowed them a team in the first place.

I haven't seen anyone make the case that we can have a payroll comparable to the $200M Yankees. Six years ago, Angelos told us the MASN money would help to close the gap.

source - Peter Angelos, Sept 14, 2006

Here are the payroll numbers ($M) before and after that statement:

2000 83.10

2001 74.28

2002 60.49

2003 73.88

2004 51.62

2005 73.91

2006 72.59

2007 93.55

2008 67.20

2009 67.10

2010 73.81

2011 86.94

2012 84.10

Even if you add in the outlier that is 2007, the average payroll for the last six years is $78.8M. We spent more than that in 2000, and spent at least $70M in 2001, 2003, 2005, 2006. This raises several questions, the foremost of which is how have the Orioles benefited from MASN dollars? How did we manage a $93M payroll in 2007 when MASN was just getting started and one assumes profits weren't where they are today? Given Angelos' statement, and if MASN is making a $54M profit in 2012 for Angelos et.al, how much, if any of that went back into the team?

I agree with you and others that the Orioles shouldn't spend money to be spending money. However, why are we still acting as if we have the same constraints we had pre-MASN?

The ongoing MASN rights fees negotiations should have something to do with the current answer to your question. Historically, I found this article interesting (couldn't find the thread, but remember one on this subject):

He is the baseball owner whose meddling has inspired years of fan griping, and the guy who wanted so badly to win, he lent more than $100 million from his personal fortune to cover his club's money losses.