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

[hoosiers]

I agree that the fees should be higher, but I don't think they are nearly as high as you've advocated in this thread. From the committee's report, 2014 should have been about 60M each or 120M total in right's fees. That would leave MASN with a 5% profit rate. That doesn't sound low to me based on reading most of the referenced deals in this thread. It might be 10M or so low, but that is less than 10% on 120M. That doesn't sound remotely like "horribly mis-managed" to me.

You can say the Os and Nats should each get $60M - and I wish this were the distribution to each club. However, while the $60M represents something close to the Os true market rate (based generally on the San Diego deal), the $60M doesn't come close to the Nats true market value (which appears to be something between $80M and $110+M which I will round to $100M). So, as I advocated above, MASN does not come close to generating the appropriate revenue to pass along market based rates to each club. The agreement, however, calls for the Os and Nats to split $ equally - so in this example each club would receive about $80M. MASN does not generate revenue for such a distribution and, being short about $40M-$50M ballpark would qualify, by my definition, as mis-managed.

[TonySoprano]

They can hope for whatever they want, but they have no say in it. Why? Because they basically negotiated to be a silent partner in this thing. Stupid, but entirely their own doing. If they want to squawk now, they should be squawking at themselves, their lawyers, and/or whoever signed up for this agreement in the first place. They didn't protect themselves well at all in the initial contract. They can be upset at what they perceive to be a loss of revenue, but they have no legal recourse IMO and their approach is horribly off base. The report from the committee clearly said as much.

They didn't get to negotiate the initial contract. It was take it or leave it because that's what MLB agreed to give Angelos as compensation.

[mdbdotcom]

Yup, I realize that, but they made the decision to bid on the team in the city knowing that was what they signed up for so from that perspective they agreed to the terms with open eyes.

And if MLB promised they would get fair market value for those rights, even beyond the RSN's ability to pay, they should seek the balance from MLB, not MASN.

[weams]

They didn't get to negotiate the initial contract. It was take it or leave it because that's what MLB agreed to give Angelos as compensation.

And because of that it is the MLB that has had all the back room business that they tried unsuccessfully to sweep under the carpet. It will be full disclosure now.

[weams]

And if MLB promised they would get fair market value for those rights, even beyond the RSN's ability to pay, they should seek the balance from MLB, not MASN.

Really, the misunderstanding was that the Orioles were told what media model would be used in perpetuity. And the Nationals may well have not been apprised of that.

[SteveA]

Market size is one thing.

But what about ratings?

Have the Nats' ratings improved for their daily regular season telecasts? A few years ago, they were abysmal. Obviously they have had some on-field success since then.

My impression of the Nats' fanbase, and this is just an impression, is that they have fewer fans who follow the team on a day to day basis than we do. People like us who tune in to every game, or nearly every game. Families where the Orioles are on TV every night. Their bigger market allows them to get the attendance they do with more "casual" fans, but I don't get the feel that so many of them are watching the game on Tuesday night when they aren't out at the park.

Maybe I am wrong, but does anyone have ratings numbers to prove/disprove it?

And should actual rating #$s be more of a determinanant than market size?

[Frobby]

Yup, I realize that, but they made the decision to bid on the team in the city knowing that was what they signed up for so from that perspective they agreed to the terms with open eyes.

And, the price they paid undoubtedly reflected their assessment of what they'd get in rights fees and the value of their MASN equity. However, the network had not begun broadcasting at the time, so obviously a lot of guesswork was involved.

[Three Run Homer]

I don't really understand the MASN appeal of the panel's decision though. As Rick has pointed out, the award looks pretty reasonable and is unlikely to get better for MASN/Orioles. I would have jumped at it if I was them unless there is something I can't see. This makes me think PGA still has a lot of issues with bitterness and "showing others".

I think the issue is that MASN/Angelos sincerely believe that the original agreement's "established methodology" is a mandate to use the Bortz methodology exclusively, which is much more favorable to MASN and less favorable to the Nats than the panel's decision. They have raised other issues in their filings, such as the impartiality of the arbitrator, but the core of their case is that they want Bortz now and Bortz forever, and they believe they are on firm legal ground in holding out for Bortz.

[Frobby]

I think the issue is that MASN/Angelos sincerely believe that the original agreement's "established methodology" is a mandate to use the Bortz methodology exclusively, which is much more favorable to MASN and less favorable to the Nats than the panel's decision. They have raised other issues in their filings, such as the impartiality of the arbitrator, but the core of their case is that they want Bortz now and Bortz forever, and they believe they are on firm legal ground in holding out for Bortz.

As I said earlier in this thread, it would have been very easy to write language specifying the Bortz formula if that had been what the parties intended. The failure to do it suggests to me that the parties knew the Bortz formula would not be the only factor considered.

[BradyBunch]

If you believe PA has purposely kept cable fees low for the consumer to benefit, then you can't possibly find fault w the Nats aggressive nature here. Keeping cable rates low would have a severely negative impact on the payroll. PA may be concerned about sharing 1/3 of local rights fees, but I doubt he has a problem receiving the sharing from the new deals in Houston, Seattle, Philly, etc. That is truly disingenuous.

FWIW, it is impossible to find where MASN is helping the Os in the two most important spending categories - payroll (until this year) and amateur talent acquisition. Very little is being flowed into the team over the past five years in any tangible manner.

Are you seriously still on this?

MASN has to negotiate with 3rd party TV companies. You know Verizon, Comcast, ATT and others in the region. Comcast being the biggest and most power to make MASN settle for less. MASN and Comcast spent almost 18 months trying to find right price and settle issues.

Wasn't until 2010 was all Comcast subs had MASN.

[BradyBunch]

It is hard to tell why he keeps these things low for sure. He has the reputation of wanting prices to be low to help the little guy. Now, I think he likes that reputation so he may keep it alive whether true or not. It is always difficult to tell someone's motivation for these sorts of acts. At the end of the day, you can only truly judge the result.

Comcast and MASN rights were agreed to under a situation in which Comcast was suing and MASN was complaining to FCC. So Comcast wasn't gonna offer more the $2.50 a sub and MASN wasn't gonna get less then $2.00 a sub.

[hoosiers]

This is correct if you buy into 60M for the Orioles and 100M for the Nationals. I don't. The split market has to eat into it the numbers in my opinion. The reports I read support that point. In addition, DC is an odd market. A very large percentage of the highest net worth clients are transplants that aren't in DC forever and typically don't care at all about the local teams.

I would be interested in the "reports you read."

I am not saying the attached article from Feb 2014 - likely previously posted on OH - (as opposed to BradyBunch's 2005 article, assume provided for comic relief) is the definitive source, but it appears pretty clear to me that MASN is under-charging, perhaps severely so, for its services. It is just one article, but I really think those who have been defending PA/Os/MASN are throwing out a bunch of hooey.

MASN is massively profitable for its owners, is under-charging for its services which in turn should be throwing much more $ off to the Os and Nats, and this under-charging hurts the Os (and Nats) competitiveness.

http://grantland.com/features/baltimore-orioles-offseason-spending-al-east/

IMO, the below is most telling:

While the Orioles are bringing in quite a bit more than the Nationals, neither team is profiting from MASN as much as it could be. According to SNL Kagan, a group that analyzes cable and broadcast network deals as well as regional sports networks (RSNs), MASN properties generated $167.8 million in total revenue in 2012.5 The bulk of that money came from advertising and subscriber fees, with 5.4 million consumers paying $2.14 a month. That’s well below the $2.47 industry average for 2012 and $2.69 projection for 2013,6 and several of the media experts and sports deal makers interviewed for this story said MASN should be getting much more. Comcast SportsNet Mid-Atlantic, which primarily airs Washington Capitals and Wizards regular-season games, got $4.02 per month in 2012, indicating the market would likely support a higher rate for MASN. It’s hard to know whether to blame the network’s low subscriber fee on inept management, the timing of the deal,7 or other factors, but whatever the reason, it’s clear MASN will be leaving tens of millions on the table until it renegotiates with local cable providers.

So, bottom line - Comcast charges over $4 for the Wizards and Caps, but about half of that for Os/Nats. MASN signed a very poor deal with Comcast and both the Os and Nats (and their fans) are suffering. It is difficult to reach any other conclusion that MASN has been mis-managed - a direct reflection on Peter Angelos.

I think, if MASN were getting closer to $4 per share, we would see that the network would indeed be capable of paying bigger local tv rights fees in line with the amounts requested by the Nats.

[Frobby]

Comcast and MASN rights were agreed to under a situation in which Comcast was suing and MASN was complaining to FCC. So Comcast wasn't gonna offer more the $2.50 a sub and MASN wasn't gonna get less then $2.00 a sub.

I think it's impossible for anyone not intimately acquainted with the cable industry to know whether MASN has been well-run or poorly run, and whether any difference between the rates it has been able to charge and the rates that some larger cable content provider (like FOX Sports) might be able to charge are the result of poor management, lack of market power due to other non-baseball offerings, or a million other reasons. In any event, it seems certain that MLB did not expect MASN to pay rights fees based on some hypothetical idea of what profits some other network might have made if they had the rights, as opposed to the profits actually earned by MASN. The RSDC (the Committee that made the arbitration decision) rightly rejected that idea, IMO. After all, the majority interest in MASN was intended to compensate the Orioles for sharing their rights to their broadcast market, and if rights fees were set so high that MASN was actually losing money, that would be no compensation at all, that would be a punishment.

So to me, the RSDC did the right thing by rejecting both sides' argument, and setting rights fees based on what would be a reasonable profit margin for MASN to make. I think it's open to debate whether the 5% profit margin determined by the RSDC is a reasonable profit margin, but that's the right framework for deciding what's fair under the contract IMO.

[Frobby]

Comcast charges over $4 for the Wizards and Caps, but about half of that for Os/Nats. MASN signed a very poor deal with Comcast and both the Os and Nats (and their fans) are suffering. It is difficult to reach any other conclusion that MASN has been mis-managed - a direct reflection on Peter Angelos.

I think, if MASN were getting closer to $4 per share, we would see that the network would indeed be capable of paying bigger local tv rights fees in line with the amounts requested by the Nats.

I think to compare Comcast SportsNet with MASN, you'd really need to look at all the programming they put on throughout the year, not just their "principal" live sport(s). I believe Comcast has a significant number of ACC basketball games and DC United games in addition to the Caps and Wizards. They also were pretty entrenched in our market before MASN ever arrived, so they get decent viewership for their local sports newscasts, talk shows and other content. I'm not making excuses for MASN here, but it's not completely apples to apples. And again, I'm not saying that MASN couldn't do better.

[weams]

I think it's impossible for anyone not intimately acquainted with the cable industry to know whether MASN has been well-run or poorly run, and whether any difference between the rates it has been able to charge and the rates that some larger cable content provider (like FOX Sports) might be able to charge are the result of poor management, lack of market power due to other non-baseball offerings, or a million other reasons.

I agree. A very important thing for me to take into consideration when I spout off about this.