MASN: the veil finally lifts

[Frobby]

As most of you know, I’ve been digging through the MASN court docket for years, trying to understand both the legal issues and MASN’s economics.    Digging around, among other things, over the years I was able to get the 2005 settlement agreement that created the dual ownership of MASN, the two RSDC decisions awarding the rights fees, and the various court decisions regarding those awards.   But certain things remained obscure, largely because the public versions of the court filings often redacted various financial numbers relating to MASN.     

Tonight, though, I hit a mother lode.   There’s a transcript of a recent oral argument in which the lawyers refer to some of the numbers that were redacted from the second RSDC award.     And here’s what they tell us:

- Between 2012-16, the Orioles received $432.5 mm in payments from MASN.     Of that, $197.6 mm were rights fees equal to what was paid to the Nats.    The other $234.9 mm was distribution of profit.

- The Nats, on the other hand, received $239.2 mm; $197.6 mm in rights fees and $41.6 mm in profit.    

- The second RSDC award, however, determined that the rights fees payable to each team should have been $296.8 mm each instead of the $197.6 each that was paid.    Thus, MASN owes each team $99.2 mm in rights fees payments for 2012-16.

- When the rights fees are adjusted, the distributable profits of MASN shrink from $277.5 mm to $78.1 mm.    Of that, $66.1 mm (roughly 85%) belongs to the Orioles, and $12.0 mm to the Nationals.

- As a result, the amount the Orioles should have gotten is $296.8 mm in rights fees plus $66.1 mm in profits, for a total of $362.9 mm.    This is about $69.6 mm less than the O’s actually were paid.    

- Per the award, the Nats should have gotten $296.8 mm in rights fees at $12.0 mm in profit, for a total of $308.8 mm, $69.6 mm more than they actually got paid.   

- I’ve been operating under the faulty assumption that MASN did not distribute the profits that were in controversy.      That assumption was wrong.     The O’s were overpaid $69.6 mm by MASN and will have to pay that back if the award is affirmed on appeal.

- Apparently, MASN has the resources to put the $99.2 mm (plus interest) into escrow while they take appeals from the court’s ruling affirming the RSDC award.    I’m guessing that the O’s are going to have to fund most of that by returning the $69.6 mm they were overpaid.

- There are still a bunch of issues floating around having to do with interest on the RSDC award and also whether the court should have taken the overpaid profits to the Nats ($29.6 mm) into account in determining the award to the Nats (it didn’t, on the grounds that it was only affirming an arbitration award about the rights fees and had no authority to get into other issues not formally addressed by the RSDC).     So, skirmishing on that stuff will continue while MASN and the O’s appeal the other aspects of the ruling affirming the RSDC award.    

Well, now we know exactly how profitable MASN has been, at least during 2012-16.     

[Roll Tide]

So its fair to assume they really could afford $150 Million + per season in payroll      (150 million + 20 million in player benefits)

[TonySoprano]

1 hour ago, Frobby said:

- As a result, the amount the Orioles should have gotten is $296.8 mm in rights fees plus $66.1 mm in profits, for a total of $362.9 mm.    This is about $69.6 mm less than the O’s actually were paid.    

- Per the award, the Nats should have gotten $296.8 mm in rights fees at $12.0 mm in profit, for a total of $308.8 mm, $69.6 mm more than they actually got paid.   

- I’ve been operating under the faulty assumption that MASN did not distribute the profits that were in controversy.      That assumption was wrong.     The O’s were overpaid $69.6 mm by MASN and will have to pay that back if the award is affirmed on appeal.   

The $234.9M distribution of profits went to the Orioles team or to the MASN owners?  My assumption is the latter to keep the numbers down.

[Frobby]

39 minutes ago, TonySoprano said:

The $234.9M distribution of profits went to the Orioles team or to the MASN owners?  My assumption is the latter to keep the numbers down.

The MASN owner is Baltimore Orioles, LP.    That’s where the money went.  

[theocean]

Great work, Frobby. Really appreciate the time you've spent explaining a very complicated issue in a very understandable way.

[Philip]

27 minutes ago, theocean said:

Great work, Frobby. Really appreciate the time you've spent explaining a very complicated issue in a very understandable way.

Yes, exactly. Actually, even though 69 million isn’t exactly what Davis makes in a season, it’s not THAT much and the Orioles can pay it.

if they lose on appeal they have to pay the accumulated interest anyway so why not pay and ha’ don wi’ it?

[jerios55]

2 hours ago, Roll Tide said:

So its fair to assume they really could afford $150 Million + per season in payroll      (150 million + 20 million in player benefits)

The 432mill over 5 years is ~86mill per and they may owe about 15mill per year back, leveling to about 71mill.  I know they have other sources, but I don't see how you get to 150million.

[jerios55]

1 minute ago, Philip said:

Yes, exactly. Actually, even though 69 million isn’t exactly what Davis makes in a season, it’s not THAT much and the Orioles can pay it.

if they lose on appeal they have to pay the accumulated interest anyway so why not pay and ha’ don wi’ it?

Let's give the nats 120mill and Davis and call it done.

[atomic]

6 minutes ago, Philip said:

Yes, exactly. Actually, even though 69 million isn’t exactly what Davis makes in a season, it’s not THAT much and the Orioles can pay it.

if they lose on appeal they have to pay the accumulated interest anyway so why not pay and ha’ don wi’ it?

If they win the appeal they get to keep the money and the interest. 

[theocean]

4 minutes ago, jerios55 said:

The 432mill over 5 years is ~86mill per and they may owe about 15mill per year back, leveling to about 71mill.  I know they have other sources, but I don't see how you get to 150million.

YES was paying the Yankees about $85M before they sold to Fox, so that's actually not too shabby for a much smaller market.

[jerios55]

1 minute ago, theocean said:

YES was paying the Yankees about $85M before they sold to Fox, so that's actually not too shabby for a much smaller market.

No argument, just curious how he got to 150mill.

[Philip]

13 minutes ago, atomic said:

If they win the appeal they get to keep the money and the interest. 

But they won’t. Manfred will see to that.

[TonySoprano]

1 hour ago, Frobby said:

The MASN owner is Baltimore Orioles, LP.    That’s where the money went.  

$362.9M/4 = $$90.725M/year from MASN.  That's more than the projected payroll for 2020.   Maybe I'm mixing up apples and oranges, but how would the Orioles not be profitable before all the revenue sharing from MLB as well as from ticket sales etc.?

[Frobby]

5 minutes ago, TonySoprano said:

$362.9M/4 = $$90.725M/year from MASN.  That's more than the projected payroll for 2020.   Maybe I'm mixing up apples and oranges, but how would the Orioles not be profitable before all the revenue sharing from MLB as well as from ticket sales etc.?

Divide by 5, not 4.    Still, it’s a fair bit of dough.    Of course, you’re on to something about revenue sharing.    The rights fees go into revenue that is subject to being shared.    The profits are treated separately and don’t count.     So, the ruling not only lowers our actual revenue by $14 mm/yr or so, but it increases the portion of revenue that is subject to being shared by $20 mm/yr or so.    So, it hurts the O’s in two respects.    Even so, it’s a ruling the team can live with IMO.     

[TonySoprano]

1 hour ago, Frobby said:

Divide by 5, not 4.    Still, it’s a fair bit of dough.    Of course, you’re on to something about revenue sharing.    The rights fees go into revenue that is subject to being shared.    The profits are treated separately and don’t count.     So, the ruling not only lowers our actual revenue by $14 mm/yr or so, but it increases the portion of revenue that is subject to being shared by $20 mm/yr or so.    So, it hurts the O’s in two respects.    Even so, it’s a ruling the team can live with IMO.     

$72.58M

Since these numbers were hidden it makes me wonder what did Forbes use in their valuations of profit/loss.  Along those lines, the Orioles may have been more profitable than some surmised.