New National TV deals are the tide that lifts all boats
Come 2014, the A’s will be a much richer team, a team capable of fielding a $100 million payroll. And they won’t have to build a ballpark, negotiate any new local media deals, or raise ticket prices to do it. That’s because new national television deals will be in place for the 2014 season, and they promise to make every team a good deal richer.
A flurry of stories have come out in the last week to trumpet the coming broadcast rights war. All of the current national broadcast deals expire at the end of next season, making this next set of TV rights negotiations a total free-for-all. I’ve assembled some of the articles for your perusal.
- Baseball’s Long, Hot Summer (Adweek/Anthony Crupi)
- For Baseball, TV Landscape Is Becoming a Pretty Picture (NY Times/Richard Sandomir)
- MLB Plans On Doubling TV Revenue (The Daily Courier/Jordan Kobritz)
- How Much Could MLB’s Next National Television Contracts Be Worth? (Baseball Prospectus/Maury Brown, subscription req’d)
Currently every team gets around $24 million per year in national TV money via three contracts (Fox, ESPN, TBS) plus international and digital media revenue. All told, it’s at least $33 million per team per year from baseball’s central revenue, or $1 billion for MLB total annually. According to many industry observers, the new TV rights deals should net MLB around $2 billion per year by themselves, at least doubling if not tripling the amount each team will get. That won’t mean all that much to the Yankees or Red Sox, since they’re often up against the luxury tax threshold. For a team like the A’s, however, it’s manna from heaven. A bump to $2.1 billion (a reasonable guess at this point) will put $70 million in every owner’s pockets, every year.
Let’s look at this at the micro level. Estimates have the A’s 2011 revenue at $160 million, though Lew Wolff will argue that it’s less. With greater ticket sales this year and other incrementally growing revenues, I’d wager that $160 million is a realistic number for this year (Forbes might say that it’s $165 million or more). Now add $42 million in fresh national TV money, and suddenly every team in baseball, including the A’s, is a $200 million revenue franchise. Use the typical 50/50 ratio of payroll to revenue, and the A’s payroll is $100 million. Simple, right? ($230 million doesn’t seem so far away anymore.)
Ah, but there’s more to it than that. Chances are the digital media and international broadcast money will also grow. Several teams will approach $300 million in revenue, which means that $150 million payrolls will become more commonplace. Again, all without raising the price of a single ticket. The A’s will continue to be a have-not relatively speaking, but that extra money should make it easier for ownership to sign a young slugger past arb years, or more than one. While we currently think of $75-80 million as the practical upper limit for payroll when Billy Beane feels the team is in contention, that amount should be the lower limit for payroll in the coming years. Giants ownership grumbled loudly about keeping this year’s payroll to $130 million. That figure should be their lower limit in 2014.
Exploding TV money will have one other important effect on teams: franchise valuations and sale prices should continue to grow. The Padres sold for $600 million plus $200 million for their share of the new Fox Sports San Diego network. I figure that puts the A’s at $500 million now, and that’s without the benefit of the new TV money. In 2014, the A’s should be worth $600 million easy. Knowing the gravy train that’s coming, Wolff/Fisher would be crazy to sell the franchise anytime soon, regardless of what happens to their San Jose ballpark pursuit in the near term. On the flip side, the growing franchise value will only make it that much more difficult for an outside group (Don Knauss & Co.) to buy the franchise and finance a stadium, soon to be a combined $1.1 billion price tag. If we’re looking for an event to burst the valuation bubble or dissuade Wolff/Fisher from continuing to own the team, the new TV contracts definitely aren’t it.
The most fascinating part of this will undoubtedly be the negotiations. When the last rights were negotiated, baseball was considered a sport on the decline among the networks, best relegated to regional sports networks and ESPN. Since then, NBC and CBS have launched their own sports network competitors to ESPN. Fox may convert Speed to all sports instead of just motorsports, the same way NBC converted OLN and CBS did CSTV. All three would want baseball as a tentpole for their fledgling networks and for their cable bundling efforts, the better to wring ever higher subscriber fees from consumers.
- Today’s youth probably have no idea that NBC was once the network that carried baseball, with Vin Scully and Joe Garagiola announcing Saturday’s Game of the Week. The peacock has now gone over a decade without baseball, and their desire now is hot and heavy. Baseball is just what NBCSN needs to gain traction among viewers, in addition to the Game of the Week. Keep in mind that because NBC’s big tentpoles are Sunday Night Football, the Olympics, Notre Dame football, and the NHL, there are huge swaths of weekend daytime programming for NBC that have no pro sports at all. That might lead people to think that when it comes to sports, NBC is out of sight, out of mind. Is NBC/Universal/Comcast will to spend money on MLB the way the company never would under Jeff Zucker? We’ll see. Pros: Better integration with Comcast Sportsnet properties. Cons: An even larger Bob Costas soapbox.
- CBS has rarely had MLB on TV over the last few decades, the exception being a financially disastrous gig in the early 90′s (thanks, Toronto Blue Jays). The Tiffany Network also owned the Yankees during the 60′s. That was about as far as they went. CBS likely has the same motivations as NBC. Under Les Moonves, the network has tended to stay away from baseball, so either they saw the light if they’re interested or it’s purely a carriage play. Pros: The unlikely yet possible resurrection of the MLB on CBS theme, which had a “The Natural” 80′s-style majesty. Cons: Potential re-teaming of Sean McDonough and Tim McCarver, one of the worst announcing tandems in broadcast history.
- Fox is the incumbent, and frankly, they’ve been shit the entire time. At the outset, Fox declared war on ESPN, claiming that its “tribal” approach to sports by grabbing RSNs would allow it to integrate well with the national broadcast. That never happened, and Fox has only retreated ever since. Not that I liked the now-discarded theme song, but to replace it unceremoniously two years ago with the NFL on Fox theme clearly showed where the network’s thinking is. The move to 4 PM broadcasts this season is a good one because it opens the afternoon slots for teams, but I can’t help but think Fox just did it because they didn’t have any primetime programming on Saturday nights for the East Coast. Pros: Can’t think of any except maybe Ken Rosenthal. Cons: Fox may get even lazier in its handling of MLB.
- ESPN may have the most to lose. They absorbed the hit that came with the launch of the MLB Network (not part of the conversation BTW), and focused on making sure their web and news coverage stayed solid in the face of new competition, though they let go of quite a few talents along the way. They still have Sunday and Wednesday night games and little good to replace them if they lost those properties. Try as it might to jam as much NFL news into its summer programming, ESPN can only go so far with football. The network has reduced the number of games per week it broadcasts. It may be forced to bid to broadcast more games per week if the other cable sports networks are willing to do the same. Pros: Webgems. Cons: Chris Berman.
- TBS will probably get outbid on its little property, Saturday Night Baseball. They tried to transition from the Braves to all teams using all of their Atlanta-based talent and production and have generally done poorly or have been ignored in the process. Handling of the playoffs, which Turner tried to do similarly to the way it handles NBA games, was confusing and generally abysmal. Clearly, national baseball broadcasts weren’t in Turner’s wheelhouse. Pros: Eck in studio. Cons: Dick Stockton.
There’s a decent chance that MLB will structure bidding so that a network can bid on a specific league, the way the NFL splits broadcasts for its two conferences. That would be an interesting twist, though it would create an inherently unequal situation due to the popularity of the Yankees and Red Sox. I’m certainly not digging the idea of AL nights and NL nights. Digital carriage also has to enter the picture. Streaming of national games may be part of every deal, though you can bet that they’d still be subject to those frustrating blackout rules.
How do think this new windfall will affect the A’s in the future? How should broadcast rights be distributed? Do you have a favorite channels on which you’d like to see national broadcasts?