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.

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?

15 thoughts on “New National TV deals are the tide that lifts all boats

  1. Re: the packaging of the AL & NL separately, they could even things up by giving Interleague games to the NL carrier and/or also package that and do them in tiers. One carrier of the AL (biggest bucks), one carrier of the NL (middle bucks), and one carrier for Interleague (least bucks) since starting next season all of them will be around all season long.

  2. honestly don’t even watch espn anymore for my “baseball coverage” on national cable. their obsession with everything nyc/bos got the point where mlbn has been a gift from the heavens.

    would love to see the national broadcast on regular tv switch off fox, just can’t stand buck and his smug appearance.

    anybody know what the local tv ratings are? they in the past few years i think were released after the first few months of the season but haven’t seen anything this season released. guessing the a’s are at the bottom espcially when the last couple of seasons the nats were the only other team with as bad as ratings but that’s probably changed a ton with the additions of strasburg/harper and the team looking like a sure bet to make the playoffs this season.

  3. Here’s a vote for NBC. Really, anybody that gets it away from the Buck/McCarver reign of terror is fine by me. Plus, I actually like Costas.

    And like, letsgoas, I haven’t bothered with ESPN in a long time for baseball, just local stuff for the Rangers, and MLB for national stuff.

  4. As much as I hate. To say it, Costas > Buck.

  5. Hey ML, this is the first I’ve heard of SPEED possibly going to all-sports. I had to look it up, and I guess the rumor is that Fox would be converting SPEED to Fox Sports 1, with Fox Soccer turning into FS2 and FUEL turning to FS3, and end up being the place most of the motorsports ended up, but potentially the good ratings of NASCAR truck series on FS1 or 2. I’m not really all that thrilled with that idea, as I like having one channel to go to for my motorsports fix, and FUEL doesn’t have that many homes right now and is not available on Comcast. I thought they had been doing a good job growing the racing on SPEED by adding things like the Australian V8 series, for example, but maybe that’s the problem. Since it’s grown, it appears to have big enough penetration to make a switch and be able to hit the ground running.
    .
    I guess I’m just not sure of their goal. With the advent of the in-house run channels like NHLN, MLBN, NFLN, NBAN, SPEED, Golf, Tennis, etc, I just don’t see the need for general national sports channels anymore. The networks that handle one type of sport tend to do it better than any of the general networks do, and when coupled with regional networks, we get the coverage we want.
    .
    As far as SPEED goes, I enjoy turning on the TV at 9am on Friday, putting down the remote, and get pretty much the rest of the day full of live NASCAR programming. :) I fear that a rebranding into a general FS1/2/3 network will eventually end up with me having to track down the shows.
    .
    It’s funny, because one of the big complaints of NASCAR through the late 80s and 90s was having to use a schedule to figure out what channel and time the race would be on. That’s one of the things NASCAR wanted to fix when they signed the deal with widespread networks FOX/FX, NBC and TNT (besides raking in the dough). Each network would carry a section of the season making it easier for people to find the race and for others to even get the race, and therefore raise the ratings. Previously, the races were scattered on CBS, ABC, ESPN, TNN, TBS and NBC throughout the season.
    .
    Anyway, I sort of figured the ESPN networks would slowly deteriorate into a few top-tier productions like SNF and maybe a baseball game or two and then….crap outside of those shows, but I must be missing something because NBC/Comcast has created their own ESPN, and now FOX wants to do the same.

  6. All I can tell ya is that I’d get MLB.tv in a HEARTBEAT if they’d do away with the completely nonsensical and antiquated blackouts. What the fuck am I paying for if I can’t watch a home game on my iPad or my Samsung TV??

  7. Could this also be a factor in MLB’s delay in making a decision on the A’s? Obviously this is gross speculation on my part but waiting on the specifics of a new TV contract (giving MLB certainty on how much more $$$$ they will have) will give MLB some financial ‘breathing room’ for such things as making new Stadiums a reality. That could help move the SJ-Giants negotiations along (on the face of it, it also waters down the Giants economic hardship argument). Conversely, if MLB prefers the A’s to stay in their ‘territory’, this could help make an Oakland stadium a reality.
    One would think a significant jump of $$$$ like this coming into MLB and its individual owners, it should help make the A’s new stadium closer to reality (wherever it is).

    • @TW/Jeffrey – I don’t think it changes the decision timeline for the A’s that much. The A’s will still be on revenue sharing (pooled local revenues) through 2016. The owners and Selig have known a big TV payoff was due, remember that the current contracts were a downward market correction from several years ago. In the new CBA, the luxury tax threshold jumps from $178 million to $189 million in… 2014, of course. Overall it doesn’t change anyone’s stance regarding a ballpark.

      Psychologically it’s nice for us to know that we could hit $100 million in payroll pretty soon. It’s a hollow victory since the richer teams’ payrolls can be that much higher.

  8. Whoa. That’s insane money. TW is right, it’s game changing money. Not sure how it changes the game, but it does change it.

  9. ML, while that’s all true, the money both teams receive from it (especially the A’s) could help with any final payout to make way for SJ. Holding off on a decision until that’s finalized may make sense to them in terms of setting any sort of franchise value or t-rights agreement.

    • @dmoas – I’ll grant you that. The difference between the projected low-end and high-end shares per team/year could be as much as $10 million. That’s nothing to sneeze at.

  10. I doubt this will be much of a game changer because all teams will get a bump. Though the A’s will have more money for payroll, so will other teams. The most likely outcome will be free agents will demand (and receive) larger contracts because teams have more money to throw their way.

  11. No doubt ML. More money to teams will eventually upwardly move the floor & ceiling of player salaries. I assume, though, it won’t be overnight. It will be a several year process for salaries to catch up to the new revenue. I assume the A’s, Giants will have extra cash on hand for a few years for non player payroll expenditures.
    One possible leap of fact I made is MLB the Corporation (call it whatever) acts to an extent like the NFL. They use their $$$$ to help make stadiums, as applicable, possible. With more $$$$ coming into MLB the corporation from the improved TV contract, I assumed that would mean they would be more apt to be involved in making stadiums happen.

  12. Every team in baseball will benefit from the increased $$$$, but there is no way you are going to see Oakland @Houston as a National game when a network can offer Yankees/Red Sox, Even in the NFL, how many times are the Cleveland Browns appearing in a National night game? Once against Baltimore. By comparison, the Pittsburgh Steelers will be on 5 times (Denver, Tennessee, Cincinnati, Kansas City & Baltimore). In addition, they will be doing some National 4:15PM games as well (Such as against the New York Giants & Dallas Cowboys).
    One more point: What MLB, NFL, NBA & NHL and the TV Networks are most concerned about are the franchises and college teams that pay the bills and generate the interest (Meaning the Yankees, Red Sox. Notre Dame, ect), and what happened in MLB with attendance yesterday (There where 9,000 more people @Target Field in Minnesota to see the Twins/ A’s then @ the Tropicana Field to see Tampa Bay hosting the Red Sox)., is a cause for concern, for A’s fans. MLB knows that the Yankees & Red Sox play 18 games down in in St Pete, and they (Along with the Networks) do not want to see empty seats for the Yankees or Red Sox, which is why fixing the Rays Stadium situation will be a bigger priority for MLB then will the fate of the A’s. In case people think I am exaggerating things, keep in mind how much MLB mentions the Rays are 29th out of 30 in attendance. For example: I watched the MLB Network/NESN telecast of Sox/Rays on Saturday Night, and Wade Boggs and the Sox Announcers were bringing that issue up even during play. As the TV Contract issue comes into clearer focus, watch the Rays Stadium issue become even more discussed.

  13. I don’t particularly care if Turner loses its deal. However, I would love NBCSN to take the Monday and Wednesday night games from ESPN and CBS taking away the Saturday games from Fox. Anything to take ESPN down a few notches. It would also force ESPN to renew MLS for more money than they think they’re worth. Imagine MLS with real money. That should help shut up the Eurosnobs. :)

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