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Dodgers Send Shock Waves Through Local TV Landscape

Early Sunday morning, Twitter was abuzz with news that the Dodgers and Fox Sports West had agreed to a 25-year broadcast deal valued between $6 billion and $7 billion. By Sunday afternoon, Bill Shaikin of the Los Angeles Times had confirmed the outline of the deal, but cautioned that the Dodgers and Fox were still negotiating, with a November 30 deadline looming.

As I explained last week in this post, the parties’ existing agreement gave Fox an exclusive, 45-day window in which to negotiate a new deal to govern the 2014 season and beyond. Hence, the November 30 deadline. If an agreement isn’t inked by Friday, the Dodgers must submit a final offer to Fox by December 7. Fox then has 30 days to accept or reject the offer. If Fox rejects the offer, the Dodgers are free to negotiate with whomever they want.

However the negotiations play out, it’s clear now that the Dodgers’ local TV revenue is about to enter the stratosphere. A 25-year deal worth between $6 billion and $7 billion would net the Dodgers between $240 million and $280 million per yearPer year. That’s more than any team has ever spent on player salaries in a single season — even the Yankees. And it’s nearly double the amount of local TV revenue pulled in annually by the team with the second-most lucrative deal — the other Los Angeles team (the Angels) — which entered into a 17-year deal with Fox Sports West worth $2.5 billion.

To truly appreciate the magnitude of the Dodgers’ tentative deal with Fox, though, you need to compare it to more than the Angels-Fox agreement. You need to place it side-by-side with the other 28 teams’ local TV broadcast contracts. We gathered that information and present it to you below in several, related charts. We relied solely on publicly available sources, which in some cases do not provide a complete picture of each team’s deal. For example, we know that the Atlanta Braves and Oakland A’s are burdened by long-term contracts at well-below market rates, but we were not able to determine the yearly revenue each team receives from those contracts.

There are a variety of ways to present the information. As you will see from the discussion, we organized the deals in a way that highlights the differences between the super rich teams, the rich teams, and the not-so-rich teams.

Recent Billion Dollar Deals

The tentative Dodgers-Fox contract is just the latest billion-dollar local TV deal. The Texas Rangers kicked off this new frenzy in late 2010 with it’s 20-year/$1.7 billion deal with Fox Sports Southwest. But it’s not just the big-market teams cashing in. The San Diego Padres — who play in one of the smallest media markets in the league — signed a 20-year/$1.2 billion deal with the new Fox Sports San Diego before the beginning of last season.

A note about equity. With the exception of the Dodgers’ deal — the final terms of which are still to be revealed — all of these new local TV contracts grant the teams an equity stake in their broadcast partner. The teams typically receive a percentage of profits commensurate with their equity holdings. But that revenue is not included in the team’s “net local revenue” and therefore not subject to revenue sharing under the Collective Bargaining Agreement. For more on the workings of the league’s revenue-sharing program, read this post I wrote a few weeks ago.

Los Angeles Dodgers 25 years/$6b – $7b$240m – $280m per year 

(tentative)

Fox Sports West Begins in 2014 seasonExpires after 2038 season
Los Angeles Angels 17 years/$2.5b$147m per year 

25% equity stake

Fox Sports West Began before 2012 seasonExpires after 2028 season
Texas Rangers 20 years/$1.7bOne time $100m fee 

$80m per year

10% equity stake

Fox Sports Southwest Begins in 2015 seasonExpires after 2034 season
Houston Astros 20 years/$3.2b$80m per year 

45% equity stake

Comcast SportsNet Houston Begins before 2013 seasonExpires after 2022 season
San Diego Padres 20 years/$1.2b$60m per year 

20% equity stake

Fox Sports San Diego Began before 2012 seasonExpires after 2031 season

Team-Owned Regional Sports Networks

There was a time when the Yankees and Red Sox stood above the other 28 teams in local TV revenue with their team-owned regional sports networks. When it comes to yearly rights fees, that’s not the case anymore. But the owners of the Yankees and Red Sox — and now Mets, Orioles, and Nationals — continue to rake in millions of dollars in profits from the operation of their RSNs. And again, as noted, these profits are not subject to revenue-sharing.

The Orioles-Nationals’ joint ownership of MASN is complicated — an outgrowth of MLB’s decision to move the Montreal Expos to Washington, D.C., and into the Orioles’ broadcast area. I explained the details of the Orioles-Nationals-MASN relationship — and the current dispute over annual broadcast revenue —  in this post.

New York Yankees Team-controlled holding company owns 34% of YES Network (Yankees Entertainment & Sports Network) $90m per year in revenue, increasing to $300m by 2042
New York Mets Mets owners (Wilpons) own 65% of SNY (SportsNetNew York) $65m per year in revenue, increasing to $83m by 2015 25-year contract
Boston Red Sox New England Sports Ventures owns Red Sox and 80% of NESN (New England Sports Network) $60m per year in revenue
Baltimore Orioles Orioles own 87% of MASN (Mid-Atlantic Sports Network) $29m per year in revenue
WashingtonNationals Nationals own 13% of MASN $29m per year in revenueNationals seeking increase to $100m per yearDispute in mediation Agreement creating MASN includes provision allowing Nationals to re-set annual rights fee every five years

 

The Hybrid Comcast SportsNet Deals

I wasn’t sure how to characterize the broadcast deals for the White Sox, Cubs and Giants. All are big media-market teams, yet none controls its own regional sports network or has cashed in (yet) in the new market paradigm. What they share in common is a significant equity stake in the local Comcast SportsNet. The White Sox and Cubs have more traditional rights-fee agreements (fee per game broadcast) while the Giants receive a percentage of revenue generated by advertising during the broadcasts. The White Sox and Cubs also broadcast some games on local Chicago station WGN. I was not able to track down information on those broadcast agreements.

Chicago White Sox Owner Jerry Reinsdorf owns 40% of Comcast SportsNet Chicago $450,000 per game broadcast on Comcast SportsNet Chicago.Fee for games broadcast on WGN: N/A N/A
Chicago Cubs Owner (Ricketts Family) owns 20% of Comcast SportsNet Chicago $450,000 per game broadcast on Comcast.Fee for games broadcast on WGN:N/ATotal local TV revenue approximately $50m per year Contract with Comcast expires after 2019 season.Contract with WGN expires after 2014 season.
San Francisco Giants Team owns 30-33% equity in Comcast SportsNet Bay Area Giants receive percentage of CSNBA revenues; contract believed to have escalators. Actual revenue received: N/A Began before 2008 seasonExpires after 2032 season

 

The Soon-to-Expire Deals

The teams on this chart have broadcast agreements set to expire over the next five years. All will be looking to cash in on the new market dynamics. Market size and ratings will drive the terms of their next deals.

Philadelphia Phillies $35m per year Comcast SportsNet Philadelphia Expires after 2014 season
Colorado Rockies $20m per year ROOT Sports Expires after 2014 season
Arizona Diamondbacks $31m per year Fox Sports Arizona Expires after 2015 season
Seattle Mariners $45m per year ROOT Sports Opt out after 2015 season; contract expires after 2021 season
Tampa Bay Rays $20m per year SunSports & Fox Sports Florida Expires after 2016 season
Cincinnati Reds $30m per year Fox Sports Ohio Expires after 2016 season

 

The Mid-Markets

Four teams with decent deals under old market conditions. Now all are outpaced significantly by the deals struck in the last two years. But all these teams reside in small to medium-sized media markets and are unlikely to command the kind of dollars thrown at the Dodgers, Angels, Rangers and Astros when their deals eventually expire. That’s particularly true for the Blue Jays, which are owned by the same company (Rogers Communications) that owns the broadcaster (Rogers SportsNet).

Detroit Tigers $40m per year Fox Sports Detroit Expires after 2017 season
Toronto Blue Jays $36m in 2012; adjusted year to year Rogers SportsNetRogers Communications owns the Blue Jays and Rogers SportsNet Year to year; no expiration
Minnesota Twins $29m per year Fox Sports North Began before 2011 season; expiration date unknown
Cleveland Indians $30m per year SportsTimeOhioThe Dolan family owns both the Indians and SportsTimeOhio Year to year; no expiration

 

The Have-Nots

Last and very much least, the local TV have-nots.  The Royals, Pirates, Brewers and Cardinals are located in small media markets. Even the Cardinals’ traditionally strong ratings just cannot command the kind of local TV revenue that bigger market teams enjoy. The A’s, of course, play in the San Francisco Bay Area, a big media market, but their consistently low TV ratings have kept the A’s from the kind of money the rival Giants enjoy.

The Braves — well, the Braves are a victim of bad deals and bad timing. Liberty Media bought the Braves from Turner Broadcasting in 2007 and inherited 25-year local TV contracts negotiated by Turner at below-market rates. We weren’t able to track down the Braves yearly rights fees but we do know that the contracts significantly hamper the Braves’ payroll decisions.

Kansas City Royals Less than $20m per year (exact figure not known) Fox Sports Kansas City Expires after 2019 season
Pittsburgh Pirates $18m per year ROOT Sports Expires after 2019 season
Miami Marlins $18m per year Fox Sports Florida Began before 2006; expiration date unknown
St. Louis Cardinals $14m per year Fox Sports Midwest Expires after 2017 season
MilwaukeeBrewers $12m per year (Some information suggests thus figure will rise to $30m before 2013 season). Fox Sports Wisconsin Expires after 2019 season
Oakland A’s N/A Comcast SportsNet BayArea Began before 2009 seasonOpt-out after 15 years
Atlanta Braves N/A Fox Sports South/Sports South/Peachtree TV Began before 2007 seasonExpire after 2031

There you have it. Thirty teams. Thirty different local TV agreements. From the Dodgers at the very high end to the Brewers, A’s and Braves on the very low end. For some teams, the dynamics are fluid and will change in their favor soon. Others are looking at years of climbing up a steep hill in an effort to compete. The new local broadcast reality. The new revenue inequity.

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Update: December 3, 2012

Since this post published on November 27, I’ve received information suggesting some of the local TV contracts differ from the information I obtained from publicly available sources. For example, as noted in the comments, the New York Times reported in September, 2011, in an article about Brewers’ owner Mark Attanasio, that Milwaukee’s $10 million per year local TV rights fee “would triple” starting in 2013. I have not been able to independently verify that number. Similarly, I reported that the Reds receive $30 million through their local TV contract, but an article cited in the comments suggests that fee is closer to $10 million.

I’ve also received information from a source suggesting that the Rays’ make less than $20 million per year in local TV money and that their contract will expire later than 2016.

I will continue to update the post as new information becomes available.

Update: December 6, 2012

The Milwaukee Journal-Sentinel has reported that the Brewers’ local TV rights fees will go up to “around $21 million” in 2013, according to GM Doug Melvin.