New York Court Hands Orioles Early Victory In MASN Dispute

A fight between the Orioles and Nationals over MASN’s television rights fees has been brewing for years. MASN (Mid-Atlantic Sports Network) was created as a form of financial compensation to the Orioles when MLB moved the Expos from Montreal to Washington, D.C. to become the Nationals. MASN is majority owned by the Orioles but has exclusive rights to broadcast Orioles and Nationals games. The agreement establishing MASN set a floor for the Nationals’ TV rights fees and a formula for how those rights fees would increase on an annual basis. After five years, the Nationals had the right to petition to reset the formula, and if the parties couldn’t agree, the matter would be taken to arbitration before a panel established by MLB. For more than two years, the teams have been fighting over this new formula. We learned and reported last week that the dispute did go to arbitration and that the MLB-established panel issued a decision in June in favor of the Nationals. The Orioles then filed a lawsuit in New York state court to overturn the arbitration decision and in an initial victory, convinced the court to stay enforcement of the decision until the merits of its claims can be fully explored. A stay order means that the status quo that existed prior to the arbitration decision — with MASN paying the Nationals only $33 million per year in rights fees — will continue for the time being. The court also rejected MLB’s request to keep all documents in the case under seal. MASN’s petition to undo the arbitration decision charges the arbitration panel with a conflict of interest, because it is comprised of representatives of three other MLB teams who would benefit financially if the Nationals receive a larger rights fee, via the league’s revenue sharing system. MASN and the Orioles also claim that the arbitration panel ignored the formula used by MLB for years to determine how to divide a team-owned RSN’s revenues into rights fees (which are contributed to the revenue-sharing system) and profits (which are not). By ignoring that formula, the Orioles, contend, the arbitration decision will leave MASN with very little in the way of profits — in direct contravention to the agreement that created MASN in the first place. You can read MASN’s petition to vacate the arbitration decision here. The court has scheduled a hearing for later this month on whether to permanently enjoin the arbitration decision.




Print This Post



Wendy writes about sports and the business of sports. She's been published most recently by Vice Sports, Deadspin and NewYorker.com. You can find her work at wendythurm.pressfolios.com and follow her on Twitter @hangingsliders.


26 Responses to “New York Court Hands Orioles Early Victory In MASN Dispute”

You can follow any responses to this entry through the RSS 2.0 feed.
  1. jss133 says:

    $13M is way off.

    Vote -1 Vote +1

  2. Mark says:

    Hi Wendy,

    Just wondering where you read that the Nationals are only being paid $13 million in rights fees in the present. This article says it was $34 million for 2012. I’d be surprised if it was so much lower now.

    Vote -1 Vote +1

  3. Orsulakfan says:

    I don’t really understand the grounds for the Nationals’ argument. The Orioles have followed the contract, and its the Nats who are trying to change the deal midway through. I guess the arbitration panel process was also in the deal, but what a farce that is.

    Vote -1 Vote +1

    • Aaron (UK) says:

      The Nats are following the contract too. This is the sort of thing that happens when awkward issues are pushed down the road – at some point you come to the end of the road and have to confront the issue again.

      Vote -1 Vote +1

    • Eric F says:

      The original contract said after 5 years in the league the Nats could restructure the payment system. All they’re trying to do is get more money, just like any other MLB team would do. The problem that the O’s had with the decision is that members of the arbitration panel work for MLB teams, and if MASN makes less profit (which goes directly to the O’s since they own it, but doesn’t contribute to revenue sharing) and gives more money to the Nats, the revenue sharing across MLB goes up, in part giving more money to the team representatives on the panel, which creates the conflict of interest.

      Vote -1 Vote +1

    • Ben says:

      Not sure what you mean by ‘the Nationals’ argument.’

      The Nationals were allowed to re-negotiate the contract (more specifically the % of rights fees) after 5 years if they believed it to be below market value. They are arguing that it is way below market value ($100+ million vs. the current $33 mil) and filed a claim to re-negotiate. Oriole’s/MASN of course don’t want to pay more in rights fees because it means less profits for MASN (80% owned by Orioles).

      So that’s been ongoing for 2 years and the two sides couldnt come to an agreement. Per the details of the contact, it goes to an MLB arbitration panel for a decision. That decision came earlier this week and ruled in favor of the Nationals (to increase their rights fees). Orioles of course don’t want that to happen, so they filed a suit in New York to stay the decision of the MLB panel. They argue that:

      1. MLB is not a neutral third party in this case. They get a percentage of Nats’ rights fees as part of the revenue sharing agreement (where previously this money would be MASN (read: Orioles) profits). So its in their best interest to get the Nationals as much money as possible in rights fees.

      2. That the MLB ignored industry standard methods for evaluating the fees/profits. The valuation by the Nats (and upheld by the MLB panel) is overestimated, and the awarded fee amounts would bankrupt MASN

      Vote -1 Vote +1

      • Orsulakfan says:

        You’re right, basically, and I understood these details. I guess the reason I react the way I do (aside from favoring the Orioles generally) is that I thought it was clear to all that the reason the deal was structured the way it was, was that the Orioles were getting compensated for the fact that a new team was entering what had been their market and was going to take a huge chunk out of their revenues. It was not structured around the basis of an equitable share of TV revenues for each team, and yet that seems to be the ostensible basis on which the arbitration panel made its decision. If we’re talking about an equal share of the TV revenues, then it’s obvious the Orioles should lose. If we’re talking about a system that was set up to compensate the Orioles for lost revenue – the way I understood it and I thought everybody else did too – then I don’t think the Nats have an argument.

        Vote -1 Vote +1

        • James J says:

          If the Orioles intended to claim the Washington DC market in perpetuity, why is it that they never played any regular season games there? Green Bay’s NFL franchise played regular season games in Milwaukee for years for this reason.

          Vote -1 Vote +1

        • Orsulakfan says:

          What stadium would they have played in? They played some exhibition games in RFK, but in the 2 decades before the Nats arrived it was no longer tailored for baseball and the left field fence was less than 300 feet from home plate.

          It is a fact that the Orioles drew heavily from the DC region in the 80s, 90s and 00s. Is it a question of whether they had a “right” to those fans? No, but it is a fact that losing them would deal them a financial blow. The deal that was put in place softened that blow and sustained the financial health of a longtime AL franchise in a division with 2 of the biggest spenders in baseball. Everybody understood that was an important thing to do. If the Orioles lose this money, their financial picture will be badly hurt. Maybe we shouldn’t care, but I do.

          Vote -1 Vote +1

        • halfstreetheart says:

          The O’s have made twice the TV revenue as the Nats over the last 7 years. A new deal evens up this relationship like it was supposed to when the plan was agreed to.

          Vote -1 Vote +1

        • Orsulakfan says:

          Again, if one thinks the deal was about equitable revenues, then the Nats win. If you think the deal was about offsetting lost revenue when the Nats moved into what had been part of the Orioles’ market, then the O’s win. Given the structure of the deal, it seems obvious that it was the latter, rather than the former, consideration that was in play.

          Vote -1 Vote +1

  4. Df123 says:

    The deal itself was a farce. The ants didn’t even make the deal, it was made by MLB before the team was even established. Remember, the Expos franchise was owned by MLB until it moved to DC. The deal is completely unfair. That’s why arbitration was part of it. The Nats started with a 10% share, which only increases 1% per year to a maximum of 33%. In other words, they get less than a fifth of the revenue currently, despite essentially bringing in half the money. And it will take more than a decade for them to get close to a third. That’s the real farce.

    Vote -1 Vote +1

    • Orsulakfan says:

      Yes, but this was the deal they signed. The Orioles lost 25% of their market with the Nats’ arrival, and this was the compensation package arranged by MLB to keep the Orioles competitive financially (or, as close as possible considering the revenue juggernauts in their division). Maybe there could be a better solution – direct compensation? – but it is a bad financial situation for the Orioles.

      Vote -1 Vote +1

      • Eric F says:

        Yeah it’s really a horrible situation for both franchises since they share the same market, especially since it’s not a huge financial market like NY or LA, where both teams still make good money.

        Vote -1 Vote +1

        • halfstreetheart says:

          Not true. First of all the Baltimore and DC market are 2 separate markets with separate TV/Print Media. Baltimore even gets special compensation from MLB for playing a small market that DC doesn’t get. If you were to combine Baltimore and Washington market is falls 4th in size about the same size of Chicago and much bigger than the San Fran / Oakland market. DC by itself is the 8th largest media market. Also MLB considers the all the way down the Charlotte to be O’s/Nats broadcast territory

          Vote -1 Vote +1

      • Ben says:

        You keep saying ‘that was the deal’ but the deal also included clauses for re-negotiation. That’s what started this process, the built-in avenue for re-negotiating the rights fees

        Vote -1 Vote +1

      • Natstown says:

        It is not a bad financial situation for the Orioles or Angelos. Not even close. It’s an absolute windfall. They are, to my knowledge, the only team/owner in the four major American sports to hold a controlling interest in the broadcast rights to multiple franchises in the same sport. Angelos got a sweetheart deal thanks to baseball’s special antitrust protection and the desire of other owners to protect their own monopolies from encroachment. To make the deal palatable they included an adjustment clause after 5 years to reflect changing market realities, the adjustment that Angelos now rejects.

        If Angelos truly thinks the Nationals’ TV rights aren’t worth what the arbitration determined, there is a simple answer- negotiate a buyout and renounce the Nats’ TV rights to allow other RSNs to bid on them. Angelos and MASN would be done forever with this “burden,” the Lerners would happily pay a nice little sum to further enrich him for his troubles. Angelos will never do this, and we all know why- because he knows the Nats’ TV rights are worth far more than he’s willing to admit, especially as the team wins and the fan base grows.

        Vote -1 Vote +1

      • James J says:

        The Washington DC region was never intended to be owned by the Orioles in perpetuity. It did not belong to them when they arrived in Baltimore in 1954, so whatever claim they hold on it is, at best, recent history. Is there any other example of a small market sports franchise holding territorial rights over an adjacent larger market?

        Vote -1 Vote +1

        • Orsulakfan says:

          Recent history = over 30 years. Although the Orioles didn’t really draw well from DC until the 1980s. They marketed heavily in DC, had a large pool of season ticket and partial plan holders there, had a store in Farragut Square, etc. If you were a baseball fan from DC (I mean really from DC, not someone who lived there but claimed allegiance to another part of the country, as is often the case) from 1980-2005, you were an Orioles fan. I know this: I was one.

          Vote -1 Vote +1

        • James J says:

          So was I, but only by default. I grew up with the Senators but had to follow the O’s after ’71. But I was only a temporary fan as my preference was having a team in my own city. I strongly resent Angelos for thinking that my baseball loyalty was his. It wasn’t. I, and many others like me, felt coerced by baseball into following the O’s as they were the only team allowed us. And now that troll says that we’re his. May he drop dead before I finish typing this sentence. Nothing against the O’s. Our anger is toward their human stain owner.

          Vote -1 Vote +1

        • Orsulakfan says:

          I don’t see this as an Angelos issue, or about whose allegiance is “owed” to whom, etc. It is really about the financial strength of the club, and any owner would do as Angelos has done, just as probably any owner would do as Lerner has done. (And Lerner, to me, is as big a troll: the deal that the Nats got from DC was criminal). Boswell and the Washington Post drummed up anti-Angelos fervor, but personally I think that’s too easy. And were you really “coerced” into rooting for the Orioles? The Senators left twice, and the O’s were an entertaining and attractive team to follow for the first half of the period from 1971-2005. It seemed organic and real to root for the Orioles, actually more than the rather soulless experience of rooting for the Nats.

          Vote -1 Vote +1

        • James J says:

          Souless? You are clearly wearing a black & orange blinders. If these DC-based fans were as loyal to Angelos as he claims, why would they stop going to Camden Yards? They can follow the O’s as they always have, better in fact since they can now watch them via online and cable tv season package.

          If Baltimore can’t support a team on its own, it should either relocate (paging Bob Irsay) or contract. If Angelos wanted the DC market, he should have bid on the Nats.

          I see an argument for this Settlement Agreement being an illegal restraint of trade in that it prevents the Nats from selling their rights on an open market.

          Vote -1 Vote +1

  5. James J says:

    Am I right in thinking that judges are very wary of over-ruling arbitration decisions in general? In this case, would the judge not take into consideration that the Orioles agreed to the MLB arbitration board, and that this suit is only a reaction to their having lost the decision of that board? That would seem to be a rather powerful argument against their position.

    Vote -1 Vote +1

  6. xoot says:

    Courts are wary of over-ruling arbitration decisions. But this is interesting. mlb’s constitution says teams can’t sue each other and can’t sue mlb itself, but must instead submit to arbitration presided over by the Commissioner. That’s a set-up for a kangaroo court if there ever was one–much like the arb panel in this case. It’ll be interesting to see how the judge rules on the conflict of interest claims, etc.

    Vote -1 Vote +1

  7. Mike Gleason says:

    The deal that the Nats got from DC was made with MLB, not with the Lerners. They didn’t own the team yet.

    ——————————–
    Orsulakfan says:
    August 9, 2014 at 3:23 am

    I don’t see this as an Angelos issue, or about whose allegiance is “owed” to whom, etc. It is really about the financial strength of the club, and any owner would do as Angelos has done, just as probably any owner would do as Lerner has done. (And Lerner, to me, is as big a troll: the deal that the Nats got from DC was criminal).

    Vote -1 Vote +1

You must be logged in to post a comment.