Padres Improving But Many Fans Can’t Watch On TV

Yesterday Jeff Sullivan wrote about the San Diego Padres. If you haven’t read Jeff’s post, go read it now. I’ll wait. Okay, so now you know that since June 10, the Padres have a record of 41-30 and have outscored their opponents by 32 runs. But that’s not all. The Padres are 9-1 in their last 10 games, 13-7 in their last 20, and 18-12 in their last 30. They are outplaying everyone in the National League West other than the division-leading Giants.

The Padres also have new owners. The second and third generation of the O’Malley family — who owned the Dodgers from 1950 until 1998 — now own the Padres, along with San Diego businessman Ron Fowler and a group of minority investors. Fowler has been designated as the team’s control person, but Peter O’Malley and his sons and nephews, with their longstanding baseball pedigree, will be key to the Padres’ efforts to re-energize the team and the fan base.

It won’t be easy.

The new owners take charge of a Padres team whose games cannot be viewed by more than 40 percent of fans in the San Diego area. The problem stems from the creation of Fox Sports San Diego, a new regional sports network launched in March. The Padres signed a 20-year TV broadcast deal with FSSD before the 2012 season. The contract is valued in the range of $1.2 billion to $1.5 billion, putting average annual payments to the Padres in the $50 million to $75 million range. It is believed that the initial payment for 2012 was closer to $30 million. The Padres also received a 20% equity share in FSSD.

But FSSD has spent the season in a stalemate with several cable and satellite service providers in the San Diego area. FSSD netted deals with Cox Cable and DirecTV, reportedly for $5 per subscriber. Time Warner Cable, AT&T U-verse, and DISH Network wouldn’t agree to that fee, leaving subscribers to those services in the San Diego area without access to Padres games in their homes. According to a report from the Associated Press in July, these sorts of disputes between program providers and cable and satellite providers are becoming much more commonplace, as each sides seeks to squeeze out additional marginal profits in an otherwise stagnant industry.

The Padres reportedly have left the negotiating to FSSD but the failure to reach deals with the hold-out cable and satellite providers for next season and beyond will hurt the Padres in the pocketbook. The 20-year deal is believed to contain escalators, so that higher viewership results in higher payments from FSSD to the Padres.

And the Padres will need every penny if they are to regain competitiveness in the National League West. The Dodgers, of course, also have new owners, who seem hell bent on spending whatever it takes to win a World Series. Much of that financial bravado comes from the new TV deal the Dodgers are expected to enter into after this season. The Dodgers’ current deal with Fox Sports expires at the end of the 2013 season, but the two sides will begin formal negotiations on a new contract after October 15. A new 20-year deal is likely to be worth between $3 billion and $4 billion, outpacing the $3 billion deal the Angels entered into with Fox Sports last fall. The Diamondback’s current TV contract expires in 2015.

The Padres, like the other 29 teams, also will benefit from the new deal between Major League Baseball and ESPN. On Tuesday, the league announced a new 8-year contract with ESPN worth $5.6 billion. ESPN will pay MLB approximately $700 million per year for the right to broadcast Sunday Night Baseball exclusively, in addition to non-exclusive rights to Monday Night Baseball, Wednesday Night Baseball, and highlights for Baseball Tonight. ESPN also will have the right to broadcast one wild card playoff game, alternating each year between the American League and National League.

The math is pretty simple. MLB equally divides the revenue it receives on its national TV contracts among the 30 teams. The Padres and every other team can expect an additional $23 million in national TV revenue from new ESPN deal. So while the Dodgers will be in a position to sign any free agent they want for the foreseeable future, the Padres should have some additional financial flexibility to lock up their young players before they become free agents.

With the outlook improving for the Padres, now’s the time for the team and its broadcast partner, FSSD, to make sure most Padres fans in the San Diego area can watch the team on TV next season.




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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.


21 Responses to “Padres Improving But Many Fans Can’t Watch On TV”

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  1. Jack says:

    Its really sad that 40% of Padres fans cant watch games on TV. Those two guys missing out have it really tough.

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  2. BillyBob says:

    I appreciated this story and thus I leave a positive comment in the comments section

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  3. Eric says:

    “A new 20-year deal is likely to be worth between $3 billion and $4 billion, outpacing the $3 billion deal the Angels entered into with Fox Sports last fall. The Diamondback’s current TV contract expires in 2015.”

    Should that be Halos instead of Diamondbacks?

    Good article though

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  4. randplaty says:

    Maybe FSSD can’t lower the $5 per subscriber fee for Time Warner & AT&T because Cox and DirecTV have already agreed to that amount.

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    • James says:

      That’s a pretty steep fee… not sure how that could be included in a base cable package. It’s time for a la carte cable.

      The worst part about it is you can’t watch games on MLB.tv because of the blackout, and you can’t watch Saturday games on Fox because the Red Sox are usually playing.

      I have lived in San Diego for 5 years, and I believe I’ve only been able to watch 3 Padres games from home during that time (one-game playoff in 2007, a Saturday FOX game in September 2010, and Grandal’s 2 HR game this year).

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  5. Brian says:

    The model won’t work. For every 1 subscriber who would switch cable/satellite companies to see the games, there’s probably 1 out there who would consider another 10% increase in their bill “the last straw” and cancel or move to one of the other options who aren’t paying $5 per subscriber. I could see someone like Dish Network making the business decision to be Regional Sports Network-free if these RSNs are going to keep signing massive deals like these with the assumption that they’ll get it back (plus NFL isn’t on the RSN’s), or at the very least trying to make it a la carte (which probably won’t happen, because that wouldn’t generate enough revenue for Fox Sports. They need non-sports fans to pay, too, to justify their deals).

    There’s just not enough demand out there to justify the contracts, and they are banking way too much on people just being on cruise control when it comes to paying their dish/satellite bill.

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  6. Antonio says:

    It is sad that 40% of my fellow San Diegans have not been able to watch the Padres this year, hope fully the new ownership can do something about it… On a side note if you have the chance to move from Time Warner to Direct TV do it, specially if you are a sports fan. I have moved so many times in my life and have had every cable system available here in San Diego and none compare to Direct TV for Sports fans…no i do not work for Direct TV i am just a sports fan and like having the ability to watch every sport if i choose too.

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  7. Eugene Jacket says:

    I see your positive comment and raise you another.

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  8. Ron says:

    What I find amazing is that people really believe that these 20 year deals will be fulfilled. Cable networks are paying huge deals for sports to try to grab on to one of the only things that is keeping TV profitable, live sports. In 20 years are we really going to still be getting our entertainment and sports through the cable television medium? If so it better be amazing 3D or something.
    The business model is outdated and internet distribution or something else will be the norm in 20 years.
    For a moment think about how different baseball coverage was 20 years ago. ESPN was in the third season of their mega coverage of baseball, but aside from that you got maybe 30 games of your local team on TV and the Braves on TBS. If you were lucky your cable got the Cubs as well. Now every game is on local cable and online. If people can’t get a game during Fox blackouts people are upset or in the case of the Padres with limited disruption.
    Cable networks and companies are acting like they are worried about survival and they should be. Still no one is trying to prepare for what is next and how to market it.
    Finally these regional sports networks are quickly becoming irrelevant without baseball. Here in the west the regional sports networks used to be the source for Pac 12 sports but with the Pac 12 Networks this source of programming is gone.
    I don’t really know what my point is. I guess this is just a messed up situation and it is going to continue to be. Whatever the future brings it will not be for the benefit of the fans.

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    • D.t. says:

      I had the thought the other day about what it may be like if PAC 12 networks goes after the Mariners (and now the diamondbacks that i see their deal is almost over) when their contract with root ends in a couple years to fill the summer air time. Things could get interesting with that.

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  9. Grant says:

    An even larger portion of Blue Jays fans can’t see games when they are on alternate channel, Sportsnet One. In fact, some cities in the area don’t even have access to the limited networks that carry this channel. Add in the fact that Canadians can’t get mlb.tv and we’re really screwed.

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  10. D.t. says:

    How did fssd get $5 per customer? Isn’t that espns fee as well?

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  11. DodgersKingsoftheGalaxy says:

    They’re asking ESPN money, no way they would agree to that.

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  12. FYI, regarding the ESPN deal, while the average revenues received is $23.3M, that only amounts to an addition of $13.1M in revenues, as the prior deal earned the teams $10.2M per year per team (got info from bizofbaseball.com).

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