Earlier this month, Grantland published a story by chronicler of Les Expos de Montréal, Jonah Keri on the Baltimore Orioles and their reluctance to spend. That’s nothing new or of even relevant to D.C. sports fans. What is relevant are details of Mid Atlantic Sports Network (MASN) which is primarily owned by Angelos/Orioles.
In 2005, MLB and Angelos worked out a deal allowing the Nationals to operate in D.C. in exchange for a new local TV deal that overwhelmingly favored the Orioles. In July 2006, the Mid-Atlantic Sports Network launched a full-time sports programming slate headlined by O’s and Nats games. The terms dictated that each franchise would receive the same amount in rights fees, but that Baltimore would control a 90 percent share of MASN and any MASN-owned spinoff networks at the start; the Nationals would pick up an additional 1 percent stake each year after an initial two-year wait, until eventually reaching a 33 percent cap. Angelos got his lopsided deal, while the Nationals, who play in the nation’s seventh-biggest market, got screwed.
While the Orioles are bringing in quite a bit more than the Nationals, neither team is profiting from MASN as much as it could be. According to SNL Kagan, a group that analyzes cable and broadcast network deals as well as regional sports networks (RSNs), MASN properties generated $167.8 million in total revenue in 2012. The bulk of that money came from advertising and subscriber fees, with 5.4 million consumers paying $2.14 a month. That’s well below the $2.47 industry average for 2012 and $2.69 projection for 2013, and several of the media experts and sports deal makers interviewed for this story said MASN should be getting much more. Comcast SportsNet Mid-Atlantic, which primarily airs Washington Capitals and Wizards regular-season games, got $4.02 per month in 2012, indicating the market would likely support a higher rate for MASN. It’s hard to know whether to blame the network’s low subscriber fee on inept management, the timing of the deal, or other factors, but whatever the reason, it’s clear MASN will be leaving tens of millions on the table until it renegotiates with local cable providers.
First off, I have to acknowledge that while the “low” subscriber fee is bad for the revenue of the franchises, it’s not a negative for cable subscribers whether they watch those channels or not. It won’t go as far to say that Angelos is “saving” cable subscribers by having the “low” rate because if not for him, CSN would probably have the Nats and we were already paying for that channel. Angelos was successful in keeping MASN off of most DC area cable systems well into 2006, the Nats second season.
There are more interesting details:
For now, the MASN status quo remains. The Nationals aren’t completely helpless, though: According to a source close to the Washington franchise, MLB has sent the team an undisclosed sum every year to help bridge the gap, and to prevent the Lerners from taking matters to court, until the deal becomes more balanced…
…when the Lerner family bought the Nationals in 2006, it was saddled with this lemon of a deal, in which neither it nor the team’s first president, Stan Kasten, had any say. The terms stipulated that the deal could be renegotiated after five full seasons, and the Nats took their first opportunity to challenge the terms after the 2011 season. When that challenge dragged into 2012, those terms looked even more unfair. After spending years rebuilding a franchise that had been decimated by penny-pinching and mismanagement in Montreal, the Nats finally made the playoffs for the first time, winning 98 games and the NL East title. That same year, the Orioles made the postseason for the first time in 15 seasons. MASN viewership skyrocketed, enhancing the network’s already rising economic profile, but the Nats saw just a fraction of the returns.
The suggestion that the team or possibly, the Lerner family themselves, are getting
payola under the table additional compensation is new to me. Whether that statement is accurate or not will certainly not be mentioned by the Lerners (see, publicly financed Nationals Park roof for reference) so we’ll have to take this cocktail party supposition with a grain of salt. An aside – several years ago I heard a rumor from a one-time employee that in addition to the $450 million purchase price, the Lerner ownership also assumed over $100 million in debt from when MLB operated the franchise. Of course, I’ve had mixed results from that source.
Given that the Lerner family is the richest in MLB, they may have the patience to wait this out a while and if they get a little good behavior money on the side, well, why not. There is risk in that as well, but TV deals have gone up so much across the league, they seem unlikely to regress all the way back.
The motivations of Angelos on the other hand, are not completely clear. As the rest of the article notes, he hasn’t not been a big spender for most of his tenure as Orioles owner (BREAKING: Since I finished writing this post, Baltimore signed Ubaldo Jimenez for four years to which Cleveland fan Vince Guerreri invoked Bill Veeck’s maxim about “the high cost of mediocrity“), this offseason being another example of that and doesn’t seem motivated by his team winning on the field. Seemingly, his motivation for being loved, liked or even respected by his fan base is not significant either — he has had a dozen years to bring Maryland’s favorite son Cal Ripken, Jr. into a meaningful role with the franchise and choose not to go that way. Hiring Ripken would be at minimum on par with bringing in Dan Duquette to take credit for Andy McPhail’s improvements. It seems as though Angelos, in addition to being duplicitous (2004: “There are no baseball fans in Washington, D.C., that’s a fiction.” 2010: What’s good for the Nationals is good for MASN) lacks business sense. Perhaps he is self-aware of that, but it isn’t a stretch to say he’s more motivated to be vindictive. What’s really weird is that he and the Orioles still enjoy relatively uncritical coverage in either his home market of Baltimore or the market he is envious of, Washington, even though he isn’t good at his job.
Another possibility is that the three main participants are quite old. Selig will be 80 in July and has pushed back his retirement date for years. Officially, he plans to step down at the beginning of 2015. Angelos will be 85 in July while Lerner is 88. The three of them could be punting or should I say, pitching around the hitter, to the next generation. That’s not necessarily bad for the Nats, the next commissioner may not have a friendship with Angelos. Of course, what the descendents of the principal owners want and are willing to do is an unknown, though Mark Lerner and his brothers-in-law seem to be in for the long haul. Whehther Angelos’ family is the same I cannot say.
Left unsaid in Keri’s piece is a wild card in all of this – Ted Leonsis. The owner of Monumental Sports & Entertainment, holding company of the Washington Capitals, Wizards, Mystics and Verizon Center, has
won’t shut up been very vocal about his plans to create a new cable channel as soon as his broadcast deals with CSN expire, going as far to start an online channel. Obviously, CSN and unless Angelos is really oblivious, MASN, have to be quite interested in this development. For CSN, they are looking at extinction unless they reach a deal with Leonsis. Angelos and MASN probably realize that too and should they team up with Leonsis, that channel would be the dominant sports channel in multiple regional markets without any meaningful competition — i.e. what Angelos wanted from MLB and lost, yet on terms very favorable to him, even if he lacks the business-sense to make it work. Of course the question is whether split profits would be a deterrent to some or all sides. CSN is but one small part of the Comcast empire that includes, many other RSNs, cable/broadband systems and something called the National Broadcasting Company. Fighting over the DC & Baltimore markets might not be a big deal to the diagonally integrated corporate conglomerate.
These are but a few possible scenarios presented and I’ve looked at it more at a mostly local & regional level; FOX Sports or some other corporation may want to be a player too. Ultimately, I expect the endgame to be not terribly palatable to Washingtonians or the Nats franchise. The likeliest situation has Angelos and not necessarily the Baltimore American League ball club coming out far ahead of anybody else. The Lerners may ultimately buy him out, holding their noses as they do it. Regardless, it is worth pointing out that the demise of the Baltimore Orioles is an acceptable, albeit unlikely outcome, for the Washington National League ball club and their fans should it result in the restoration of television rights. Since in the Angelos and Orioles point of view, Washingtonians were acceptable as collateral damage, the same can be applied to Baltimoreans. Perhaps Mr. Keri’s city would be a suitable relocation site for Orioles, whose lease ends in 2021.