SBJ/October 10-16, 2011/Media

Will rising tide of rights fees lift the Nationals?

‘Reset’ for RSN deal comes at opportune time for low-rated team

Television rights fees are growing at such a fast clip that even one of the MLB’s lowest-rated teams now is seeking a big increase.

The Washington Nationals have hired media consultant Chris Bevilacqua to help the franchise redo its local TV deal, which should result in a significantly higher rights fee for a team that had baseball’s smallest local RSN viewership last season.

According to several sources, the Nationals currently get around $29 million per year from the Mid-Atlantic Sports Network, which is majority owned by Baltimore Orioles owner Peter Angelos. But as part of the contract that MLB signed with MASN when it ran the Nationals franchise in 2005, an automatic “reset” was included every five years to make sure that the deal still falls within market value.

Now, it’s up to Bevilacqua and the Nationals to demonstrate that the team deserves a higher rights fee. Conversely, Angelos will try to show that the Nationals’ rights fee is not out of whack.

If the two sides fail to reach an agreement, the case will go through an arbitration process. The Nationals’ rights will not go out to the open market as part of this reset.

The Nationals would not comment. “We are not at liberty to talk about our agreement,” said Andy Feffer, the team’s COO.

But sources say the team’s MASN contract is being reset at a time when sports rights are escalating faster than ever. Bevilacqua, who did not return phone calls for comment, has been in the middle of many of those deals.

He advised the Pac-12 Conference on its blockbuster $3 billion, 12-year media rights deal with ESPN and Fox. He also helped the Texas Rangers solidify their media deal with FS Southwest that resulted in a 20-year extension worth a total of $1.6 billion.

The key will be how to define what is fair market value for the team. The Nationals’ tenure in D.C. has been marked by lots of on-field losing and dismal TV ratings. In its seven seasons in the nation’s capital, the team has never finished above .500.

Its local TV ratings also have been among the league’s lowest. This season, the Nationals drew an MLB-worst 29,000 average viewers to their games on MASN and MASN2. The Orioles did not fare much better this season. Their average of 31,000 viewers tied with Oakland as the second-least-viewed team.

But the Nationals look to be on the verge of getting interesting. Next season, star pitcher Stephen Strasburg is expected to have a big role on the team, and fellow No. 1 draft pick Bryce Harper is a budding young star. Local fans are excited about those players, and team officials clearly hope they will boost the Nationals’ TV ratings.

The Nationals currently hold 13 percent of MASN. The franchise picks up around 1 percent a year. The original deal says that the Nationals, who are owned by Ted Lerner, can’t hold more than a 33 percent stake in the RSN. Once the Nationals reach that 33 percent stake — after about two decades — the franchise will stop accruing equity.

The closest parallel to the Nationals’ situation just occurred in New Jersey, where a cable rights fee dispute between the NBA’s Nets and YES Network went before an arbitrator. Weeks before the arbitrator’s decision was due, the two sides wound up agreeing on a 10-year extension.

Cable rights fee disputes are common between RSNs and teams, but it’s rare that they go to arbitration. In fact, it is believed that no fee dispute between an RSN and a team has ever been resolved by an arbitrator.

MLB negotiated the Nationals’ initial rights deal when it operated the franchise in 2005. At the time, the deal gave Angelos 90 percent ownership of MASN, which was a way for MLB to alleviate the Orioles owner’s concern that the relocation of the Nationals from Montreal to Washington would harm his club.

Staff writer Eric Fisher contributed to this report.


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