SBJ/June 11-17, 2012/Media

MLB extends deliberations as MASN, Nationals said to be $70M apart on new rights deal

MASN and the Washington Nationals still are so far apart in their media rights fee dispute — there’s a $70 million annual difference between the two sides, sources say — that Major League Baseball has decided to extend its deliberations by a month.

Originally, the league planned to decide how much MASN should pay the Nationals for their media rights by the beginning of June. Now, MLB has told both sides not to expect a decision until July, sources said.

It’s not clear why MLB has held off on making a ruling, especially since the league originally heard testimony in April. But sources say the league has a concern that any decision will lead to a lawsuit from one side or the other.

Plus, other MLB teams are watching the dispute closely, fearful that a ruling in favor of MASN could set a new lower bar for local TV rights. In the past few years, the market for local baseball rights has been scalding hot, punctuated by deals like the Texas Rangers’ 20-year, $3 billion pact with Fox Sports Net and the San Diego Padres’ 20-year $1.2 billion deal, also with FSN.

Right now, the two sides are far apart, and there doesn’t appear to be much middle ground.

The Nationals have told MLB that they should receive an average of more than $100 million a year in media rights, a fee that would put the team on par with other teams in the top-10 media markets.

MASN said the fee should average about $35 million a year, citing the team’s low TV ratings and tepid fan base. Plus, MASN believes the fact that Baltimore Orioles games are carried in the Washington, D.C., market should depress the rights fee going to the Nationals. MASN’s offer represents a 20 percent increase over the $29 million a year it now pays the Nationals.

In addition to the rights fee, the Nationals hold a 13 percent equity stake in the regional sports network, adding 1 percentage point annually until it peaks at 33 percent.

Complicating matters is a parity clause in MASN’s contract requiring that the Orioles receive exactly as much in rights fees as the Nationals. That means if the Nationals wind up with a new deal worth $100 million a year, the Orioles also would get $100 million a year.

Cable industry sources have questioned whether MASN could afford both contracts, given the long-term carriage deals they already have signed with cable and satellite operators. MASN gets about $2.14 a subscriber per month, according to figures from SNL Kagan. That’s higher than only a handful of RSNs.

Plus, MASN has run into trouble expanding its footprint in North Carolina, where Time Warner Cable has refused to give it basic tier carriage. Just last month, a federal appeals court upheld a Federal Communications Commission decision that allowed Time Warner Cable to keep MASN off of its basic tier, according to published reports.

MLB created an ad hoc committee of owners from the New York Mets, Pittsburgh Pirates and Tampa Bay Rays to come to a decision. Rob Manfred, MLB executive vice president for labor relations and human resources, is leading the committee.

As part of their MASN deal, the Nationals can reopen their media rights deal every five years. The two sides have been negotiating since the end of last season. As part of the contract, if the two sides can’t reach an agreement, MLB would settle the matter via an arbitration-like process.

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