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SBJ/June 25-July 1, 2012/Media
MLB television formula at issue in dispute between MASN, Nationals over rights fee
Published June 25, 2012, Page 6
The Nationals and MASN have been negotiating for months without success on a new rights fee, as the club holds the right to seek a reset every five years. Last fall presented the first opportunity for that reset following an initial, two-year startup period for the regional sports network.
The two sides are far apart on money. MASN is arguing the Nationals should receive $35 million a year, up 20 percent from their current $29 million annually; the club is pushing for as much as $120 million annually.
Beyond basic financial terms, the sides are nowhere near agreement on how the new rights fee ought be derived, according to industry sources. MASN, majority owned by the Orioles, argues the fee should be determined by a formula used for more than 15 years by MLB’s revenue sharing definitions committee. That formula takes into account factors such as local market size, geography, network revenue and expenses, and prior TV ratings to determine related-party broadcast rights fees for clubs that own equity in their television partners. The formula was developed with the aid of league consultant Bortz Media & Sports Group of Colorado and has been used for clubs such as the Boston Red Sox and NESN, the New York Yankees and YES, and the Toronto Blue Jays and Rogers SportsNet. Industry sources said the Orioles’ 2005 deal with MLB to allow the Montreal Expos to relocate to Washington, D.C., specifically calls for the use of the same, established structure.
The Nationals, conversely, are pointing more to current open-market conditions for baseball rights, which have grown by unprecedented degrees in the last two years. The Texas Rangers, playing in a market smaller than the combined Washington-Baltimore TV footprint, hold a 20-year deal with Fox Sports Net worth $3 billion. The San Diego Padres, playing in a market less than half the size of Washington alone and fifth-smallest in baseball and not fully distributed in their own market, recently signed a 20-year deal with FSN worth $1.2 billion.
The Orioles and MASN, however, argue those long-term deals are not comparable. They not only point to the prior settlement with MLB, but they also point to key differences between those multiyear deals and the MASN-Nationals agreement, which essentially is a collection of successive five-year pacts that eventually could be worth the same as those long-term deals.
MLB has put the issue before an ad hoc committee involving owners of the New York Mets, Pittsburgh Pirates and Tampa Bay Rays, and led by Rob Manfred, league executive vice president for economics and league affairs. A decision had been due by early June but is now on hold until at least early next month. Further complicating the issue is the rising possibility of a lawsuit from the losing party.
MASN’s contract with the Nationals also includes a parity provision mandating that any new fee the club receives must also be paid to the Orioles. In addition to rights fees, the Nationals are also an equity holder in MASN, with its 13 percent stake set to rise to 33 percent over the next two decades, and both teams have received undisclosed, annual profit distributions each of the past several years.
The Nationals, MASN and MLB declined to comment.