SBJ/Aug. 26-Sept. 1, 2013/Media

MASN deal creates a legend and a deadlock

It remains one of the most lopsided deals in sports TV history and bolsters Peter Angelos’ reputation as a shrewd negotiator.

In 2005, Major League Baseball gave the Orioles owner control of the media rights to his team’s closest geographic rival, the Washington Nationals. At the time, MLB wanted to relocate the Expos from Montreal to Washington, and MLB used this as a way to convince Angelos to cede rights to the D.C. market to the new club.

Former MLB President and CEO Bob DuPuy and Angelos at a congressional hearing on Nationals TV rights in 2006
Photo by: AP IMAGES
That allowed Angelos to launch two regional sports networks — MASN and MASN2 — that would showcase two of the regions top sports attractions: the Orioles and the Nationals. The Orioles hold a majority ownership stake in the channels; the Nationals have a 13 percent stake, a figure that can rise to 33 percent over the next two decades.

To mollify the Nationals’ owners, MLB allowed the team to open up the media rights deal every five years to make sure it was being paid the market rate. Nearly two years ago — five years into the deal — the Nats exercised their option and opened the deal for the first time. The team believes its $29 million-per-year rights fee that MASN pays is well below market value.

After nearly two years of on-again, off-again negotiations, a resolution still seems far away, as the two sides remain about $85 million apart.

Despite the difference, several sources are reporting some small steps that have been taken toward a resolution. Several sources say one scenario — where NBC Sports Group would buy the rights to the Nationals and Orioles from MASN — has emerged as the front-running scenario to break the impasse.

NBC Sports Group has been discussing a plan that would see the group operate two regional sports networks in the Baltimore-Washington market. Currently, three RSNs operate in the market: MASN, MASN2 and Comcast SportsNet Mid-Atlantic, which is run by NBC Sports Group and carries the NBA Wizards and NHL Capitals to both markets. NBC Sports Group uses an overflow channel when games run at the same time.

Under a plan discussed with MASN, NBC Sports Group would pay in the neighborhood of $1 billion for the media rights to the region’s two baseball teams. One RSN would carry the Orioles and either the Wizards or Capitals. The other RSN would carry the Nationals and either the Wizards or Capitals. It’s not clear what the revenue split would be. But this type of deal would demonstrate that Angelos’ moves in 2005 that led to the creation of MASN still would be paying benefits to the Orioles owner.

No deal is imminent, as talks between MASN and NBC have cooled, sources said.

Initially, Fox Sports also had been involved in talks to buy the teams’ rights from MASN. But sources said the initial price tag quickly got so high that Fox executives have not participated in talks since the spring.

It’s not known if NBC Sports Group is interested in buying MASN and MASN2, or just the rights to the Orioles and Nationals. Neither MASN channel features much original programming. The channels carry feeds from ESPNews when baseball games end. It’s conceivable that NBC Sports Group could shut down one of MASN’s channels if it got control of the rights.

These talks are occurring as the dispute over the Nationals’ rights approaches a two-year anniversary. In order to speed up the process, MLB hired Allen & Co.’s Steve Greenberg to try to arrive at a deal.

The Nationals are seeking a rights fee increase from around $29 million per year to as much as $120 million per year. The Nats believe such an increase is warranted given rights fee increases in Texas (the Rangers signed a 20-year, $3 billion deal last year) and San Diego (the Padres recently signed a 20-year, $1.2 billion deal).

MASN believes the Nationals’ fee should increase to $35 million per year, a 20 percent jump. MASN bases its figure on MLB’s “television formula” that takes into account local market size, geography, TV ratings and network revenue and expenses.

The Nationals are using Proskauer and Bevilacqua Helfant Ventures as advisers. MASN and the Orioles are using a law firm that’s long been tied to the team, Rifkin, Livingston, Levitan & Silver.

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