Two views about impact of media deals
It was incredible to me that Cardinals slugger Albert Pujols, as an aging 32-year-old baseball player, would get a $254 million contract for 10 years. Is he going to be worth a guaranteed $25.4 million when he is 42 and in the last year of that deal? Even as a baseball fan who appreciates Pujols for being the great player he is, I said to myself, has the Angels’ ownership gone crazy? How can it spend that much?
The day after the Angels signed Pujols, the team agreed to a $3 billion, 20-year contract with Fox Sports West for the rights to continue airing 125 team games a season. The new deal increases the Angels’ television rights revenue by $100 million per year, or about $2 billion in total. Only the most naïve person would think that the TV deal wasn’t in the works at the same time the Angels were negotiating with Pujols. The TV deal was central to the Pujols signing! The formula was simple: Sign Pujols, do the TV deal with Fox Sports, and make the viewers pay.
As a country, we need to start questioning whether the sports market is working, particularly for the non-sports fans with a pay-TV subscription. Basically, Pujols, the Angels, and Fox Sports West get paid by many, many people who do not care about nor watch baseball and the Angels, let alone know who Albert Pujols is. Ironically, as SportsBusiness Journal reported, the Angels are one of the least popular baseball teams on TV today!
Small cable operators have consistently warned about the harm posed by out-of-control sports rights fees. But this latest example shows how crass the system is and how uncaring it is to the consumer, particularly the non-sports fan, who is forced to pay for the outrageous fees paid by Fox Sports West, which is layered on top of excessive fees paid by ESPN, Versus, TNT, Golf Channel, Speed and all of the other channels that carry sports.
Unfortunately, there is absolutely no transparency in the market for consumers to see how they are being forced to pay (because they have no choice) for the Pujols contract, not to mention the Olympics, “Monday Night Football,” Wimbledon and all of the other sports that many people don’t care about or watch at all. In fact, the sports channels want it this way and impose nondisclosure provisions in their contracts. In the last two days, the Angels paid more for two players than the owners paid for the entire team ($183.5 million in 2003 for the team vs. $331.5 million for Pujols and C.J. Wilson)! Why? Because Fox Sports and all of the other sports programmers know they can just shove the product down the throats of all consumers and make them pay whether they like it or not.
I’m sure more deals like this one are on the way. But I can assure you that we at the American Cable Association intend to let policymakers — who have given the leagues antitrust exemptions and other perks — know that it is the choice-denied pay-TV subscriber who is paying the vast sums to Pujols, the Angels and all of the other sports leagues and sports channels.
The following letter is in response to the story “Another jackpot for NFL,” in the Dec. 5-11 issue of SportsBusiness Journal.
From a team perspective, when you divide the new [NFL] total average yearly media revenues of $7 billion across 32 teams, you end up with a yearly average of nearly $224 million per team, well above the current per team average of nearly $134 billion per team.
In turn, that’s why the NFL lockout ended up without a single regular-season game being lost, as the growth in total media revenues allowed each side to claim victory. Team owners will pay out a lower percentage of revenues for player compensation, while the players will receive more compensation dollars as team revenues grow.