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Volume 20 No. 42


The ongoing media rights dispute between MASN and the Washington Nationals hinges on the interpretation of a longtime MLB television formula that was included in the 2005 relocation settlement deal between the league and the Baltimore Orioles, according to several sources.

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.

The NFL marketplace is showing no signs of softening with Super Bowl and regular-season ad sales attracting record-high prices.

CBS has sold 80 percent of the Super Bowl’s game inventory and is moving into the summer with a handful of spots left to sell. Sources say CBS is asking a record-high $3.8 million per 30-second spot for the game, which has set U.S. television viewership records for the past three years.

CBS’s $3.8 million rate for a 30-second Super Bowl spot represents a nearly 9 percent increase from last year. CBS has already sold 80 percent of the  game inventory.
Just three weeks ago, CBS was saying that the game was 50 percent sold, so the latest figure shows a lot of inventory moved in the ensuing weeks.

“The game has moved early,” said John Bogusz, executive vice president of sales and marketing for CBS Sports. “We’re certainly well ahead of where we were three years ago [the last time CBS carried the game].“

The pace of CBS’s ad sales offers further evidence that the Super Bowl selling season has moved earlier than ever. Three years ago, for example, CBS went into September with a lot of inventory left to sell. But for the past three years, networks had completed the bulk of their ad sales in early summer, just after the upfront selling season.

CBS would not identify advertisers who have bought spots. A-B has a long-term deal for the game that includes around 10 spots. Bogusz said the auto category has been strong despite GM’s decision to not advertise in the game. Bogusz also pointed to film studios and beverages as strong categories.

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CBS’s $3.8 million rate marks a nearly 9 percent increase from last year, when NBC sold the game for $3.5 million per 30-second spot, according to several advertising executives — both buyers and sellers — with knowledge of the rate.

The $3.8 million is generally the price paid for one 30-second TV ad during the game. Most advertisers buy packages and schedules across the network to bring that rate down. CBS has been active in selling packages throughout its prime time, sources said.

Overall, NFL ad sales are steady for the networks’ regular season. CBS, ESPN, Fox and NBC say they are selling at a similar pace as last year when sales were high despite the league’s offseason work stoppage. This year, sources say the networks are commanding increases in the high single digits.

All of the networks said they were in the middle of cutting deals last week and were not able to say how much of their schedule was sold. CBS’s Bogusz said he expected his network’s Sunday afternoon schedule to be 80 percent sold by the middle of July.

“It’s going to be a healthy market. We just need to figure out a number that works for all.”
Jeremy Carey,
U.S. director for Optimum Sports
“It’s going to be a healthy market,” said Jeremy Carey, U.S. director for Optimum Sports, who was finalizing NFL deals for several of his clients last week. “We just need to figure out a number that works for all.”

That number generally represents an increase in the mid to high single digits, sources said, and almost all of the schedules involve digital media.

NBC walked into the offseason with nearly 50 percent of its “Sunday Night Football” schedule already sold, thanks to the multiyear deals that the network sold.

For example, Toyota is returning as a halftime sponsor and Wendy’s as a postgame sponsor as part of multiyear deals.

Seth Winter, executive vice president of sales and marketing for the NBC Sports Group, said interest in the network’s first prime-time Thanksgiving Day game has been high despite a cost that Winter has previously said would approach $1 million per 30-second spot, putting it on par with NFL playoff games.

“The marketplace has been moving since February,” Winter said.

Fox executives said the network was in the middle of negotiations with several advertisers last week, and that it had seen a lot of interest in the quick-service-restaurant, auto and electronics categories.

“Our volume is strong,” said Neil Mulcahy, Fox Sports’ executive vice president of advertising sales. “The NFL delivers such huge audiences.”

ESPN delivered the same message. “The marketplace is strong, and we’re seeing demand for the NFL,” an ESPN spokesperson said.

With Fuel TV shifting away from action sports programming, Red Bull — a producer of action sports programming through its Red Bull Media House — faced a problem: Of the hundreds of cable channels in existence, none is devoted entirely to the action sports genre, which may not bring huge ratings but reaches a young, male audience that advertisers typically want.

Red Bull will distribute its action sports programming on the upstart network.
After assessing the landscape for several months, the company has settled on a new network, Outside Television, that launched in June 2010. This week, Red Bull Media House plans to announce a three-year programming deal with Outside Television that will see at least 30 hours of non-event Red Bull branded programming on the network starting in the middle of next month.

Outside Television, which recently cut a deal with Comcast and expects to have a distribution of 5.7 million homes by the end of the year, paid a rights fee for the programming, but the companies would not say how much the deal is worth. The deal is strictly a programming one and does not include any sponsorship elements beyond having Red Bull’s brand integrated in the shows. Outside Television will handle the ad sales.

“Outside is now the only channel that can support lifestyle action/adventure programming,” said Greg Jacobs, head of distribution for Red Bull Media House North America. “That’s why they are so important to us.”

Fuel TV is in 36 million homes, but Jacobs said he is not concerned by Outside Television’s smaller distribution footprint, saying that he believes in the strength of the brand and is confident it will grow. “We don’t want to be on a bigger network if we’re going to be lost in a Saturday daypart,” Jacobs said. “We have a big audience that we can migrate to that network.”

The deal includes original series, films and future shows with Red Bull athletes, including NFL player DeMarcus Ware, NBA player Blake Griffin and skier Lindsey Vonn. Red Bull’s roster also includes action sports stars Travis Pastrana and Ryan Sheckler. The 30 exclusive hours of prime-time programming will be produced by Red Bull Media House. The deal also contemplates future shows that are yet to be developed.

The best-known series is “Pushing Boundaries,” which Outside Television plans to run nightly in prime time.

“Our audience works well with Red Bull,” said Rob Faris, senior vice president of programming for Outside Television. “Our audience is older than the typical action sports audience. Our more mature audience — typically over 30 — is a good complement for Red Bull.”