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Volume 23 No. 29
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Leonsis keeps RSN in the picture with deals

The future of video may be in digital. But for the Washington Capitals and Wizards, the next 17 years will be rooted in traditional television.

After two years of sometimes arduous negotiations, NBC Sports Group reached a handshake agreement to extend its media rights deals with both franchises through the 2031-32 NHL and NBA seasons. Final contracts have yet to be signed, but sources say that the 15-year deals will give the teams’ owner, Monumental Sports & Entertainment, a 33 percent equity interest in the Comcast SportsNet Mid-Atlantic regional sports network that covers Washington, D.C., and Baltimore. Ted Leonsis is founder, majority owner, chairman and CEO of Monumental.

Monumental’s Ted Leonsis has been vocal about keeping his teams’ rights for his OTT service.
Most importantly to the legacy RSN business, the deal counters talk from an increasing number of team owners looking to offer their live game rights directly to consumers via over-the-top distribution. A former AOL executive, Leonsis has a strong media pedigree and has been the most vocal sports owner about cutting out the RSN middleman and keeping the Caps and Wizards’ rights for his Monumental Network over-the-top service.

Across the country in Los Angeles, talks between the Clippers and Fox Sports broke down over a similar issue — Clippers owner Steve Ballmer wanted to keep some rights for his own over-the-top offering. Sources said the Clippers and Fox are back at the negotiating table working on a more traditional RSN rights deal.

CSN Mid-Atlantic’s deal continues the trend of NBC Sports Group selling equity stakes in their RSNs. In addition to the Capitals and Wizards’ stake in CSN Mid-Atlantic, the Giants, Phillies and Celtics have equity interests in the NBC Sports Group RSNs covering the San Francisco, Philadelphia and Boston markets, respectively. CSN Chicago is a partnership with NBC Sports Group, the Bulls, White Sox and Cubs.

NBC Sports Group President Jon Litner and Leonsis negotiated the deal. Allen & Co.’s Steve Greenberg represented Leonsis in the negotiations.

The deal represents a coup for Leonsis, who still had several years remaining on both teams’ deals. Leonsis inherited the Wizards’ deal, which runs through the 2020-21 season. The Caps’ current deal runs through the 2016-17 season. With the new deal, both teams’ local media rights will sync up, starting with the 2017-18 seasons. CSN Mid-Atlantic agreed to have the Wizards’ new deal start four years early.

It’s difficult to determine the average annual value of these deals, given upfront bonus payments made to each team and Monumental’s equity interest stake. Still, sources said both teams will more than double their average annual rights fee. Taking out upfront payments and equity considerations, the Capitals will see their annual average rights fee climb to around $28 million, up from their current amount of $13 million per year. The Wizards will take in an average of around $35 million per year in their new deal, up from the current annual average of $17 million, sources said.

The Baltimore-D.C. market also is home to the Mid-Atlantic Sports Network, which is owned by Orioles owner Peter Angelos. While it’s set up as a competitor to CSN Mid-Atlantic, sources said MASN never was a serious contender for the Caps and Wizards’ rights.