445 replies to this topic

[Mackus]

$3.6M > $0M.

 

Increasing the TV rights clearly helps the Nationals, as they end up with more money.  It never hurts them, because even when they eventually end up with 1/3 of the profits, it'd be 1/3 of $20M, which would exactly matches the dollars you say they keep after paying their TV money into revenue sharing (without considering any of what they get back).

[Nigel Tufnel]

$3.6M > $0M.

 

Increasing the TV rights clearly helps the Nationals, as they end up with more money.  It never hurts them, because even when they eventually end up with 1/3 of the profits, it'd be 1/3 of $20M, which would exactly matches the dollars you say they keep after paying their TV money into revenue sharing (without considering any of what they get back).

 

Right, but now you can see why MLB giving the Nats an extra $7M in revenue sharing is actually sort of fair to both teams - it's equivalent to about $20M in additional rights fees and doesn't screw Angelos.

[Matt_P]

Right, but now you can see why MLB giving the Nats an extra $7M in revenue sharing is actually sort of fair to both teams - it's equivalent to about $20M in additional rights fees and doesn't screw Angelos.

 

And you bring up an excellent point.

 

MLB would get the majority of revenue in this scenario not the Nationals. So MLB is the party that has the most interest in seeing the Nationals win. And MLB is the party that can decide the dispute. And MLB has decided not to make a ruling on it for a few years. In fact, they've decided to give the Nationals money to keep them happy which is the worst case scenario for them.

 

What do you think MLB thinks about the Nationals complaint?

[Nigel Tufnel]

What do you think MLB thinks about the Nationals complaint?

 

I think they think they're a bunch of dumbasses for not noticing how Angelos snuck that 'using the RSDC's established methodology' line into the agreement.  Actually, though, I guess that was MLB's fault.

[Domenic]

I think they think they're a bunch of dumbasses for not noticing how Angelos snuck that 'using the RSDC's established methodology' line into the agreement.  Actually, though, I guess that was MLB's fault.

If you don't read a contract to all the way through before signing it I have very little sympathy for you. In this case of course it benefits the league and the Nats if the Nationals get more of the profits. However they know that if they just arbitrarily rule in the Nationals' favor Angelos will sue. And he'd be right to do so because it would be breach of contract. I guess my point is that in many cases you can only get screwed if you allow yourself to be screwed. MLB/Nationals allowed themselves to be screwed in the interest of having a team in Washington. Granted the Lerners might well be a victim of circumstance in this case, however agreeing to this deal was a condition of them buying the team.

[Matt_P]

I think they think they're a bunch of dumbasses for not noticing how Angelos snuck that 'using the RSDC's established methodology' line into the agreement.  Actually, though, I guess that was MLB's fault.

 

That was MLBs fault. But what's MLB going to say? Our formula sucks and is completely wrong but we're not going to change it?

[Nigel Tufnel]

That was MLBs fault. But what's MLB going to say? Our formula sucks and is completely wrong but we're not going to change it?

 

I'm kind of surprised that they don't just say their methodology isn't to 'use formula x', but is to 'periodically conduct a review of market conditions to establish the fair value blah blah blah' and then go develop a more updated formula.  But then Angelos would probably still sue, and the methodology for developing the formula would go public, so I guess MLB wouldn't want that.

[Domenic]

But then Angelos would probably still sue, 

As well he should.

[dude]

They [Astros] got something between $10-$15 million in rights fees and ended up losing a lot more to keep the network afloat (and couldn't do it). The RSN did go bankrupt and is still bankrupt (Astros will end up getting zilch this year because the RSN still owns their rights and won't be able to pay basic expenses).

 

It seems like you're saying that equity stake profits should be subject to revenue sharing but that equity stake losses are the responsibility of the team and have no impact on revenue sharing. 

 

...and aren't there enough different topics involved in this thread?  I guess this is coming back to my other comment but there's a much larger discussion here than we should probably not do in this thread.

 

The short answer to the second part is....no, that's not what I'm saying.  For me, it's a much bigger issue of the responsibility of every team in the community of baseball to do their job reasonably....again, a much bigger issue in terms of revenue sharing, etc.

 

If the Astros owners screw up their network.....that's not really the League's fault.  They took a risk (as you like to say), but the bottom line is that if they had just put their TV rights on the market, the Astros (team) would have a media revenue stream in that area.  I wouldn't get too specific without more details, but in a situation like you're describing, the Astros rights have some value which they aren't getting because of the RSN failure.  Under a something like I'm discussing (adjusting FMV calculations up to current levels) when a team falls into the Astros' condition, they may have to appeal to the League for relief of that amount (more to it than that...but short answer).....maybe there's a series of penalties.....first time a warning.....second time 50% forfeiture of revenue share....3rd time forfeit full share.....4th time MLB managed 'sale' of media rights to local sources (because obviously the team has proven incompetent).

 

There's nothing that requires the Astros to develop their own RSN.....I get what the benefits are but aren't part of the benefits (the desire for oweners to do this) driven by the under-valued FMV formula?  If you reduce the upside of hiding the money.....then fewer owners may be enticed into doing stupid things because the benefits aren't there (still their call)....maybe the Astros (others you mention) would just sell their rights to Fox Sports (whoever), take the money, contribute their share and get onto the business of winning.

[dude]

As well he should.

 

....so I don't know....does it specify the formula with no reference directly or indirectly to the MLB FMV?

 

....because if it calls out (directly or indirectly) the FMV formula and the formula changes, then there is no breach...in fact....by your argument Angelos should NOT sue, because as you say, a deal is a deal.

[Nigel Tufnel]

....so I don't know....does it specify the formula with no reference directly or indirectly to the MLB FMV?

 

....because if it calls out (directly or indirectly) the FMV formula and the formula changes, then there is no breach...in fact....by your argument Angelos should NOT sue, because as you say, a deal is a deal.

 

Matt posted the contract a few pages ago if you want to check it out.

 

Basically, it never specifically mentions the word "formula", but it says the rights fees are determined using MLB's 'established methodology',  which the O's would say clearly refers to the formula.

 

The formula is what MLB uses to make sure that teams that own their own RSN's pay themselves a fair amount in rights fees, and don't cheat to try to avoid revenue sharing.  It's out of date, but from what I gather, it's still being used for other teams, so it's not so easy for MLB to just change it.

 

The formula wasn't really designed with the Nats' situation in mind, but it's what's specified in the contract.

[Matt_P]

This isn't so relevant to anything but I found this article by Boswell and thought that it should at least be good for a laugh. So many gems. He thought the deal was reasonable enough at the time.
 

If the new Mid-Atlantic Sports Network is someday a truly big success -- like NESN -- the Orioles would get two-thirds of the profits instead of, say, a 50-50 split with Washington. So how much is that? Do the arithmetic. The Orioles might get $8 to $10 million of the $12 to $15 million in profit instead of just half of it, which would be $6 to $7.5 million. So, this whole fight may get the Orioles a couple of million dollars extra a year someday.

 

http://www.washingto...005Mar31_2.html

 

This article explains more about the whole formula bit.

 

http://www.sportsbus...Media/MASN.aspx

[dude]

1) Suppose Nats rights fees increase by $10M

2) The Nats have to pay 34% of that toward revenue sharing, so they keep $6.6M

3) The O's rights fees would also increase by $10M, per the terms of the agreement

4) MASN Profit = Revenue - Expenses - DCrf - BALrf

5) If DCrf and BALrf both increase by $10M, then MASN profit drops by $20M

6) Nats share of the MASN profits drops by 15% x $20M = $3M

7) Of the $10M increase in rights fees, the Nats actually see $10M - $3.4M - $3M = $3.6M

8) I just used $10M as an example but if you want to see $20M, just double all the above numbers

9) I guess the Nats would also collect an extra $200k or so in revenue sharing, but I'm ignoring that

 

1) OK

2) No.  Nationals revenue sharing is not a straight loss.  I'd guess they are making money (or ~neutral) in revenue sharing so when they contribute A for their 34%, they get back B (1/30 of total) and A <~ B

3) OK

4) Brilliant

5) True 

6) Yes

 

7) 2 above is going to screw this up and I'm not sure why you want to try and do it this way....any money that is turned as rights fees is a 50/50 split with the Orioles and the Nats get all (most, more) of that back from MLB....anything that gets split on the MASN profit side is shared 85/15.

 

8) not going to necessarily be true, because there are some other factors in there, and still confounded by 2

 

9) bottom line for the Nationals is that MLB treats them better on the Revenue Sharing side than Angelos (per deal) does on the MASN profit side.  Lerner's have shown more of a willingness to be aggressive with the team resources for the team, so regardless of where they make it (rights fees or MASN profits) they are still looking to sink it back into the team.  Angelos is in the opposite condition where he's not looking to expose the money to MLB (through sharing) or sink profits back into the team.

[Nigel Tufnel]

2) No.  Nationals revenue sharing is not a straight loss.  I'd guess they are making money (or ~neutral) in revenue sharing so when they contribute A for their 34%, they get back B (1/30 of total) and A <~ B

I guess this is the part I don't understand.  Say the Nats are currently getting X in rights fees and getting back Y in TV rights revenue sharing (where Y = 1/30 x 34% x total MLB rights fees).

 

So if the Nats suddenly got (X+$10M) in rights fees, wouldn't they have to pay an additional $3.4M to MLB for revenue sharing, and only get back an extra 1/30 x 34% x $20M = $226,667?  (I ignored the $226k in my original example to simplify things because it was small).

 

What am I doing wrong here?

[dude]

I guess this is the part I don't understand. Say the Nats are currently getting X in rights fees and getting back Y in TV rights revenue sharing (where Y = 1/30 x 34% x total MLB rights fees).

So if the Nats suddenly got (X+$10M) in rights fees, wouldn't they have to pay an additional $3.4M to MLB for revenue sharing, and only get back an extra 1/30 x 34% x $20M = $226,667? (I ignored the $226k in my original example to simplify things because it was small).

What am I doing wrong here?

just as a note....34% of all local revenue goes into the pool....we tend to just look at the TV side, but they aren't broken out like that.

I think I sort of see where you were going with the whole thing.....I don't like working the numbers backwards because it sometimes leaves other things out.....let's work them from the front with the 2013 numbers suggested in the Kilgore article,

If the Nat's 14% of profits was 8M, then the Orioles 86% is 49M.....that's 57M in MASN profit given 37M payouts to both teams. For the sake of discussion, let's assume both teams break even in revenue sharing (34% team = 1/30 MLB) or just use a net of 0 for the initial case.

DC = 8M MASN+ and 37M DCrf with RevShare (net) 0......total 45M
BAL = 49M MASN+ and 37M BALrf with RevShare (net) 0.....total 86M

If we add 10M to both teams TV rights fees.....that's 47M each and MASN profits are now 37M and DC gets 5.2M and BAL gets 31.8M.....10M is shared at 34% and they get 1/30th of the back (-3.3M)

DC = 5.2M MASN+ and 47 DCrf with RevShare (net) -3.3M.....total 48.9M
BAL = 31.8M MASN+ and 47M BALrf with RevShare (net) -3.3M....total 75.5M

Before total (DC + BAL) = 131M
After total (DC+10, BAL +10) = 124.4

....so the total cost (really the 34% of 20M) is -6.6M, but the Nationals are up 3.9M

....and you can see why PGA wants to fight about it because he's down almost 20M away from the game.

Also....one of the issues for teams is to stay in the bottom 15 or 20 teams because the top (10, 12, 15?) teams can't make money in revenue sharing (IIRC) so if you are getting money (making) in RevShare you want to stay in that group. I don't know how close the Nats (or Orioles) are to that line.....so there's consideration for that to keep your organizational revenues at a level where you qualify for your full share (impacts both teams)......violate that rule and the numbers for both teams above go down (RevShare would be down more than the 3.3M)

[Nigel Tufnel]

OK, you're looking at 2013, when the Nats own 14% instead of 15%, so the numbers from my example would change slightly.

 

I would say Nats get $10M - $3.4M - (14% x $20M) = $3.8M.  You're adjusting the $3.4 to $3.3 to reflect the 1/30, so I would say $3.9M.

 

Now let's look at your numbers:

 

First, if 14% of the profit is $8M, then the total profit is $57M (57 x 14% = 8) leaving $49 for the O's, so:

 

DC = 8M MASN+ and 37M DCrf with RevShare (net) 0......total 45M
BAL = 49M MASN+ and 37M BALrf with RevShare (net) 0.....total 86M

 

With an additional $10M for each team, it becomes:

 

DC = (14% x $37M) = 5.2M MASN+ and 47 DCrf with RevShare (net) -3.3M.....total 48.9M
BAL = (86% x $37M) = 31.8 MASN+ and 47M BALrf with RevShare (net) -3.3M....total 75.5M

 

 

48.9M - 45M = (drumroll) 3.9M.

 

So I think we actually agree, although I've kind of forgotten the question by now.

[dude]

First, if 14% of the profit is $8M, then the total profit is $57M (57 x 14% = 8) leaving $49 for the O's, so:

 

You're right....I'll go fix that.....I divided and then added the 8M back in (which I shouldn't have done).

 

The question was whether the move to 66/33 solves the differences.....which I didn't address either.....

[dude]

48.9M - 45M = (drumroll) 3.9M.

 

So I think we actually agree, although I've kind of forgotten the question by now.

 

....so I corrected mine and we have the same answer.

 

DC gets 10M in rights fees from MASN adn they have an additional 3.9M in resources.

------

 

So what happens in that case if it's a 67/33 split?

 

DC gets 16.2M MASN+ (33%) and 37M DCrf and RevShare (net) 0 = total 53.2M

BAL gets 42.1M MASN+ (67%) and 37M BALrf and RevShare (net) 0 = total 79.1M

 

or in the MASN+ = 0 case (split the 49M between the 2 teams....37+25=64M)

 

DC gets 0 MASN+ and 64M DCrf and RevShare (net) -8.2M = total  55.8M

BAL gets 0 MASN+ and 64M BALrf and RevShare (net) -8.2M = total 55.8M

 

....and again....the Nationals goes up a little and Angelos gets hammered away from the game.

[Domenic]

....so I don't know....does it specify the formula with no reference directly or indirectly to the MLB FMV?

 

....because if it calls out (directly or indirectly) the FMV formula and the formula changes, then there is no breach...in fact....by your argument Angelos should NOT sue, because as you say, a deal is a deal.

What the Nationals are arguing is that the formula that's in place doesn't give them what they deem to be fair market value for their rights. And I agree with them, although I do think that they believe FMV is higher than it truly is. However the fact is that the league isn't going to just change the formula that's in place for one team. So yes they don't get FMV for their rights, but given the contract stipulations they really can't argue that they should get more. And yes, Angelos should sue if they're awarded anything more than what the formula stipulates.

 

As I said, you can only allow yourself to be screwed so much before the accountability lies with you. I recognize that the Lerners didn't negotiate the deal, however they agreed to it. If they didn't want to honor the agreement, they could have opted not to buy the team. If I'm Angelos, I'm going over that contract with a fine tooth comb and ensuring that it's enforced to the the word of the law. What's "right" isn't always what's "legal."

[You Play to Win the Game]

Holy crap my head hurts after reading the last couple pages. But hey, kudos to smart people!