668 replies to this topic

[Nigel Tufnel]

 Retweeted by Adam Kilgore

James Wagner ‏@JamesWagnerWP  1m

NYC judge grants MASN & Orioles a preliminary injuction against Nats. Essentially MASN can't be forced to pay more for Nats TV rights.

[Domenic]

Was just about to post this. Great news! In a related tweet by Jeff Barker of the Sun, MASN apparently was successful in raising the question of the true "arbitrary nature" of the panel.

[You Play to Win the Game]

This was always a "good luck lawyering Angelos" type of thing. I still think this gets nasty here soon, but the Gnats aren't going to win.

[Nigel Tufnel]

Yeah, this didn't really decide anything, except that the Nats can't pull their games from MASN while the rights fees are still being determined.  But a temporary win is better than a loss.

 

James Wagner @JamesWagnerWP · 1m

MASN still has to post $20 million by Fri., remaining amount owed in MLB panel's ruling. Sides to meet w/ judge Thurs. to decide next step.

 

James Wagner @JamesWagnerWP · 33s

*$20 million bond

[PatrickDougherty]

Yeah, this didn't really decide anything, except that the Nats can't pull their games from MASN while the rights fees are still being determined.  But a temporary win is better than a loss.

 

James Wagner @JamesWagnerWP · 1m

MASN still has to post $20 million by Fri., remaining amount owed in MLB panel's ruling. Sides to meet w/ judge Thurs. to decide next step.

 

James Wagner @JamesWagnerWP · 33s

*$20 million bond

Anyone know whether the judge is a mediator or an arbitrator? 

[Matt_P]

Just some thoughts.

 

If I were a Nats fan, I WOULDN'T be disappointed with MASNs deal. After looking at the details for a number of teams and reading the court documents, I can assure you that the Nationals aren't getting a bad deal (provided that the constants true from 2012-2016 remain true for the entire deal) and that Comcast would screw them over if it wasn't for MASN. Comcast did this to the Phillies and their deal is considerably worse then what MASN is offering the Nationals despite being a stronger market. The Phillies pretty much said that we know our position sucks if we don't capitulate to Comcast so we better do so.

Comcast controls the Washington/Baltimore area. If MASN isn't around to negotiate for the Orioles and Nationals then Comcast will tell the Nationals to take a serious cut in rights fees and there is nothing that the Nationals can do about it. Especially when Comcast tells them that they're not broadcasting their games in York, Lancaster and Harrisburg.

 

Without MASN, the Nationals are the Phillies if they're lucky. And I'm not sure they're even the Phillies. The Phillies allow Comcast to take away market share from Direct TV because they don't need to give them coverage. What leverage do the Nats have? CSN-MA already is charging $4.24 per subscriber, highest in the nation. They know they've got a monopoly in the region. And they have a precedent that $2.50 is fair value for the Nats/Orioles. How much are the Nats rights worth? 

The Nationals are insane. I'm done trying to explain their actions. They want over $100 million more in rights fees over five years than the Yankees.

 

The Orioles won't go for a second network. MASN would lose a lot in revenue if that happened. Completely out of the question unless MASN loses.

 

No idea if the judge is a mediator or arbitrator. How would I tell? My gut feeling is neither but I don't know how you'd tell?

 

Is it clear?  If I'm the Nats, I argue that the established methodology is to develop a formula based on current market conditions, and not just to blindly use the out-of-date Bortz formula.  I don't think anyone would argue that there's been a huge change in TV rights fees since the Bortz formula was developed.

 

Will MLB still be using the Bortz formula in 20 years?  10?  At some point it will be too out of date to use - why isn't that now?

 

Yes. The court documents talk about how its derived. It's considerably less complicated than I would have thought. And it will work forever. Sorta like how 2+2 will always be 4.

 

At some point, I want to write an article about this situation and I think I'm going to discuss a pargraph about how the Bortz methodology works given as that is pretty much the main crux of the case. That's one of the things that hasn't been covered by the media coverage that I've read.

[Matt_P]

I still say be careful what you wish for (not you specifically per se, but the "collective you") First off, the TV rights thing is far from an easy fix if MASN ceases to exist. The Nationals would go to CSN without a doubt. Given the fact that they would have been devious enough to have sent MASN out of business (potentially with that intent, mind you) are we to believe that they might not require some sort of non-compete clause from CSN?

 

I think they form a new channel with Comcast. After all, CSN-MA already has the highest subscriber fees for an RSN in the nation. Why do they need the Nationals? If they want to charge $7 per subscriber per month for CSN-MA without the Nats then why exactly can't they? They're already asking a ridiculous price and they have a monopoly. Why not ask $10 per month per subscriber?

 

Why does Comcast need the Nationals? Simply to screw over the Orioles (Comcast is pissed about MASN and would do just that)? Why would they be interested in paying the Nats a reasonable amount? What do the Nats bring to the table?

[aurelius]

Why not ask $10 per month per subscriber? Probably the same reason a team wouldn't charge $100 for the cheap seats. Nobody (or not enough) would pay it. A monopoly only gets you so much.

[Matt_P]

Why not ask $10 per month per subscriber? Probably the same reason a team wouldn't charge $100 for the cheap seats. Nobody (or not enough) would pay it. A monopoly only gets you so much.

 

Subscribers don't really have an option. CSN-MA (Comcast Sports Network Mid Atlantic) is owned by Comcast. Comcast is pretty much the sole cable provider in Baltimore/Southern Pennsylvania (I think over 95% of cable subscribers have them) and the main provider in Washington DC (I believe Comcast has 70% of the market share). If CSN charges $10 a month then Comcast can force their subscribers to pay extra in order to pay for this fee.

 

The Dodgers and Astros couldn't do this because their provider only controlled 30% of the market. So, people with their provider paid the fees and no one else. The Orioles/Nationals/Phillies are in Comcast's monopoly. And Comcast has its own station.

[PatrickDougherty]

No idea if the judge is a mediator or arbitrator. How would I tell? My gut feeling is neither but I don't know how you'd tell?

Not really any way to know beforehand unless it says so somewhere. I'm just curious. An arbitrator hears both sides and picks one or the other. A mediator's goal is to help the two sides reach an agreement, and generally has some legal standing to do so. If this goes to an arbitrator, it's supposed to be one-and-done, and would be a pretty weighty decision to be made by one person.

 

EDIT: Removed misremembered information.

[Mackus]

(or, in the case of MLB player contracts, some number in between)

 

Actually they can't pick a number in between for contract arbitration.  The arbitrator does in fact pick either the player's or the team's suggested salary if the case goes all the way through arbitration.

[Matt_P]

The Wash Post has reported that this case has also gone in front of the AAA (American Arbitration Association or some such). If I had to guess I would say that Justice Marks is definitely not a mediator. I just don't know if I'd call him an arbitrator. 

 

I do think that whatever he says goes although I think his power is limited. Obviously, he has the power to allow MASN not to pay the Nationals until this process has completed. It would seem that he has power to vacate MLBs ruling. I don't know if he can uphold MASNs requested amount.

 

Not sure if this helps any.

[PatrickDougherty]

The Wash Post has reported that this case has also gone in front of the AAA (American Arbitration Association or some such). If I had to guess I would say that Justice Marks is definitely not a mediator. I just don't know if I'd call him an arbitrator. 

 

I do think that whatever he says goes although I think his power is limited. Obviously, he has the power to allow MASN not to pay the Nationals until this process has completed. It would seem that he has power to vacate MLBs ruling. I don't know if he can uphold MASNs requested amount.

 

Not sure if this helps any.

Okay thanks. Definitely sounds like an arbitrator, though maybe not one tasked with coming to a decision at this point. I was just curious as to the route the teams had taken.

[Russ]

Is this a factor in not extending Hardy and could it affect the offseason moves?

[Matt_P]

Is this a factor in not extending Hardy and could it affect the offseason moves?

 

Possibly. My understanding is that Dude thinks that Angelos is pocketing all of the money received from his equity stake. If he is correct then the Nationals winning will mean that the club will receive more money in rights fees and therefore have more money to spend on players. That could mean that resigning Hardy is easier.

 

I believe that Angelos is spending more money on payroll then we can afford based solely on revenue by ten million or so. I think one of the reasons he can do that is because he is receiving a significant amount of money in MASN equity stake payments. If so, if MASN loses then PA may cut payroll to make up some of the money that he would lose in MLBs decision was implemented.

 

In other words, it's almost definitely a factor. The problem is that a win could mean the team will spend more on payroll (receiving more revenue) or could be a reason why the team will spend less on payroll (Angelos wants a larger profit).

 

Another factor is the fact that we didn't have a first or second round pick last year saving us millions in draft costs. This year we could potentially have four first round picks (our own plus compensation for Kakes, Hardy and Cruz) and two second round picks (our own and the competitive balance pick). It might cost us maybe 8 million to sign all of those prospects if we do end up with 4 first round picks and 2 second round picks.

[Russ]

Is this a factor in not extending Hardy and could it affect the offseason moves?

  Possibly. My understanding is that Dude thinks that Angelos is pocketing all of the money received from his equity stake. If he is correct then the Nationals winning will mean that the club will receive more money in rights fees and therefore have more money to spend on players. That could mean that resigning Hardy is easier.   I believe that Angelos is spending more money on payroll then we can afford based solely on revenue by ten million or so. I think one of the reasons he can do that is because he is receiving a significant amount of money in MASN equity stake payments. If so, if MASN loses then PA may cut payroll to make up some of the money that he would lose in MLBs decision was implemented.   In other words, it's almost definitely a factor. The problem is that a win could mean the team will spend more on payroll (receiving more revenue) or could be a reason why the team will spend less on payroll (Angelos wants a larger profit).   Another factor is the fact that we didn't have a first or second round pick last year saving us millions in draft costs. This year we could potentially have four first round picks (our own plus compensation for Kakes, Hardy and Cruz) and two second round picks (our own and the competitive balance pick). It might cost us maybe 8 million to sign all of those prospects if we do end up with 4 first round picks and 2 second round picks.

Thanks for the informative post.

[Matt_P]

Thanks for the informative post.

 

Sure.

 

By the by, I'm working on writing another blog about MASN that should come out next week heavily based on the court record. There's probably been 500-1000 pages of testimony so far so it's hard to remember all the details that should be considered. If people here have questions they want answered then I can see whether I do know the answers and if they'll fit in this post or not.

 

I know people were interested in how the Bortz Methodology worked so I have a section on that (one document discussed how it was implemented for NESN in 2003).

[dude]

Possibly. My understanding is that Dude thinks that Angelos is pocketing all of the money received from his equity stake. If he is correct then the Nationals winning will mean that the club will receive more money in rights fees and therefore have more money to spend on players. That could mean that resigning Hardy is easier.

 

I have to say I feel all warm and fuzzy inside that you saw fit for me to represent what I'd guess is a widely held opinion.  Does a certificate or something come with that acknowledgement?  

 

I'd actually suggest that for a significant portion of the last 15+ years Angelos hasn't authorized the spending of the core organizational resources.  You have to go beyond just payroll and the Orioles are routinely at the bottom of other league-wide spending.

 

Maybe there's an argument that Angelos has intentionally under developed MASN and other Oriole $$ sources (and under utilize the resources they have) in an attempt to hold down the perception of what the Orioles can afford to do (we've seen Os media complicit in this too) specifically for the fight they're having today.

 

If you want to separate 'MASN fee' and 'MASN resources'....ok....I guess.....but the fact is that without an owner owned/controlled RSN, Angelos would be looking to exploit a SIGNIFICANTLY different (higher) financial package from a Comcast (or whoever).  The whole point of owner operated RSNs is to protect a bigger portion of the team's revenue from revenue sharing IN THEORY to expand the opportunity to invest in the team.

 

If you think intentionally undersourcing the media deal and then claiming all of the 'other money' isn't really a team resource then....uh....ok.

 

Don't get me wrong....when you own the team you get to make decisions on what you do or don't spend.  I actually don't have a specific problem with that.  My issue is the hypocrisy between what they say (or try to make us believe) and the reality.

 

fwiw, I think anything short of the "Orioles position" will significantly impact what the Orioles are willing to spend next offseason because the ownership team is going to want to make a point about consequences, regardless of what they really are.

[hallas]

I have to say I feel all warm and fuzzy inside that you saw fit for me to represent what I'd guess is a widely held opinion.  Does a certificate or something come with that acknowledgement?  

 

I'd actually suggest that for a significant portion of the last 15+ years Angelos hasn't authorized the spending of the core organizational resources.  You have to go beyond just payroll and the Orioles are routinely at the bottom of other league-wide spending.

 

Maybe there's an argument that Angelos has intentionally under developed MASN and other Oriole $$ sources (and under utilize the resources they have) in an attempt to hold down the perception of what the Orioles can afford to do (we've seen Os media complicit in this too) specifically for the fight they're having today.

 

If you want to separate 'MASN fee' and 'MASN resources'....ok....I guess.....but the fact is that without an owner owned/controlled RSN, Angelos would be looking to exploit a SIGNIFICANTLY different (higher) financial package from a Comcast (or whoever).  The whole point of owner operated RSNs is to protect a bigger portion of the team's revenue from revenue sharing IN THEORY to expand the opportunity to invest in the team.

 

If you think intentionally undersourcing the media deal and then claiming all of the 'other money' isn't really a team resource then....uh....ok.

 

Don't get me wrong....when you own the team you get to make decisions on what you do or don't spend.  I actually don't have a specific problem with that.  My issue is the hypocrisy between what they say (or try to make us believe) and the reality.

 

fwiw, I think anything short of the "Orioles position" will significantly impact what the Orioles are willing to spend next offseason because the ownership team is going to want to make a point about consequences, regardless of what they really are.

 

I don't think the O's are getting any more in the open market.

 

The Dodgers got $250 million a year, and they have a population that is 6 times the Baltimore metro area, and a second team about the same distance from downtown LA as the Orioles.  The current arrangement calls for $40 million for the fees and probably about 20-30 million in profit, for a total of about 60-70 million a year.  That is almost double the per-person rate the Dodgers are getting in LA, in a richer market.  The new agreement would have the O's collecting a similar sum, but with more money exposed to revenue sharing,

[Matt_P]

Under MASNs proposal, the Orioles would receive roughly $40 million in rights fees and between $50-55 million in equity share profits in 2014. The Yankees received nearly $90 million in rights fees and the YES network made about $135 million in profit in 2013.

 

As I noted in my post today, this is within industry standards. This is because the Orioles used the Bortz methodology as well as Allen and Co pro formas to determine their bid. The Bortz methodology defines a percentage in profit that a team deserves from its media deal and is usually reasonably consistent for each team. Teams are supposed to receive at least 20% of profit from baseball activities and 30% profit from non-baseball activities (I have no idea how to differentiate between the two and my understanding is that there can be differences between parties). It is possible using the Bortz Methodology that media rights fees should be higher (I don't know what MASN proposed as its operating margin) but it should be a slight difference perhaps a few million a year and not a huge difference.

 

Dude - I used you because the fact that you felt that way stuck with me. Your post reminds me that at some point it would be beneficial to write a blog about cable providers, markets and their impact on team media deals. I wonder if you realize how impressive it is that MASN actually exists nor what Comcast would have done to the Nats and Orioles if it didn't. I've seen evidence strongly hinting that if MASN didn't exist that the Nationals and Orioles would each have media right payments BELOW at least fifteen other teams for MLB unlike the current state of affairs.