As agents for Major League Baseball players begin discussions with teams regarding contracts for their available players, they invariably remind executives that new TV deals with national networks will be providing economic windfalls that should be passed on to the labor force. A 100% increase in rights fees paid by ESPN, Fox and Turner gives MLB clubs somewhere on the order of $1.5 billion annually, and the agents want to make sure the boon’s proceeds do not go merely into owners’ offshore accounts.
You can’t blame them. If more money is coming in, more should be going out, which means the going rate for a mediocre lefthanded starting pitcher is likely to rise beyond what could be considered reasonable. The resulting eight-figure contracts bestowed upon hurlers who will post losing records and above-4.00 ERAs will likely infuriate fans. But that’s baseball.
If said agents are smart, their first call this winter will be to Los Angeles, where the Dodgers have reportedly agreed on a local deal with Fox that is absolutely mind-boggling. The 25-year contract will bring the club between $6-7 billion during its course, or an average of $280 million a year. By the time the contract expires, the Dodgers will be taking in $350 mil each season. That’s enough to have the majors’ highest payroll and still have nine figures lying around for fun. All of a sudden, that $2.15 billion the group led by Guggenheim Partners paid for the franchise last May doesn’t look like such a bad investment.
Regional TV deals have been ballooning in recent years, and it appears as if the inflation will continue. It’s one thing for the Angels to get $2.5 billion over 17 years or the Rangers to reap $3 billion over 15. It’s another to commit more than $6 billion over 25. But that’s the power of competition. Fox was up against Time Warner and its fat checkbook, so decisive action was necessary – especially since Time Warner scooped up the Lakers earlier this year.
Regional sports networks are smart to gobble up local rights, since holding them provides necessary inventory and allows them to build programming around the games. Without local action on the air, regional nets are forced to show infomercials, minor sports that attract little or no interest and syndicated fare that doesn’t bring eyeballs, either. Grabbing 140 or so baseball games, plus exhibition contests, fills the viewing calendar for several hours a day for nearly half the year. And by paying so much, Fox guarantees the Dodgers will have money to spend on players who will be compelling to fans. It’s a symbiotic relationship that also includes a huge promotional component, since announcers for the games are approved by the club and are unlikely to do much to hurt the brand, no matter how bad the product on the field sags.
In fact, that’s the only downside to this, although it can be significant. If the Dodgers fail to perform well, recent history proves that viewers won’t tune in. Last year, the Phillies (38.6%) and Red Sox (18.4%) both experienced significant ratings drops as a result of their lackluster play. The Phils have picked a particularly inopportune time to stagger, since their contract with their regional broadcaster, Comcast SportsNet, is up for renewal after this season. Unlike L.A., which has a pair of titans available to battle it out for broadcast rights, Comcast has no competition in Philadelphia. Another shaky season could lead to a significant price drop for the Phils, who have displayed an appetite for high-priced players over the past five-plus seasons. They need a big TV deal to keep paying those big salaries and remain competitive in a market that is extremely punitive to teams that don’t win.
The Dodgers’ deal shows that TV networks remain ravenous for sports programming, despite predictions that the cable landscape could be significantly different in the coming years. It’s impossible to predict what delivery methods will prevail next decade, especially as Apple, Sony (through PlayStation) and Roku offer ways to watch networks like MLB.tv. As competitors create methods for tech-savvy fans to bypass traditional broadcast avenues, the money paid by networks to air games and companion programming could look like folly. And don’t think this isn’t a threat. Seeing a teenager watch archived TV shows on tablets, phones and PlayStations shows the power of TV on demand. Although deals cut with teams and leagues are designed to prevent that now, there is no telling what the future will hold in terms of delivery. If viewers’ habits change considerably, teams could be stuck with antiquated partners.
For now, expect a big windfall for players negotiating new contracts, just as teams are getting big bucks for cutting deals. The Dodgers will be flush for years to come, provided the current system remains in place. If not, expect a free-for-all, as clubs and leagues try to protect revenue streams and keep up with evolving technology.
Michael Bradley is a writer, broadcaster and teacher headquartered in suburban Philadelphia. His written work has appeared in Sporting News, ESPN the Magazine, Athlon Sports, Hoop and Slam, among others. He is a host on 97.5 the Fanatic in Philadelphia and contributes analysis for Yahoo! Sports Radio and Sirius Mad Dog Radio. He appears on CSNPhilly.com, writes a weekly column on Philadelphia Magazine’s “Philly Post” and has authored 26 books. He teaches sports journalism at Saint Joseph’s, Villanova and Neumann Universities.