The negotiations for the next Collective Bargaining Agreement (CBA) will feature considerable back-and-forth between the players’ union and the league’s various ownership groups. This is only natural: those are the two parties which must ultimately agree upon the terms of a new deal. But it’s also not an entirely aimless point to make, because those negotiations won’t be the only ones taking place. The owners themselves could have some fairly contentious discussions in deciding their own strategy, particularly when it comes to sharing revenue among the teams. Big-market teams have long gained an advantage on revenues at the gate, but increasingly, the advantage has come from television revenue from local cable networks. Teams continue to sign billion-dollar deals that include an ownership stake, and determining how to divide that money could prove difficult.
Over the last few years, the Arizona Diamondbacks, Philadelphia Phillies, and St. Louis Cardinals have all agreed to new long-term local television deals with Regional Sports Networks (RSNs). It has been a few years at FanGraphs since Wendy Thurm documented the local cable television deals for all MLB teams, and this post aims to provide an update. The work she did helped inform this post as well as a few others to provide a base for research.
When we hear about television deals, we often think of them in terms of the average annual value they provide. That’s a familiar term in baseball, as most player contracts are structured to be paid evenly over the course of the contract. That practice is less common under other circumstances, however, with deals often paying a smaller sum at the beginning of a contract and increasing over time. Television contracts are often structured in this second way. To account for that practice, I have estimated 2016 television money by assuming a yearly 4% increase in money paid to teams in order to find a (hopefully) realistic estimate for how much teams are receiving this year. For example, the Phillies currently possess a 25-year, $2.5 billion dollar deal that begins this year. Instead of assuming they will receive $100 million every year, I am assuming they will receive around $60 million this year with 4% yearly increases over the course of the contract.
There is a full chart below with all the relevant information, but let’s focus on 2016 money first in the graph below.
I did my best to include only contracted revenue — i.e. to omit revenue generated from an ownership stake in a network. However, due to the lack of publicly available information, it’s best to regard these numbers as estimates. Note that, particularly with respect to the Chicago teams, as well as the Los Angeles Angels and Boston Red Sox, that the revenue estimates actually might include money from network ownership. It was difficult to parse those figures.
If the graph above leads one to believe that big-market teams are reaping most of the benefits while the small-market teams are left with a relative pittance, that view is supported by market information. The graph below shows the estimated 2016 local television revenue along with the number of households in a team’s market.
Given the number of other variables — like how long ago a team signed its contract, the team’s popularity, its regional appeal, and its ratings — a correlation coefficient of .64 is fairly strong. Especially for the simplicity of the categories utilized on the axes — that is, merely the number of households in the principal market and the 2016 television revenue estimates. Teams and networks make their money on getting their broadcasts to appear within the standard cable lineup and charging a per-subscriber fee, and the result is that more homes means more money to give to teams. And that’s the not only big-market advantage.
Teams also reap benefits from owning a stake in the network, assuming it’s profitable (the Houston Astros and Los Angeles Dodgers provide counter-examples). By and large, the bigger-market teams have been able to negotiate more favorable setups when it comes to ownership. The graph below depicts the ownership stakes teams have in the network that airs their team. (Note: I was unable to find the percentages for the Diamondbacks and it appears the Dodgers own 100% of the network in an unusual setup with Time Warner that does not show up in the graph)
The Toronto Blue Jays present an interesting case. They weren’t included in the graphs above. Several years ago, the Blue Jays received $36 million from their RSN, but it’s difficult to accurately discern how much they’ve received over the past few years. The Blue Jays are owned by Rogers, which entity also owns Sportsnet, the channel on which the Blue Jays appear throughout Canada. The Blue Jays are likely only receiving a portion of the television money while the rest stays with the parent company.
For the most part, the teams receiving an ownership share of the network are in the big markets. Only the San Diego Padres, and maybe the St. Louis Cardinals, are located in what would be considered a small market. The Cardinals might be in a small-market television-wise; they operate on a larger scale, however, due to attendance. Their deal with the ownership stake does not begin until the 2018 season.
The ownership shares are incredibly important when it comes to revenue-sharing because any money gained as an owner of a network is shielded from revenue-sharing, as are the figures that MLB has provided when calculating the players’ share of revenue. The losses are not considered as well, which likely hurts the Astros, who struggled to get paid by Comcast on their deal, which is now with DIRECTV through ROOT SPORTS. This shielding of revenue is also where the dispute between the Baltimore Orioles and the Washington Nationals is relevant. The Orioles own a much bigger share of MASN than the Nationals, so every dollar that does not go towards the Nationals’ rights fees gets paid in a disproportionate share to the Orioles.
The Yankees used to have a much higher share of the YES Network, but have sold off most of it to FOX over the past few years for roughly $2 billion. It’s no surprise, then, that the Yankees are voicing their displeasure about revenue-sharing given that much of their revenue used to be sheltered from the rest of MLB through the network, but those sheltered revenues have been decreasing.
In all, MLB teams are receiving an estimated $1.5 billion on their local cable deals without considering ownership interests. The chart below shows the 2016 estimates, the total deal, if known, the start and end of the deal, the ownership stake, and a link with more information.
|2016 Revenue||Deal||Deal Start||Deal End||Ownership||More Info|
|Dodgers||$204 M||25/$8.35 B||2014||2038||100%||LINK|
|Angels||$118 M||20/$3 B||2012||2031||25%||LINK|
|Yankees||$98 M||30/$5.7 B||2013||2042||20%||LINK|
|Red Sox||$80 M||2006||80%||LINK|
|Mariners||$76 M||18/$1.8 B||2014||2031||71%||LINK|
|Phillies||$60 M||25/$2.5 B||2016||2040||25%||LINK|
|Astros||$60 M||20/$1.6 B||2013||2032||No||LINK|
|Rangers||$56 M||20/$1.6 B||2015||2034||10%||LINK|
|Tigers||$55 M||10/$500 M||2009||2018||No||LINK|
|Giants||$54 M||25/$1.75 B||2008||2032||30%||LINK|
|White Sox||$51 M||2004||2019||20%||LINK|
|Diamondbacks||$50 M||20/$1.5 B||2016||2035||Yes||LINK|
|Mets||$46 M||25/$1.3 B||2006||2030||65%||LINK|
|A’s||$41 M||21/$1 B||2009||2029||No||LINK|
|Indians||$40 M||10/$400 M||2013||2022||No||LINK|
|Padres||$39 M||20/$1 B||2012||2031||20%||LINK|
|Twins||$37 M||12/$480 M||2012||2023||No||LINK|
|Cardinals||$33 M||15/$1 B||2008, 2018||2017, 2032||30%||LINK|
|Royals||$22 M||12/$240 M||2008||2019||No||LINK|
|Marlins||$20 M||15/$270 M||2006||2020||No||LINK|
|Rockies||$20 M||10/$200 M||2011||2020||No||LINK|
Craig Edwards can be found on twitter @craigjedwards.