New multibillion-dollar contracts from Fox Sports regional networks enabled the Rangers to break the Red Sox's record for money spent on a Japanese import and the Angels to make Pujols baseball's second-highest-paid player, behind the Yankees' Alex Rodriguez.
And with local television rights gaining value in an increasingly competitive media landscape, they are likely just the beginning of a wave of deals that will enrich many franchises but further isolate those at the bottom of the revenue spectrum.
"The local TV money has changed the entire landscape," says Ed Goren, vice chairman of Fox Sports media group. "There are a lot of other teams that can play with the big boys now and write big checks."
The Rangers were the first to hit pay dirt in August 2010. Their deal with Fox Sports Southwest. which includes equity in the network, escalator clauses and profit participation, is for 20 years and valued at $3 billion ....
The Los Angeles Dodgers, Philadelphia Phillies, Seattle Mariners, Arizona Diamondbacks and Washington Nationals could be the next to cash in, with deals that expire or have reopener clauses by 2015.
Even the San Diego Padres, playing in the 26th-largest market in baseball -- are poised to sign a deal with Fox Sports, pending MLB approval, that will guarantee them $75 million a year for 20 years.
Angels owner Arte Moreno, with the ink barely dry on his ballclub's new television deal, wasted no time signing Pujols and starting pitcher C. J. Wilson to deals totaling $317.5 million, eight years after Moreno paid $183.5 million for the franchise.
The Rangers, in bankruptcy 18 months ago, will have a franchise-record payroll of about $125 million this year, thanks to their Fox Sports Southwest deal.
Meanwhile, up the Santa Ana Freeway from the Angels, the Dodgers' franchise value has skyrocketed because of the team's anticipated TV deal.
Yet there's a fear that the new TV deals could create even greater separation between large- and small-market clubs. The Yankees had an average of 318,000 households watching their games on the YES network last year, according to the Nielsen ratings, while the Kansas City Royals averaged 32,000 households.
"It does have the potential to hurt competitive balance," said Chicago White Sox chairman Jerry Reinsdorf.
The Dodgers might soon put the competitive-balance theory to the test with a deal that should dwarf their National League West competition. The Dodgers are expected to be sold by April 30 for the largest amount paid for a North American sports franchise -- at least 11 groups have submitted bids in excess of $1 billion -- largely because of a future TV deal that figures to exceed the franchise purchase price.
"Whatever you're going to pay for the Dodgers, you're going to get 2-1/2 times for those cable rights," Orange County-based agent Scott Boras said. "You can spend $1.5 billion now to get the team, but a month later you're to get $4 billion or $5 billion or more for the regional sports network. If you have the cash to get into this, the cherry on top is the major league team. The regional sports network is the sundae."
The trouble, MLB executives and club officials say, is trying to determine the actual value of the equity rights owned by teams. The Yankees say their TV rights are worth about $85 million to $90 million a year from YES, while the Red Sox insist their TV rights from NESN are worth less. The less money declared by the two giants, the less that goes into the revenue-sharing pool, which was about $400 million last year, Selig said.
Pittsburgh Pirates President Frank Connelly, former MLB senior vice president and general counsel: "If the significant increase in rights fees is not going into the revenue-sharing system, the system breaks down and these uneven TV deals have the potential to hurt the game."
It's not hard to imagine what direction those numbers will be trending. While there's great value in rights to sporting events, baseball might be king of them all, with a 162-game schedule filling the airwaves for at least three hours a day for six months, excluding pregame and postgame shows, at a time of year when original programming is at a premium.
an excerpt from...
"MLB Teams Cash In With Cable"
Bob Nightingale
USA Today Sports Weekly
February 22-28, 2012
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