Regular Articles

We've all turned on our TV to find a game that's been blacked out.  Local TV rights are a big deal and very big business.  They greatly drive up cable bills and like most cable stations, they are subsidized even by those who don't watch them when they are included in the "basic package" that all viewers have to buy, adding as much as $10-15 dollars to the monthly cost.

As an example in New York City, ESPN gets roughly $5.11 per household in fees, YES network gets $2.99, SNY gets $2.47, and MSG gets about $3, which covers the basic regional sports networks on most cable systems.  Those fees are per month, if you watch the networks or not.  Many of those fees are about to go up as well as contracts with YES and several of the others are due to expire soon.

 

TV
Can there be too much TV in baseball?
Photo by Kevin H., used under creative commons license.
Certainly that doesn't hurt Major League baseball -- aside of course from the viewers annoyed that they don't get to watch games that are blacked out due to baseball's archaic local rights system.   Well actually it does in a number of cases.

 

When the Dodgers signed their massive local TV deal last week that will pay between $6-7 billion dollars, they essentially threw a lot of money into the coffers of smaller market teams.  At the top range of that scale the Dodgers will be kicking in roughly $95 million of the $287 million that they'd be making under baseball's revenue sharing on local TV rights.

That's 34%.  And by paying that the Dodgers are the Warren Buffett of the baseball world.  They'll be paying in what's fair and what the rules as they stand say they should pay.  But not all teams play that way and the ones who don't often don't just auction off their television rights but own them.

Teams involved in owning their own regional sports network include the Yankees, Red Sox, Orioles, Indians and Nationals, and in all cases they own the majority rights to the programming. (The Yankees and YES are actually owned by the same holding company, rather than the Yankees owning YES).  What that means is that by making the team and network into separate companies, they can essentially unilaterally decide just how much those TV right are worth to them.

So while the Dodgers just signed a deal which pays roughly $1.7 million per game, the Yankees deal calls for them to get roughly $500,000 per game.   The rest of that money -- and there is a lot of it as the YES network is the biggest regional sports network in the country with revenues in the neighborhood of $550 million per year -- gets to be kept in house.*

* The holding company which owns the Yankees and YES did recently sign a deal to sell a 49% stake in the YES network to Rupert Murdock's News Corp for $3.4 billion.  That will reduce the Yankees stake from 34% to 25% of the YES network.

So while the Dodgers put $95 per million into the common fund for revenue sharing, the Yankees put in just about $30 million, despite making more money, having greater valuation and having far more viewers.

That's gaming not just the system, but the other owners and the competitive balance that might be achieved if those who owned the teams weren't allowed to own the RSN as well.

So it's not just the blackouts that hurt the game, but the hiding of money that's supposed to be in the common fund that helps take away competitive balance from any small- to mid-market team not owned by Jeffery Loria.

Regional sports networks aren't good for baseball.  For the best interest of the game they are something that really should be done away with.  Or at the very least, the value of broadcasts of any team sharing ownership with an RSN should be assessed at fair market rate so that teams who depend on the common fund get their full due and so that they can try to remain competitive in what is becoming more and more a big market dominated sport.