I’ve been writing for a while now about how the Mariners are in line for a big financial windfall in a few years because of a 2015 opt-out clause in their regional sports network (RSN) deal with ROOT Sports. Today, I had a conversation with Adam Chase, a Washington, D.C-based lawyer with the Media and Information Technologies practice group and Sports Law practice group at the DowLohnes legal firm.
Chase has spent years working on sports licensing and media deals and figures there isn’t much chance the Mariners will fail to land a big money boost now that they have a contractual chance to renegotiate their 10-year, $450 million deal with ROOT, owned by DirecTV.
“The only way I can see for them not to be able to get a windfall is if the carousel stops, when the music stops” Chase said. “It doesn’t seem like it is. It seems like it’s at a pretty feverish point. Will it stop at some point? Potentially. If you have the opportunity to get the money now, I’d say you have to seriously consider taking it.”
New rights fees and RSN deals are being struck seemingly by the week and have transformed teams like the Angels and Rangers into revenue-generating monsters. Aside from folks inventing a device that would allow them to fast-forward through commercials while watching live programming, the only other threat he forsees is if any traction is gained in the movement to push sports off the main programming lists that cable companies feed to their subscribers.
As of right now, teams and cable giants count on a large percentage of non-sports fans to fund their sports programming by forcing them to pay for it via their basic TV package. This keeps driving the cost of cable TV higher and has sparked complaints from some viewers who don’t appreciate having to pay for sports channels they never watch.
But Chase doesn’t see such the movement to push sports programming into different “tiers” becoming a threat anytime soon.
And he agrees that the Mariners — and DirecTV — could move sooner rather than later to change their current arrangement.
“If DirecTV wanted to, they could open up negotiations whenever they want,” Chase said. “They could say ‘Hey, listen, to keep you from going on the open market we’re going to negotiate now and lock you up for the next 10 years.”
Photo Credit: AP
Now, one part of this entire equation is we don’t know what the Seattle sports landscape will look like in a few years. We’ve seen a movement underfoot that could eventually lead to a new NBA and NHL franchise coming to Seattle.
I wrote this morning about the possibility of the Mariners teaming up with those squads to form their own RSN. When I ran the idea by Chase, he said the potential for a multi-team network to make even more money was certainly there.
“If all of those rights are combined in one RSN, it’s pretty compelling programming,” he said. “It would be tough for a cable provider not to carry that.”
In speaking with Chase, there are essentially three ways the Mariners can go on this.
1) Renegotiate their current deal with DirecTV or sign another one with rival Comcast to begin in 2015 that ups their current yearly TV rights take.
2) Form their own regional sports network, likely with one or more other pro teams as partners
3) Form their own regional sports network by teaming with an existing network
The first option is rather straightforward, and could see the Mariners make noise about forming their own network in order to leverage a better deal from ROOT or whoever they decide to sell their rights to. This is what the Texas Rangers did and they scored a pretty sweetheart deal with Fox Sports Southwest that is funding their current spending spree.
Option No. 2 would see the Mariners jump wholeheartedly into the TV business, sort of the way the Yankees did in starting up the YES Network. That network is pouring over $400 million in annual revenues into the coffers of team owners and helping finance the largest payrolls the game has ever seen. But such a venture would involve the Mariners leasing their own studios and TV equipment, hiring their own on-air talent and then seeking distribution deals so that other networks would pay them fees for their programming.
Chase correctly notes that the Mariners don’t have the Yankees’ history and nostalgia on their side to market the way it’s done in New York. That reality, he adds, means it makes sense for the Mariners to bring in one or more additional teams in order to bring them enough live programming and content to fill a 24-hour cycle.
The downfall to such an arrangement? They’d have to split the profits with those other teams. But then again, how much Mariners programming would you want to watch in a 24-hour day? Even if they went it alone, the M’s would almost certainly have to pay other cable companies a fee in order to air some of their team content to fill up air time. So, the multi-team format has plenty of advantages.
Finally, Option 3 would involve teaming with an existing cable company the way the Astros and Rockets have with Comcast in Houston. Both the MLB and NBA teams own 38 percent of that network, with Comcast owning 24 percent.
The advantage with that is, the teams don’t have to lease equipment, hire talent, or cut their own distribution deals, since they are buying that existing infrastructure through Comcast.
“It just gives you one less person to hire,” Chase said.
Whichever route the M’s eventually take will be determined by whatever their own numbers crunchers — or any outside consultants they hire — tell them is the most profitable course.
Again, we won’t know what the possibilities are until the likelihood of the NBA and NHL coming to Seattle gets spelled out further in the months and years ahead. The Mariners don’t have all that much time to make up their minds.
But then again, they may not have to wait very long. We’ll see.