We’ve been on this subject for a while, but a USA Today story published online last night by reporter Bob Nightengale provides an all-encompassing look at how the Mariners and a select handful of teams are about to win a local television lottery in just a couple of years.
The Mariners just started a 10-year, $450-million deal with ROOT Sports last season that was negotiated way back in 2007. But there is a 2015 opt-out clause in the deal and the timing could not be better for the Mariners, given how the market for regional sports network (RSN) contracts is shooting through the roof.
In his piece, Nightengale quotes sources saying the San Diego Padres stand to earn $75 million per year on a soon-to-be negotiated RSN deal for themselves. The Padres play in baseball’s 26th biggest market, the Mariners in its 12th largest. You do the math.
And the Mariners, when you really look at where their fan base extends to, could actually be sitting on a market much bigger than just the Seattle-Tacoma area. We’ve talked before how their territory encompasses fans over a multitude of states and even to other countries. That’s not just me talking. A sports valuation expert from Texas testified to the exact same thing at the Chris Larson divorce trial back in December.
Again, do the math. Big bucks coming Seattle’s way and possibly well before 2015.
Nightengale spells out in his piece how these TV deals could change the perceptions of exactly who baseball’s superpowers are. Another thing it does it is challenge the currently-held wisdom about whether or not teams can afford certain players and which deals are good versus bad.
Photo Credit: AP
For instance, it would be pretty naive to suggest the Albert Pujols deal was a bad one for the Angels, despite the $240 million committed to him this winter. First off, the Angels likely inflated their 20-year, $3-billion TV deal’s value by getting Pujols and now are in a position to further solidify their brand for years to come based just off what Pujols does in the early years of his contract.
And if Pujols tails off on the back-end, who cares? The TV money is guaranteed and the Angels stand to gain on the revenue side if Pujols performs well and they win big in the short-term.
The same applies to Prince Fielder in Detroit. As Nightengale mentions, the Tigers and owner Mike Illitch went out and made that $214-million deal even though they currently gain only $40 million in yearly revenues from local TV. Ah, but it says in the story that the Tigers hope to redo their TV deal prior to the 2018 season.
Now, what better way to build the value of your franchise and potential TV rights than by winning big on the field for the next few seasons? At that point, you break into early negotiations on your new television contract and parlay that gained value into a deal that’s what? Three times the size? Maybe more?
There’s your protection for the back-end of Fielder’s contract. And believe me, those back-end years on Fielder’s contract will hold big value in any TV negotiations. The Tigers in 2015 will be able to say: “Hey, we’ve got a perennial playoff team built around a marketable, 30-year-old, 35-homer slugger in his prime who’s still under contract for the rest of the decade. Pay us.”
In other words, don’t buy the pack-fueled wisdom that the Tigers just signed their own death warrant down the road with Fielder. Predictions that the franchise will be hamstrung for years by the middle of this decade simply have not adjusted to the new realities of MLB and where revenue streams are headed.
You can’t really blame people making those doom and gloom predictions too much. After all, the new reality of RSN deals has really only recently hit the game like a ton of bricks. It all began, as Nightengale notes, with the $3-billion deal the Rangers signed with Fox Sports Southwest back in 2010 and was hammered home by the Angels and their $3-billion deal back in December.
But there’s no longer any excuse for being uninformed. Once something appears in USA Today, you have to assume the whole world and their hairdressers know about it from here on it.
The safest thing to do is to never assume that a billionaire like Illitch, or other wealthy hands-on owners like Moreno, do things simply off-the-cuff with little regard for long-term implications. That’s not how they built their fortunes. Before pronouncing them foolish, it’s best to remember that they made they fortunes in the first place with a good deal of calculated risk. That’s the way I’d do it, anyway. I don’t think I’m smarter than everybody else.
As for the Mariners, I also don’t think I’m smarter than their current ownership. I think there is something very cold and calculated going on with this baseball team that has to do with a whole lot more than “playing the kids” and “rebuilding the right way” and whatever other buzzword and catchphrase can be culled from the Baseball PR 101 playbook.
The Mariners have trimmed their bottom-line admirably the past few years to the point where they don’t need any new investments from ownership to keep their last-place team alive and breathing. They will have just the Felix Hernandez contract on the books — if they choose — as a significant contract by the end of 2013. In fact, they have no major deals on their books beyond 2014 as of right now. And they will almost certainly not be spending any more money than they take in revenue-wise for the next two or even three seasons.
By 2014, or even earlier, they’ll have a nice new TV arrangement and maybe even be shrewd enough to secure an up-front payment like the $160 million cash the Rangers got from Fox Sports Southwest.
Could the Mariners score even bigger money by winning something before that windfall moment arrives? Like the Tigers are trying to do? Like the Angels just spent the last several years doing?
Sure they could. But that’s not really in their playbook right now, with two big owners dealing with their own sets of financial challenges off the field. This team simply is not prepared to spend more than its dwindling season-ticket base will give it right now. They will declare an operating loss of roughly $6.75 million for 2011 — according to my sources — and now appear to have cut payroll low enough so that they can balance the books from here on in.
Until they hit the TV lottery.
So, if you don’t mind hanging in a few more years, the team should be prepared to seriously start trying to win again.
Not because they’ll have rebuilt “the right way” and seen their young players mature. The maturing part will help, no doubt. But you can rebuild like the Angels are doing with Mike Trout, Mark Trumbo and Hank Conger and still be actively trying to put a winner on the field in the interim. You can spend past the mistakes like Vernon Wells and not simply sit around losing 90-to-100 games per year while waiting for the contract to run out.
That’s not what the M’s want to do. They don’t want to spend while the maturing is going on.
Instead, they will start trying to win again by 2014, or, more likely, 2015, because this ownership — or a new one — will have an added cash windfall to pay for the types of players winning teams need to sustain contention. Right now, they don’t have it. Fans are tuning out because the team has lost 196 games in two years, while owners are busy dealing with losses outside of baseball and aren’t putting new cash in to fund a better team.
That’s all going to change by 2015.
But make no mistake. The moves being made today have plenty to do with the new economics of the game and where its all headed. Best to consider that when attempting any serious analysis of what teams can and can’t afford and what is driving current decision-making.
Whether it’s involving the Angels, the Tigers, or the Mariners.