April 17, 2013 at 9:12 AM
Few things in Seattle sports will top yesterday’s Mariners news in terms of impact
There was a point yesterday when a reader on Twitter asked me whether the announcement of a new regional sports network owned by the Mariners and minority partner DirecTV was the same as the pending big new television deal I’ve been writing was coming for over a year now.
My answer to him was: yes, yes and emphatically yes.
Part of me worried that we had done a poor job of transmitting the impact of yesterday’s move to readers, so it caused me to go back and pore over all that was written. Then again, I can’t blame readers if they were slightly ho-hum about the whole thing. After all, had you turned on the radio or flipped through the online news pages here and elsewhere and you’d have seen and heard a lot of time, space and energy devoted to whether there may or may not be a vote on a basketball franchise that may or may not be coming to Seattle this week, next week or some other week.
The nature of sports and — sometimes — those who cover it is to treat news like a sporting event, where you root and cheer and analyze every tidbit in hopes of figuring out who is going to win or lose.
But in terms of the Mariners and their purchase of a regional sports network (RSN), the news was signed, sealed and delivered yesterday. The final score is in and the Mariners won big. Years from now, when readers are looking back at online archives and some stories catch their eye, you can bet they won’t be tranfixed by the latest installment in the daily soap opera of when the Sacramento Kings vote will actually take place.
No, their eyes will almost certainly be on the TV game-changer that occured yesterday. Because if the Kings ever do get moved to Seattle, it will likely be on the new Mariners-owned ROOT Sports RSN that their games as the newly-minted Sonics — and those of any incoming NHL franchise — are eventually shown. And if we’re to ever see a baseball, NBA or NHL franchise win a championship for this city, it will very well be because of what transpired yesterday and the vast new revenue source the RSN will bring the Mariners and their potential TV customer team clients.
While many fans don’t want to hear it, the results of on-field sporting events are often decided well in advance of any season. This is especially true in baseball, a sport with little financial parity where having a bigger payroll can help teams overcome the lack of depth caused by early injuries like the Mariners are now seeing. That can help teams like the powerful Detroit Tigers overcome season-long underachievement last year and still emerge just four wins shy of a World Series title.
Had we written yesterday that the Mariners had just found a way to double their season-ticket base overnight, fans likely would have sat up straight and beseiged radio call-in shows with their opinions and hopes of what it will lead to. Well, talk to any sports financial analyst, economist or advisor — and we did just that yesterday — and they will tell you the Mariners pretty much did the equivalent.
“The numbers do vary widely, but what you’ve got is pretty much a guaranteed source of income,” Michael Haupert, an economics professor at the University of Wisconsin-La Crosse, told our Jayson Jenks.
“Without dipping into your profit margin or without the uncertainty of how many tickets are you going to sell in August in September, it tells you, for example, you have an extra $50 million in revenue that you can put some of that into the payroll. So you can go out and sign another free agent or two, shore up that pitching staff, grab that star shortstop on the market. That’s the kind of freedom it gives you, and the kind of ability it allows you moving into a season. You don’t have to gamble with, if we get this guy, are we going to sell enough tickets to pay for his salary?”
“If you do it right, you can probably double your income,” Haupert added. “It’s hard to get at those figures in a real clear sense, but I would say it wouldn’t be unreasonable to think you could double your revenue.”
Because the sports world is changing from a gate-driven business to a televised one, to the point where local TV money is surpassing ticket sales as the prime revenue generator for teams.
When Mariners CEO Howard Lincoln and the team’s chief counsel, Bart Waldman, told Art Thiel of SportsPress NW last October that they weren’t getting into the RSN business because they didn’t want to hurt their in-stadium gate, those of us following the trends in the sport nearly doubled over in disbelief.
Either Lincoln and Waldman were just plain clueless and out-of-touch, or they simply were not telling the truth in public.
Confronted with some of Lincoln and Waldman’s past comments yesterday, Mariners executive vice president Bob Aylward confirmed that both men are not clueless. Aylward admitted the Mariners and DirecTV have been in talks over forming an RSN since 2010.
By sheer coincidence, no doubt, the Mariners have been actively shedding long-term contracts and team payroll at the same time they have been putting the finishing touches on a deal that will take their revenues to places they’d only once dreamed of. As we saw with the San Diego Padres and Houston Astros before them, a team’s on-field record ahead of time has little bearing on what their new TV deal is going to be valued at.
So, all of those last-place finishes leading up to now? Didn’t matter one bit. The team was turning a profit in the interim — all the payroll slashing helped big — sprucing up the ballpark with a giant video screen and new restaurant and now has a lean, mean, ballclub that may not win all that much, but doesn’t cost a whole lot relative to what is being taken in.
Meanwhile, franchise value has likely doubled through all of the 87-101-loss seasons to the point where it could now top the $1-billion mark were the team to be put on the open market with this TV network on its ledger.
Not a bad, tax-subsidized business if you can get in on it.
Fans might not find it as interesting as the daily-Kings/Sonics blow-by-blow, but in terms of long-range impact on the city and its sports landscape, you’ll be hard-pressed to find a more important sports story in Seattle this year or next in terms of impact — aside from a team actually winning a championship.
And while fans may yawn at business stories — as many of you have — it’s important to understand them in terms of what the team can have happen next if it so chooses. The Mariners have made some bad off-field decisions on players the past decade, both under Bill Bavasi and Jack Zduriencik and that has no doubt contributed to some of the poor showings we’ve seen.
But the team’s ownership itself contributed to the impact of those decisions by not giving their general managers the flexibility to spend beyond mistakes the way an owner like Mike Illitch has with the Tigers. No GM is perfect, whether it’s Tigers GM Dave Dombrowski, Yankees counterpart Brian Cashman or A’s boss Billy Beane, or Zduriencik.
What can separate the perenial contenders from the once-in-a-while pretenders is the willingness of ownership to devote resources to improving the team. Nobody said the Mariners had to spent several last-place seasons waiting for the Ichiro (ownership-dictated signing) and Chone Figgins (Zduriencik move) contracts to run out while they constructed an RSN deal they knew was going to fill their coffers a few years down the road.
The waiting part and decision not to replace the sunk costs of both those players with better, at-times-costly talent was a conscious one by the Mariners.
Going forward now, by Aylward’s own admission yesterday and that of New York investment bank consultant Steve Greenberg — who advised the Mariners on the deal — this new RSN gives the ballclub the ability to compete evenly in the AL West and in some cases surpass their rivals.
So, let’s see them do it. No more excuses made for this team. No more payrolls a fraction of what the 93-win Rangers and 89-win Angels spend.
This isn’t the Little Engine that Could, despite what some more apologetic types would have you believe. This is a Mariners’ high speed train that is now one of the few teams in all of baseball to have a majority ownership stake in its own RSN. As bad as their personal finances were a couple of years ago, the Wilpon brothers in New York — owners of the Mets — fought tooth and nail to hold on to their RSN because they knew what a cash cow it was.
Just like Orioles owner Peter Angelos all of a sudden dropped his bitter opposition to the Washington Nationals moving in on “his territory” the moment he was promised a majority stake in an RSN and shown the type of money it could make him.
This is a game-changer. The Mariners have known it for some time, no matter what Lincoln, Waldman and others were telling people for public consumption.
And while officials from the Mariners and DirecTV both claim they have had no official talks with Chris Hansen on adding any future NBA or NHL teams to their new TV empire — which is what this is — they have held informal talks with him about other subjects. Would the local TV topic have come up? Only they know for certain, but common sense dictates it would have by now.
You can bet it will come up down the road.
Sure, there are risks associated with any new venture. It’s possible the lucrative RSN market dries up in a few years, just like the new stadium gambit eventually ran its course as a gold mine for baseball teams. But do you know what? Teams with captive sports audience followings always seem to find a way to keep making money on top of money.
Right now, this is the big moneymaker and the Mariners just went in on it in a huge way.
Don’t let them off-the-hook any more when it comes to what they can and can’t do.
Oh, and as far as the potential for a new majority owner to emerge for the team, like, say minority owner John Stanton? The kind of ownership change Lincoln has long and forcefully insisted is not on the table, despite the franchise conducting itself like a house owner doing furniture staging and a paint job?
Well, all I can say is, I truly hope his team enjoys its years-in-planning decision to get into the TV business. Hopefully, this time, the fan base will as well.