Baseball is one of the best indicator of things to come, particularly when it comes to television. While football may have been made for television, television has made baseball unequally equal. This year there will be more money pumped into the game than ever before. Why? It was decided a few years ago, that ‘LIVE’ television was the key to survival for television networks, whether they are broadcast or cable, to fill the 24/7 programming blocks while the world waits for the next resting place for the millions of eyeballs who are moving through the Millennial stage. Traditionally, television was THE place to reach people. And advertisers, as they always do, flock to wherever the opportunity presents itself to get in front of those who would, could or should buy.
Now, television, especially cable network television, is betting on sports, particularly baseball, to attract the eyeballs of the constantly moving population both via legacy standards at home and most importantly digital/mobile platforms. From April through September, for six solid months, baseball will be front and center. No other sport has the completeness of dominant and ever-changing information as does baseball for this length of time. It is every day news and information. And when you throw in March as Spring Training gets underway, television finds itself gearing up. Take October when the World Series is the ultimate goal, you now have eight months of solid baseball.
Baseball has just finished one of its best hauls in its history. Consider this:
Los Angeles Dodgers $150 million annual rights fees (thru 2038)
Philadelphia Phillies $129 million annual rights fees ($2.5-$3.0B 20-25yrs) +25% SSN Philadelphia
Houston Astros $ 60 million annual rights fees
Texas Rangers $ 80 million annual rights fees +10% FOX Sports Southwest (thru 2034)
Arizona Diamondbacks $ 75 million annual rights fees (2016 to 2036) + %of FOX Sports Arizona
Chicago White Sox $ 72.9 million annual (@$450,000/gm. + 40% of Comcast SportsNet Chicago
Chicago Cubs $ 72.9 million annual (@$450,000/gm +20% of Comcast SportsNet Chicago (thru 2019)
LA Angeles Anaheim $147 million annual rights fees + 25% FOX Sports West (thru 2028)
San Diego Padres $ 60 million annual rights fees +20% FOX Sports San Diego (thru 2031)
New York Yankees $100 million annual rights fees ($367 million in 2042 for 49% of YES)
New York Mets $ 83 million annual rights fees +65% of SNY -25 year contract) (thru 3032)
Boston Red Sox $ 60 million annual rights fees +80% NESN
San Francisco Giants $ 30 million annual rights fees (+ percentage of SCNBA. + 30-33% ownership Comcast SportsNet Bay Area)
Seattle Mariners $115 million annual rights fees (purchased ROOT NW worth $100 million/yrx20 yrs) (thru 2030)
Cleveland Indians $ 40 million annual from sale of SportsTime Ohio ($400 million over 10 years)
Detroit Tigers $ 40 million annual rights fees (thru 2017) FS Detroit
Toronto Blue Jays $ 36 million (adjusted annually) Owned by Rogers SportsNet. No expiration.
St. Louis Cardinals $ 14 million (2016) + $35 million (2017) $55 million (2018-2033)
Baltimore Orioles* $ 29 million annual rights fees +87% of MASN
Washington Nationals $ 29 million annual rights fees +13% of MASN fee reset every 5 years
Minnesota Twins $ 29 million annual
Colorado Rockies $ 20 million (expires in 2020)
Tampa Bay Rays $ 20 million (thru 2016)
Cincinnati Reds $ 20 million (Thru 2016)
Kansas City Royals $ 19 million (thru 2019)
Miami Marlins $ 18 million (thru 2020)
Pittsburgh Pirates $ 18 million (thru 2019)
Milwaukee Brewers $ 21 million (thru 2019)
Oakland A’s $ 43 million (opt out after 2023)
Atlanta Braves $ 20-30 million annual rights fees (through 2031) FS Sports South
In 2013, each team also received $25.53 million as part of the National TV Revenue.
In 2014, each team also received $51.67 million as part of the National TV Revenue.
*[MASN] was created as part of the deal that moved the Expos from Montreal to Washington, D.C. to become the Nationals. Orioles owner Peter Angelos opposed the move as an encroachment on the Orioles’ exclusive broadcast and commercial region. [This is different from the dispute between the Giants and the A’s over the territorial rights to San Jose and Santa Clara County.] As part of the negotiated settlement between MLB (which then owned the Expos) and Angelos, MASN was created with the Orioles to own 90 percent and the Nationals to own ten percent. The deal also called for the Nationals to be paid $20 million/year in broadcast rights, although that figure would increase by $1 million every season. In 2011, MASN reportedly paid the Nationals $29 million in broadcast fees and $7 million for its now 13 percent share of the network. No matter. Attorneys for the two teams and MASN have continued to launch attacks and counter-attacks. The Orioles think the MLB-sponsored panel was predisposed to rule for the Nationals because the league stands to gain financially the more the Nationals receive as a rights fee. For their part, the Nationals have threatened to terminate MASN’s license to broadcast their games if the panel’s ruling isn’t confirmed.
The MASN mess may shed some light on Selig’s unwillingness to make a final decision on the Oakland Athletics’ proposal to move to San Jose. He might have feared that any resolution of the territory dispute between the A’s and the San Francisco Giants that involves the A’s compensating the Giants could lead to in-fighting for years down the road.
The MASN agreement also includes a re-set provision by which the Nationals can re-negotiate the broadcast fee structure every five years. Early in 2012, the Nationals proposed that MASN pay between $100 million and $120 million per year in broadcast fees. The Orioles countered at $34 million per year. The two sides have been in protracted negotiations ever since. Former Commissioner Selig asked representatives from the Pirates, Rays, and Mets to mediate the dispute. A resolution was expected over the summer but never materialized and the parties reportedly remain far apart.
But all of this is minuscule to the real power of baseball today.
The power is BAM…short for Major League Baseball Advanced Media. In 2000, Bud Selig, then baseball’s commissioner, created BAM as an in-house IT department for baseball which would be in charge of creating websites for each of the teams and consolidated MLB’s digital rights. His feeling was that by pooling resources, he would prevent the bigger teams from outpacing their smaller market rivals. To keep the division honest and efficient, BAM would operate its own company. All of the MLB teams agreed to contribute a combined $120 million, $1 million each over the first four years, with each taking an equal ownership stake. And this is the hidden gem of baseball…and baseball ownership.
Forget the amount of money a team makes from its attendance, concessions, broadcast TV and radio rights, Regional Sports Network rights or any other form of income,. Today, whether it is ‘Magic’ Johnson as one of the owners of the Dodgers or Mark Attanasio, owner of the Milwaukee Brewers, they both are equal owners of BAM. What is that worth? Fifteen years after it was founded, BAM will have a profit this year in excess of $900 million. Any idea how much that is worth today as an asset on the balance sheet? When you figure it out, just divide it by 30 and you will have figured out how much the owner of a small city franchise in Milwaukee is worth today.
One could say it is all due to Ichiro. When he came over to play from Japan for the Seattle mariners, he was an icon in his country. If you can remember, in those days a corps of press came along each and every day to cover Ichiro. BAM decided to experiment with streaming live audio of his games, giving his followers a way to keep up to speed with all-Ichiro all the time. This led to the league consolidating all of their digital rights within BAM. To secure more funding, BAM made a deal with TicketMaster to provide all of their ticketing functions for a $10 million advance so they could push not only audio but video.
A small company called eCommercial had created and implemented compressed video packages used as attachments for email. This small start-up was at the forefront of video delivery as CBS bought one of the first packages from Lance Hanish (LBC Advertising, now CNA|SOPHIS) who presented the technology to Kelly Kahl (CBS) to promote its first reality program, ‘Survivor’. With Les Moonves approval, on May 24, 2000, the first eCom packages were sent out to a list of email users consisting of editors, reporters, publishers and potential viewers. ‘Survivor’ debuted on 30 May 2000 and finished as the #2 program that season. That opened the eyes for video delivery and changed the world of mass communications.
Before YouTube, on August 26, 2002 BAM produced a broadcast of a Texas Rangers/New York Yankees game. It was streamed to 30,000 fans at only 280 kilobytes per second. To those who do not know, this is like dial-up speed. Broadband was not yet happening. But it allowed, later that Fall, to offer a post-season package for $19.95 which was successful and led to MLBtv in 2003. This provided a most unique opportunity. Because FOX held the rights, the first post season video delivery was only to Europe. This allowed for advancements in geofencing and multi-application delivery at scale. BAM obviously had already leaned of high-compression from the eCommercial technology.
Today BAM has as customers, ESPN (it handled the 2014 World Cup), HBO (it developed HBONow), WWE (Yup. It does the streaming of wrestling), SONY (PlayStation) and the NHL (National Hockey League). It not only handles their streaming but distributes the content.
BAM in 2014 contributed $5 million to each team or $150 million in additional revenue.
Now perhaps major acquisition of talent by several of the ball clubs is understandable. The Arizona Diamondbacks threw open their coffers as their windfall from BAM and their new television contract provided them with the flexibility of bringing in Zach Greinke ($34,416,667/year). San Francisco Giants added Jeff Samardzija ($18 million/yr) and Johnny Cueto ($21,666,667/yr) with the same revenue income. Kansas City Royals resigned Alex Gordon ($18 million/yr) and Joacim Soria (8,333,333/yr). Washington Nationals signed Stephen Drew ($3 million/yr) and Daniel Murphy ($12,500,000/yr). Cleveland Indians signed Mike Napoli. Boston Red Sox signed David Price ($31 million/yr). Chicago Cubs signed Jason Hayward ($23 million/year), Ben Zobrist ($14 million /yr) and John Lackey ($16 million/yr). Detroit signed Jordan Zimmerman ($22 million/yr). St. Louis signed Mike Leake ($16 million/yr). Los Angeles Dodgers signed Scott Kazmir ($16 million/yr) and Japanese pitcher, Kenta Maeda (3.125 million/yr-8yrs). Toronto Blue Jays signed J.A. Happ ($12 million/yr) and resigned Marco Estrada ($13 million/yr). Baltimore signed Darren O’Day ($7,750,000/yr). Seattle signed Hisashi Iwakuma ($12 million/yr).
So, what have the Milwaukee Brewers done? They have signed Eric Young Jr. ($1 million/yr), Will Middlebrows ($1.2 million/yr) and Chris Carter ($2.5 million/yr).
That’s called banking it. With a projected revenue in excess of the 2014 figure of $91.68 million in TV & estimated 2015 BAM revenue coming in the door BEFORE attendance gate receipts, concessions et all, their payroll at present is estimated at $98,089,079. With gate receipts of approximately $65 million (per Mar 2015 Forbes numbers), The Cream City Nine has an opportunity to bring in more than the 2015 estimated operating income of $11.3 million. With an attendance in excess of 2.5 million in 2015 (ranking 13th in MLB) or 31,389, with another hapless season, the average dropped from 34,536 in 2014. With few stars in 2016, the drop of another 10%-20% could be expected. Regardless, the value of the team will be approximately $850 million, should someone want to purchased the club and stop #watchingattanasio.
Today, as it has been since the days of Ban Johnson, John Taylor, Charles Somers, George Vanderbeck, Connie Mack and Charles Comiskey, baseball is not about the players or the fans. It’s all about money.