MLB TV Contract Eliminates Excuses for the “Small Markets”

Wendy Thurm (@hangingsliders) had a post at Fangraphs discussing the National TV contracts for Major League Baseball and the value that they will provide for each team. Within the article, Thurm had several valuable bits of information:

ESPN will pay MLB $700 million per year for the right to broadcast games exclusively on Sunday nights, other games (non-exclusively) on Monday and Wednesday nights, extended highlights for Baseball Tonight, the Home Run Derby and other All-Star activities (but not the game) and one Wild Card Game. The deal also includes national and international radio and digital rights.

MLB announced a new national TV contract with Fox and TBS, which also covered the 2014 through 2021 seasons. Under that deal, MLB will receive $800 million per year in combined revenue from the two networks, in exchange for broadcasts rights for the Saturday game of the week on Fox, the Sunday game on TBS and all of the postseason games — save for the one that will be broadcast on ESPN. Fox also retains the rights to the All-Star Game.

That’s $1.5 billion in national TV revenue per season that will go into MLB’s Central Fund, or $750 million more than under the contracts that just expired. MLB can spend money from the Central Fund in a variety of ways, but it’s been assumed in the reporting that the league will distribute the TV money to the teams. If so, each team will receive $25 million more in national TV revenue in 2014 through 2021 than they did in 2013.

Teams aren’t obligated, of course, to use all or even part of that additional $25 million on player salaries. That money can also be helpful to expanding a team’s national and international scouting operation, or its data analysis department, or marketing, or all three.”

AL TV Deals

Local AL TV Deals (courtesy Fangraphs.com)

Beyond the television money being received directly from Major League Baseball, each team has their very own local television contract, as well. The dollars being tossed towards clubs has reached absurd levels, as the Los Angeles Dodgers will bring in $340 million per season through 2032 in local television money alone, meaning roughly $390 million including the money coming from MLB. When the Dodgers have that kind of money coming in before averaging 46,216 fans per home game, ranking No.1 in 2013 MLB attendance, you can see the revenue and profitability that comes from these mega deals.

Local NL TV Deals (courtesy Fangraphs.com)

Local NL TV Deals (courtesy Fangraphs.com)

The money is huge, and when you factor in how many teams are being extra cautious with the contracts that they hand out, it makes it seem unreasonable for clubs to cry “small market” any longer. There is no “small market” when a team is streaming revenue of $43 million from television contracts like the Pittsburgh Pirates and Miami Marlins were in 2013, and that number will go up to $68 million with the additional $25 million in 2014. And, while so many were upset with the Marlins and their owner, Jeffrey Loria, for the club’s consistent losing, fire-sales, and sticking Miami with an expensive stadium with a Triple-A worthy roster playing each night, it can’t be as hard as it is for Houston’s fans to watch the Astros pocket $105 million in television deals in 2013, while fielding a team with a payroll of $26 million.

Jeff Luhnow, GM, Houston Astros

Jeff Luhnow, GM, Houston Astros

With international signing limits and caps on spending within drafts, it doesn’t seem fair that owners and teams are able to sit on millions of dollars of revenue while doing very little year in and year out to field a competitive team. Certainly, the Astros are utilizing the wizardry of Jeff Luhnow to develop a dynamic farm system, which is ranked in the upper-half of the league after being one of the most vacant systems in all of baseball for nearly a decade. However, if other teams decided to gut their major league rosters to build in the same manner, how could MLB and its commissioner tell fans that they were fielding a solid product?

When the Tampa Bay Rays, Oakland A’s, and Boston Red Sox publicly entrenched their baseball operations within data analysis and the sabermetric way, they also committed to spending wisely and finding value, possibly bargains, by linking players and their abilities to areas that the club needed to improve. By signing their young players to lucrative contracts early in their careers, the Rays were able to manage the long-term salary of their stars by avoiding the arbitration process, while, simultaneously, taking on a huge risk by investing in a player who may battle an injury or be unable to make adjustments when the league caught up with their skills. Evan Longoria, for example, was signed to a six-year, $17.6 million deal (with team options for 2014 through 2016), after just seven days in the majors. The A’s have been very careful with their payroll over the years as Billy Beane has utilized the Moneyball way to build success out of a spacious ballpark and on-base driven offensive players, though that has changed with players like Yoenis Cespedes and Josh Reddick being key members of more recent teams. Boston, on the other hand, seems to have learned their lesson from the failures of mega-contracts that were given out to Adrian Gonzalez and Carl Crawford, shipping the huge deals to the Dodgers and finding payroll relief and success through finding strong character players, which landed them a championship this season behind the leadership of new additions like  Jonny Gomes, Mike Napoli, and Shane Victorino.

When looking at teams that have created unique ways to be competitive, though, does it show a pattern or a method to success, or can spending money guide a team to a title? The Dodgers, for example, have over $190 million committed to their payroll in 2014 before free agency has even started. Add on the rumors of the club is interested in acquiring David Price via trade with the Rays and being a major player in the posting process and negotiations with Japanese import Masahiro Tanaka, and the Dodgers could have a starting rotation (that’s right, five guys) earning over $100 million in 2014. The New York Yankees tried for several years to build a contender through free agency, but the club was most successful when they were building from within with Mariano Rivera, Derek Jeter, Jorge Posada, Bernie Williams, and Andy Pettitte in the mid-to-late 1990’s and early 2000’s…though, they did win a title in 2009.

Joe Mauer, C, Minnesota Twins

Joe Mauer, C, Minnesota Twins

No team can duplicate the science that one team has perfected, but they can certainly try. As teams like the Twins and Marlins continue to try different techniques in finding success, one thing remains evident: they need to spend money to be successful. The Twins have struck gold with recent international signings and drafts, adding Byron Buxton and Miguel Sano to their system, but how will they help Joe Mauer at Target Field with the terrible pitching that they continue to produce? The Marlins tried to buy success when they signed Jose Reyes and Mark Buehrle prior to the 2012 season. That experiment lasted all of one season before Miami sold off several pieces to rebuild with prospects that they received from the Blue Jays.

Every team should be active when free agency begins. There is no excuse for the “small market” teams when each team is receiving nearly $50 million dollars from MLB each season from the league’s national TV deals. Add on a minimum of $18 million for local TV deals (which the Marlins and Pirates have, lowest of all teams), and you’re looking at $68 million in revenue before the team takes the field, provides marketing space in the stadium, sells a ticket, or sells a t-shirt this season. Of course, there are operating expenses for a team and their employees, but how much exactly? Why exist if the owner is more focused on the bottom line and profitability of the club than the club’s long-term success? After all, we’re talking about billionaire owners paying millionaire players, and every time an owner complains about how much money they aren’t making, you can look at the figures that were provided above and laugh…as you make five-figures and save for months to pay $200 or more to take your family of four to a game once or twice per season.

Another major question could be: is there too much money in baseball? If a team like the Dodgers is bringing in nearly $400 million in revenue on television deals alone, how can the Pirates and Marlins compete against them? The Dodgers could sign Tanaka, trade for Price, and add Robinson Cano to play second base, and the club would still have nearly $150 million in annual salaries before reaching $400 million, over five-and-a-half times the amount that the Pirates and Marlins have in revenue. If or when Clayton Kershaw reaches free agency, if or when Mike Trout reaches free agency, and if or when Bryce Harper reaches free agency, what are the smaller revenue clubs to do? My answer to that…see the Tampa Bay Rays, who compete in the AL East with much smaller revenue numbers than the Boston Red Sox, New York Yankees, and even the Toronto Blue Jays and Baltimore Orioles, by being smarter, more creative, and careful as to how they have built their roster each season.

And if there is still concern about your team and wanting to cry “small market”, remember this:

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