Early Sunday morning, Twitter was abuzz with news that the Dodgers and Fox Sports West had agreed to a 25-year broadcast deal valued between $6 billion and $7 billion. By Sunday afternoon, Bill Shaikin of the Los Angeles Times had confirmed the outline of the deal, but cautioned that the Dodgers and Fox were still negotiating, with a November 30 deadline looming.
As I explained last week in this post, the parties’ existing agreement gave Fox an exclusive, 45-day window in which to negotiate a new deal to govern the 2014 season and beyond. Hence, the November 30 deadline. If an agreement isn’t inked by Friday, the Dodgers must submit a final offer to Fox by December 7. Fox then has 30 days to accept or reject the offer. If Fox rejects the offer, the Dodgers are free to negotiate with whomever they want.
However the negotiations play out, it’s clear now that the Dodgers’ local TV revenue is about to enter the stratosphere. A 25-year deal worth between $6 billion and $7 billion would net the Dodgers between $240 million and $280 million per year. Per year. That’s more than any team has ever spent on player salaries in a single season — even the Yankees. And it’s nearly double the amount of local TV revenue pulled in annually by the team with the second-most lucrative deal — the other Los Angeles team (the Angels) — which entered into a 17-year deal with Fox Sports West worth $2.5 billion.
To truly appreciate the magnitude of the Dodgers’ tentative deal with Fox, though, you need to compare it to more than the Angels-Fox agreement. You need to place it side-by-side with the other 28 teams’ local TV broadcast contracts. We gathered that information and present it to you below in several, related charts. We relied solely on publicly available sources, which in some cases do not provide a complete picture of each team’s deal. For example, we know that the Atlanta Braves and Oakland A’s are burdened by long-term contracts at well-below market rates, but we were not able to determine the yearly revenue each team receives from those contracts.
There are a variety of ways to present the information. As you will see from the discussion, we organized the deals in a way that highlights the differences between the super rich teams, the rich teams, and the not-so-rich teams.
The fangraphs article is great. It has a rundown of the current TV deals. To be honest though this seems like a real bubble to me. That breaks down to around $1.5 million a game. I don't see how the Dodger's TV rights can do anything but lose money.
Once the deal is finalized, how long before they pull a Loria and bring their costs down to the bare minimum? If they have a set revenue stream of $250M/yr for 25 years then what is their incentive to keep spending abhorrent amounts of money on the MLB roster? Is it worth an extra $150M/year in salary to get a small attendance bump? I'm sure it will be a gradual shift towards a more reasonable budget, but it will happen.
Everybody likes to say that getting a big TV deal means teams will start spending more money. To me, the teams that are locked into long TV deals are less likely to spend money. The marginal benefit of each dollar invested becomes much lower. Then, 5 years before the TV deal expires, ramp up spending again and get a good buzz going, and sign a new TV deal. Rinse and repeat.
Pogotheostrich wrote:The fangraphs article is great. It has a rundown of the current TV deals. To be honest though this seems like a real bubble to me. That breaks down to around $1.5 million a game. I don't see how the Dodger's TV rights can do anything but lose money.
A lot of the data they used is questionable. I believe some of the TV contracts weren't updated for 2013, and I know that the value of the Blue Jays' TV contract is misleading. Rogers owns the Blue Jays and the TV network, as well as basically all major media and sports teams in Toronto (Maple Leafs are worth $1B according to Forbes; not bad for a hockey team). The $36M figure is nowhere near what the TV deal would be worth on the open market; it's set that way for accounting reasons. The Blue Jays have I believe the largest TV viewership in all of MLB, with a rather affluent fan base.
It wouldn't be worth it for attendance bump, but it would be worth keeping a winning team on the field for merchandise and developing a worldwide brand. I would have to believe that the Dodgers are very jealous of the Yankees worldwide brand and even the NBA team in their backyard the Lakers. Plus, I don't see any team that's generating way above average that's pinching pennies.
jfg wrote:It wouldn't be worth it for attendance bump, but it would be worth keeping a winning team on the field for merchandise and developing a worldwide brand. I would have to believe that the Dodgers are very jealous of the Yankees worldwide brand and even the NBA team in their backyard the Lakers. Plus, I don't see any team that's generating way above average that's pinching pennies.
I agree with this. I also hope most teams want to win as well as make money. (Yeah I'm an old man and yeah my wife is sending me to the Dr. tomorrow for a checkup).
Magic Johnson is a businessman, but he's a winner. This guy isn't going to mess with TV people just to make himself more millions. He's in this to win, and I have to think he has a lot of weight with the group and their decision-making process.