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Nats MASN issues and MLB’s many ongoing legal issues

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Wendy Thurm reviews legal matters for Fangraphs, and her writing is excellent.  In her latest article, she gives updates on several ongoing legal battles involving MLB.  Its an excellent read.  Here’s a quick review of the current issues, how I think they’ll play out and then how I *wish* they would play out, as a baseball fan and a fan of all that is right and just in the world :-) .  I won’t go into a full description of the issue (read Thurm’s article for more, because she also links to her past stories to provide full context of the issues).  Then at the end of this post we’ll talk about the Nats-MASN issue, which lingers without resolution but received a very intriguing piece of news this week (and thus has come up in the comments elsewhere).  Read on…


Houston Astros/CSN Houston

Issue: CSN Houston couldn’t get most of the cable companies in Houston to pay its fee demands, so 60% of local residents can’t watch the games and CSN Houston just went chapter 11.  (There’s more to this story than this sentence; Thurm’s article has links to more detailed overviews).

How I think it will play out: I think the fact that CSN Houston is now in Chapter 11 will grease the skids towards getting the games onto the local carriers at significantly cheaper fees, which means less money in the Astro’s pocket.  Oh, and they probably lose their ownership percentage too as the bankruptcy court pays out debtors.

How I wish it would play out: I think the Astros have dug their own grave here.  Lots of executives and baseball pundits are praising their “purposely bad” strategy, which has resulted in 3 straight #1 overall picks, three straight “worst in the majors” seasons, and they’ll likely challenge for a 4th straight such season in 2014.  This may be a great long term strategy … but if I was a season ticket holder or a suite renter I’d be beyond livid at the product being put on the field.  You want me to pay to see your team play?  Then show me you’re at least *trying* to field a competitive, entertaining team.  In that respect I don’t feel the Astros deserve nearly anything close to the RSN fees it’s getting.  The fees Houston gets should be commensurate with the product its putting on the field; make them sign a cheap deal until they’re good again, and then they can re-negotiate.

Alex Rodriguez Suspension

IssueAlex Rodriguez got an unprecedented suspension not entirely in line with the JDA signed between MLB and the MLBPA, and is suing everyone and their brother to try to get reparations and/or reversals.

How I think it will play out: I think union arbitration processes are sacred and the courts are not about to change that.  All A-Rod’s lawsuits to that end will be tossed, he’ll serve his suspension, perhaps he’ll play some independent league baseball or go to Cuba or something (boy wouldn’t that be a thumbing of the nose to America).  And then sometime in the off-season of 2014-2015 the Yankees will outright release him, nobody else will pick him up, and A-Rod will go the way of Barry Bonds with his hundreds of millions of dollars and ruined reputation.

How I wish it would play out: I’ve gone on record a couple times in this space (here and here) about how I think both sides are culpable in this mess.  I believe A-Rod continued to dope and more and more I believe he showed a distinct pattern of cheating to the point where I don’t have a problem if he never played again.  But in the meantime I believe what MLB did to pursue A-Rod went far above bounds, and I believe that Selig was colluding with the Yankees owners in some respects (just as I believe Selig has organized collusion among the owners against players and/or the MLBPA several times in the past).  I wish MLB would lose its anti-trust exemption so that a number of the unsavory situations in the game could see the light of day in a courtroom.  It’ll never happen.

San Jose vs MLB/Giants and Athletics

Issue: Oakland wants and needs to get out of its sh*tty stadium and San Jose is an ideal spot to move.  Except that San Francisco is claiming that as part of its god-given “territory” despite evidence that it was once Oakland’s to begin with and the then-Oakland owner “gave” it to SF out of gratitude.  Meanwhile, San Jose filed an antitrust lawsuit to try to compel movement in the interminable “blue-ribbon panel” that Bud Selig appointed years ago but which has done nothing.

How I think it will play out: Well, the lawsuit that San Jose filed against MLB has no chance of winning.  How do I think the whole Oakland moving thing will play out?  Unfortunately, I think the commissioner (who, remember, works at the behest of the owners) will *never* broach a territorial battle of one of its owners, because that’d set a precedent that they wouldn’t be able to fix (think about how many teams would *love* to move to Brooklyn and immediately have a 10m person fan base…Tampa Bay would be there tomorrow with their NY-based ownership group).  So Oakland will continue to be stuck in Oakland until maybe possibly they decide to test a new market in Portland or San Antonio or Charlotte.  Except that (of course) all those markets also have the same territorial rights (from Seattle and Houston and Washington/Atlanta respectively), so maybe that’s a non-starter too.  *sigh*.

How I wish it would play out: I wish the Giants would just be forced to admit that San Jose is not part of their territory.  Perhaps when they played in Candlestick and it was workable to drive from San Jose to the south of the city to see a game.  Now?  The heart of San Jose is 50 miles from the Giants stadium, which is in the middle of the city with limited parking.  It is exactly akin to driving from DC to Baltimore on a mid-week night to see a game … except that the Baltimore stadium has acres of parking paved out.  Oh and if you realistically wanted to make a 7:05 start in Baltimore and you lived in Northern Virginia … you’d be leaving your house at 4:30 to ensure you beat the traffic.  For that reason, I feel that the A’s should be allowed to move to San Jose and re-distribute the fan-bases of the Bay area.  Large swaths of the Oakland suburbs in east bay would now be so much closer to AT&T park than the A’s stadium that they may start patronizing the Giants, while huge swaths of the south bay would now have an easily accessible team to visit and follow.  It’ll never happen though.

Antitrust challenge to MLB Blackout Policy

Issue: Thanks in part to the whole “territory” issue mentioned above, MLB now finds itself with these arcane blackout policies that are incredibly unfair to people who live in certain “multi-team territory” states and who depend on MLB.tv to watch games.  If you live in some places like Iowa, south Nevada, Oklahoma, Connecticut, etc then you may be completely blocked from watching your local team altogether, thanks to MLB blacking it out and your local cable channel perhaps not carrying your favorite team’s games.

How I think it will play out: I’m sure MLB will continue to claim that it can’t compete against its RSNs … not while these RSNs continue to line the pockets of owners.  Remember, everything baseball does is about putting extra pennies in the owner pockets.  See the CBA, limits on amateur spending, the cap on posting fees for Japanese players, everything.

How I wish it would play out: How hard would it be to just pipe in the RSN feed to MLB.tv in these blackout areas?  You’d be showing local customers their local commercials and ending the blackouts.  Is that just too simple?  If RSN’s are worried about ratings … just add in the MLB.tv ratings.  In this day and age, where companies now can track TV watching far better than the Nielsen ratings ever could (don’t believe me?  How did Tivo know that the infamous wardrobe-gate incident was the most “rewound event” ever unless they’re tracking our watching patterns FAR more closely than we know?)

 


Thurm also maintains an equally excellent overview of the Regional Sports Network (RSN) deals in place for MLB teams, so that fans can see just how ridiculously unjust the current revenue distribution is in the game.  By way of example; the Dodgers are getting an unbelievable $340M/year from their RSN deal while Pittsburgh gets $18M.  Yeah; that’s pretty much the definition of an uneven monetary playing field.  Yes some of this money goes into a revenue sharing pot, but the lions share of it stays with the team, and enables the Dodgers to have a payroll 5-6 times that of most of its competitors.

I bring up this last point because (in case you didn’t know or havn’t been reading the comment sections here) Jonah Keri recently published an excellent “expose” of the downfall of the Baltimore Orioles under the “leadership” of Peter Angelos, and it contains a very interesting nugget of information about the ongoing Nats-O’s MASN struggle.  Thurm didn’t go into this particular issue because it isn’t a “legal issue,” meaning there’s no lawsuit pending.  Not yet anyway; Keri discovered that MLB has been making secret under the table payments to the Nats to make up for the obvious and clear RSN revenue shortfall that the Nats are being screwed out of in the current MASN deal, and Keri alleges that these payments are being made in order to PREVENT a lawsuit from Ted Lerner and the Nats ownership group.  Which only makes sense to me.

Washington’s market is about the same size as Dallas, in terms of population.  It is significantly more wealthy.  However the baseball-watching fan-base isn’t as developed as in other mature baseball markets.  You can easily make the argument that the Nats should be getting a comparable deal to what the Texas Rangers on some levels, but not others.  The Rangers are getting a whopping $150M/year from their deal while the Nats get $29M (plus whatever under-the-table cash from MLB) from MASN.  Its no wonder the Nats have demanded $100M from Angelos, and its frankly ridiculous that Angelos’ thinks his counter of $35M is anywhere close to equitable.  And its no wonder this hasn’t been resolved yet, not when the sides are $70M apart.  That being said, Keri lays out a rather reasonable explanation why Angelos is worried about this whole deal, and why it may be impacting his on-the-field product.

How I think it will play out: a deal is a deal, and I’ll bet the Nats are stuck with this deal for the long term.  Thanks Bud!

How I wish it would play out: I wish the league would just recognize its deal with Angelos was hopeless and force a one-time buyout fee and/or a splitting of the RSNs.  I’d love to see a buyout of the deal (costing hundreds of millions of dollars), and then a new RSN and/or a joining forces with CSN Washington (who already broadcasts Wizards and Caps games) to create a strong Washington DC RSN.  I’d even be willing to throw some ownership percentage as an appeasement to Angelos.  Maybe we can do some partnership deals with MASN to broadcast Orioles games in the DC area on CSN-Washington2.   Let Washington control its own destiny.

 


Editor Note: I corrected Wendy Thurm’s name throughout; I had it as “Thrum.”  Thanks to commenter Wally for pointing this out.

Written by Todd Boss

February 7th, 2014 at 7:51 am

10 Responses to 'Nats MASN issues and MLB’s many ongoing legal issues'

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  1. CSN Houston is an interesting situation to me, and I had a somewhat different reaction. I have never liked how the player/team salary negotiations play out: the teams force a structure that makes players very cheap during their first six years, then once a player has clear success and can negotiate their pay, they force a team to pay these hugely long term contracts at inflated prices in order to buy their next several years of high productively. I know it is a market and I don’t find it insulting, but I kind of side with the team against these huge contracts, and think everyone would be better off if there were more freedom throughout a players career (in part because I think these 10 year deals would go away). I guess the whole thing bothers me because it feels hard to imagine that your team will keep their homegrown stars, which as a fan, is always what you want. But watching this CSN Houston thing unfold made me realize that the teams do it too. When their local contract expires, they negotiate as long and high a contract as they can, without taking into account whether the market can support it. So I guess that I don’t feel too bad for the teams any more.

    I am more hopeful that the MASN dispute gets restructured, although I do think it gets resolved with a disproportionate payment to Angelos in some way (up front or equity) to reflect his legitimate deal. What gives me some hope is that (1) the Lerners appear to be acting as if they see it that way: their payroll is pretty large, relative to what their local TV revenue would suggest. If they thought the O’s would win @ $35m/yr, that would put them kind of in Atlanta territory, and their payroll is 30% higher than ATL. And the Lerners aren’t stupid. (2) there appears to be money being left on the table with how MASN is monetizing the combined market, and new money can cure a lot of ills, and (3) while this may sound harsh, Angelos is elderly, and when the team passes to new ownership, even if it is just a son or other family member, you never know whether they will be motivated differently or have the stomach for a prolonged fight.

    I’ll bet the A’s do get relocated to San Jose, solely because that appears to be a vibrant market that the league wants to access and that usually wins out. Hopefully they don’t get stuck with as bad a deal as the Nats did.

    I can’t talk about ARod any more. And I think Wendy’s name is Thurm, not Thrum. :)

    Wally

    7 Feb 14 at 12:35 pm

  2. Interesting segue to player contracts: I agree that the structure of baseball contracts seems to be incredibly one-sided to the team. You draft a guy, you can keep him at least 5 years, sometimes 6 in the minors … then assuming you promote him to the majors he’s then also locked in at minimum salary for 3 more years, then has his fair market value limited by the arbitration process. So that’s worst-case of a HSer being tied to an orgization for fully TWELVE years and being 30 before he gets to hit free agency. That is a very, very long time.

    But is the alternative any better? Consider football; bigger bonuses and bigger contracts out of college, but they’re not guaranteed. And the salary cap completely drives team finances. Basketball contracts seem to favor the players more (guaranteed, decent money for rookies coming out), but there’s still a cap and of course there’s so few spots that even 2nd round picks are basically coin flips to even make the bench. I guess the basketball model is better … but would result (from a team perspective) in a ton more money outlayed earlier on. I don’t know if that’s a great idea, especially since it takes so much longer for players to matriculate to the majors.

    Good points on MASN. Can’t disagree, especially on what may happen if/when Angelos kicks the bucket.

    Thanks on thrum/thurm; i fixed in the post inline and put an edit at the bottom.

    Todd Boss

    7 Feb 14 at 4:03 pm

  3. Todd Boss

    7 Feb 14 at 4:53 pm

  4. Yeah, baseball is probably best of all the sports, but I’ll bet that over time, we’ll see the years of control shorten. Cameron did a piece on where the dollars are being spent, and the dollars for the older guys are coming down, which is logical. But I think the players association says ‘fine, but let the players reach freedom more quickly then’.

    I just can’t get talking about ARod any more. He is a buzz kill. Although more puzzling is, Ayala? What is up there? Ok, minor league deal but I doubt that he is signed without a decent expectation of making the team, but in place of who (whom?). My guess is that there is a trade brewing.

    Wally

    7 Feb 14 at 5:41 pm

  5. “a deal is a deal, and I’ll bet the Nats are stuck with this deal for the long term. Thanks Bud!”

    I disagree.

    ” The terms stipulated that the deal could be renegotiated after five full seasons, and the Nats took their first opportunity to challenge the terms after the 2011 season” (Kerri). Angelos is basically trapped in a corner if the Nationals sue. He’s not paying them close to market value, and they have the legal right to demand more.

    The question becomes how much do they want to? Or really, “how much does the MLB not want them to?” the MLB is typically afraid of litigation because of their antitrust exemption, but their exemption doesn’t actually really do anything at all, and they don’t actually use it very much. They follow antitrust regulation most of the time, just so they don’t lose their exemption. And losing their exemption isn’t even very likely, given how little the supreme court seems to give a shit. The MLB will only be so terrified of litigation.

    My point is, if the Nationals value increases even more, with say, a world series win, the Lerners will want more money. There’s no way to me the MLB will send them an 80-100 million settlement check just to avoid a little bit of court action. There may be other reasons the MLB avoids court? I can’t think of anything that would make them want to give up 1% of yearly revenue to avoid a lawsuit that doesn’t involve their lawyers.

    Maybe Angelos will just die.

    Luke S.

    7 Feb 14 at 5:57 pm

  6. From a WaPo article:
    According to a Grantland.com report earlier this week, MLB has sent the Nationals has sent the team “an undisclosed sum every year to help bridge the gap, and to prevent the Lerners from taking matters to court, until the deal is more balanced.” Asked about the alleged payments, the person familiar with the matter said that they were “not sure that is accurate.” The Nationals declined to comment.

    Wally

    8 Feb 14 at 1:50 pm

  7. WaPo article/Keri nugget about the MLB payments: yeah of course the Nats are going to deny that one. It embarrasses Angelos and probably doesn’t look good to the lower-revenue owners in the league, the fact that MLB is giving the richest owner in the game a few bucks under the table.

    If it is true (and I have no doubts that it isn’t; I’ve read Keri’s work for years and trust his reporting), it does seem to indicate that MLB recognizes the inequity of the deal, and maybe even is willing to support a wholesale change. That’d be fantastic.

    Todd Boss

    9 Feb 14 at 8:30 am

  8. Luke; let me clarify what I meant when I wrote the “deal is a deal” thing. I meant the whole “Nats as permanent minority owner in MASN” component. You know, the part where the Nats play to line Angelos’ pockets in perpetuity.

    The 5-year renegotiation window has done exactly what you could have predicted it would; create a massive stalemate where the teams are literally $70 million dollars apart, with the impotent MLB/Selig regime unwilling and unable to solve it, for years on end.

    I think Baseball’s antitrust exemption is vitally important to them for two primary reasons: it basically allows the “old boy’s club” of owners to control who gets teams (you think the Lerners were the most deserving DC-based ownership group? I don’t; there were groups that worked for years and years to get the team here; Selig *selected* the Lerners to be part of his little club). Also consider just how deathly afraid the league was of Mark Cuban getting ahold of the Rangers; the only reason he was even in a position to do so was because that sale was forced through the courts and not via a private selection process. The other reason has to do with the ability of teams to move from one place to another or to challenge things like the increasingly unfair territorial disputes and RSN contracts. You don’t see that in the other three major sports, where teams are constantly on the move relatively speaking. But, at least teams in other sports aren’t stuck in sh*tty markets when better markets are available.

    Todd Boss

    9 Feb 14 at 8:46 am

  9. Your points make sense. I read a Legal Review (http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=3458&context=wmlr) that pointed out some reasons why it wouldn’t, but your points are a lot more indisputable. It was a bit curious to be how valiantly the MLB would fight to protect something so non-essential.

    In which case, I can’t help but agree. I think the Nationals will get theirs because the MLB wants to avoid court, but unfortunately, Angelos will get his just as much.

    Luke S.

    9 Feb 14 at 10:24 am

  10. Thanks for the Law article; I love stuff like this :-) Suggestion to Law Reviews; can you frigging use something smaller than a 3″ margin??

    Hey, I’m no lawyer. I’ll never dispute a professional in a field in which I’m not qualified. I can’t wait to read this whole thing… good lunch time reading.

    Todd Boss

    10 Feb 14 at 9:46 am

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