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July 9, 2012

Bizball

How Much Could MLB’s Next National Television Contracts Be Worth?

by Maury Brown

There was a point not too long ago when the key revenue stream for Major League Baseball was the gate—ticket sales—with media rights through television coming in second. Recently, however, there has been an explosion in the amount of money coming into sports properties in the U.S. via media rights that is altering the landscape. Whether it’s collegiate sports conferences or the “big four” sports leagues (NFL, MLB, NBA, NHL), the dollar amounts for national and local broadcast rights have increased. The reason? With the advent of the DVR and movies on-demand, regular programming can be watched whenever viewers like. With content being recorded, fast-forwarding past commercials has become commonplace. Live sports programming is the exception. Since fans want to see action when it happens, advertisers are placing more focus around sports than ever before.

The increases in media rights fees have happened already at the local and regional level in baseball, as exhibited by the Rangers, Angels, and Astros (and soon to be Dodgers and Padres). In the coming months, MLB itself will be cashing in, too, when the national television broadcast rights come up for renewal. Currently, the deals with FOX, TBS, and ESPN all expire at the end of 2013. According to sources, informal conversations have already begun on renewing the national television deals.

The looming question is, “How much will they be worth?” Also, will the same broadcast partners be in the mix, or could others jump into the fray? The payday for the league will be a significant jump from where they are now, no matter who the players are.

To get an idea of where MLB could land, it’s important to understand how the current media rights landscape fits into the equation. Based on where the contracts are expiring, baseball is one of the last to see their contracts being renewed in this new media rights world.

The big change came about when collegiate sports conferences started launching their own networks. The PAC-12’s deal set the table when negotiations brought about a deal that garners $250 million annually, a massive escalation based upon changes in the market. That contract spawned the ACC deal with ESPN that now pulls in $155 million a year. That ripple-effect set the market for the rest of the sports landscape. The NBA renewed with ABC/ESPN and TNT in an eight-year deal that pulls in approximately $930 million annually, or $7.44 billion over the life of the contracts.

The NHL has benefited from this rights boom as well. They currently are pulling in $187 million annually after renewing with NBC and Versus—a 146 percent increase from the $76 million they were pulling in prior. The NFL renewed their contracts in late December last year and, with it, saw a 60 percent jump from what they were pulling in prior. The nine-year deals kick-in in 2014, and when it does, rights fees from CBA, FOX, and NBC will jump from $1.93 billion annually to an estimated $7 billion. Along the way, the Lakers 25-year deal with Time Warner Cable pulls in an estimated $200 million annually. That deal, which includes all preseason, regular season, and postseason games not broadcast nationally, eclipsing the prior deal that was reportedly $30 million annually. Throw in the aforementioned MLB deals (Rangers and Angels each getting $3 billion for 20 years; the Astros pulling in $80 million annually as part owners of Comcast SportsNetHouston; the Padres’ pending deal of $75 million annually for 20 years; and the expected windfall for Dodgers when their deal is reached), and baseball is about to hit the mother lode with their national contracts.