MASN, the Baltimore Orioles, and DC

Earlier this week, a Hollywood Reporter story came out regarding the Mid-Atlantic Sports Network’s ongoing battle regarding the TV rights fees of the Orioles and Nationals. (The article can be found by clicking here.) First off, let’s get one thing straight; this dispute is not the Orioles vs. the Nationals. While many media outlets try to spin it as such, that’s in no way the case from a legal perspective. The Orioles and MASN do share the same majority owner in Peter Angelos; however the two are separate entities. So in reality it’s MASN vs. the Nationals.

Bearing that in mind, the contract stipulates that every five years the Nationals’ TV rights fees are to be reset in accordance with fair market value. Per the contract, the Orioles’ TV rights fees must also be the same so as to ensure that the two franchises are on an equal footing within the MASN viewing area. The first reset period came about following the 2011 season. The Nationals asked for rights fees in the $100-$120 million range. (It’s unclear how much MASN counter-offered, but I’ve heard that the number was in the $40 million range.)

The formula that was to be used in determining fair market value (per the contract) was the same formula that MLB has used for some time. However once again per the contract, if there was any sort of dispute in terms of how much MASN needed to pay the Nationals for the rights to broadcast their games it was to be decided by an independent panel of arbitrators. The panel’s decision was to be legally binding, lest there be corruption of some sort. The panel was the CEO of the NY Mets, the President of the Pittsburgh Pirates, and the owner of the Tampa Rays.

According to the Hollywood Reporter story (again, linked here), the panel rendered a decision in favor of the Nationals back on June

Mandatory Credit: Brace Hemmelgarn-USA TODAY Sports

30th. (The amount that the panel awarded them in terms of rights fees is undisclosed, however it was obviously closer to what the Nationals wanted as opposed to something closer to MASN’s liking.) The Nationals, perhaps justifiably, want their money right away. MASN has yet to pay them, and both sides are filing suit against the other.

Keep in mind that this is the short version of the situation, much of which has been well-documented at various points right here on Birds Watcher. With that said, the Nationals have a legitimate claim when they say that their rights fees are much higher than what they’re getting from MASN. There’s no question about that. However, the contract also stipulates the formula to be used in re-setting the rights fees. It’s unclear how they came up with the $100 – $120 million number, what whatever formula they used appears to have carried weight with the panel.

Some might ask how exactly MASN has a case in this at this point. If both parties agreed that the panel’s decision would be legally binding, it’s over…right? Technically, yes. However I suspect that MASN’s point in this will be that the panel was hardly “objective” in a sense – especially the owner of the Tampa Rays. Tampa, being a mid-market team like the Orioles, would stand to benefit by the Orioles having hugely inflated TV rights fees. The same is true of Pittsburgh, as well as the NY Mets (but to a lesser degreee – NYC isn’t a mid-market). So one could argue that the impartiality of the panel itself could be questioned beyond a reasonable doubt.

Ultimately, keep in mind that whatever MASN pays the Nationals they also have to pay the Orioles. So if the worst-case scenario is that the Nats get $120 million per year, that would end up being $240 million that MASN would have to pay out annually in rights fees. That might well bankrupt the network – I say that without knowing what MASN’s finances might be or anything along those lines. So what happens then?

Ultimately there are several potential end games, none of which are very beneficial for MASN or the Orioles. Peter Angelos could decide to sell the network, and over time various potential suitors have been rumored. Or the network could go belly up, which would probably also have a ripple effect for the Orioles. Even though the two are separate companies, one company going under isn’t going to be good for that owner’s other company. (Ted Lerner, the owner of the Nationals, also owns a minority stake in MASN. So while the same could be true for him, the effect would be much less given the fact that his stakes are minority shares.) Furthermore if the network itself went under, how would Orioles games be televised?

The other option is that the courts could rule in MASN’s favor in that the panel wasn’t as arbitrary as it could have been. However I suspect that’s going to be difficult to prove – true as it might be. (All three of those teams stand to benefit from higher rights fees.) It’s situations like this which can show how business can often rear it’s ugly head in terms of sports. In the midst of all of this, Bud Selig sent a letter to both Peter Angelos and Ted Lerner, stating that he was “disappointed” that things have had to come to this. He also threatened to use his power to discipline either or both sides with the strongest sanctions possible.

So what would that mean; stripping Angelos and/or Lerner of their respective teams? With the Donald Sterling saga we saw an owner lose his team, albeit under much different circumstances. That threat comes across as empty given that Selig is retiring; but the threat is still there. For the record, one can’t blame either side for their respective points in my view. They both feel they were promised things contractually, and are now getting shafted. Ultimately it’ll be decided in court.