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Some Major League Baseball teams are practically minting money in mind-boggling local television deals the past couple of years.
The Miami Marlins are among those missing the gravy train due to being locked into a long-term broadcast contract. A prominent sports economist believes the bonanza may be over by the time their deal with Fox Sports Florida expires in 2020.
"Bad timing. Absolutely bad timing," said Andrew Zimbalist, a Robert A. Woods professor of economics at Smith College. "All of this, I think, is coming to a head now and it's not likely to continue going forward."
The Los Angeles Dodgers just got a staggering 25-year, $7 billion deal with Time Warner worth as much as $280 million a year. That eclipses the $147 million annual haul the Los Angeles Angels got through a 17-year package from Fox in 2011.
Even smaller market teams are cashing in with lucrative annual rights fees, including the San Diego Padres ($60 million), Houston Astros ($80 million) and Cleveland Indians ($40 million).
The Marlins' annual revenue from local television is believed to be in the $16 million-$18 million range.
While there are skeptics to owner Jeffrey Loria's claim that the Marlins lost "tens of millions of dollars" in 2012, the team's payroll reduction has more to do with limited local television revenue than disappointing attendance.
"We have the worst TV revenue in baseball, and we have another two or three years to go before we can negotiate that," Loria said.
The Marlins aren't alone in being tied to deals well below the current market value. Ironically, the Atlanta Braves, once known as America's Team when all their games were televised nationally on TBS, are also among the have-nots with an under-market cable deal.
The Braves entered into a 20-year deal in 2007 that pays less than $20 million a year, and some accounts place it closer to $10 million. But resourceful teams find a way to stay competitive.
Braves CEO Terry McGuirk said earlier this year that the team has found other ways to enhance revenue. The Braves were able to add outfielders Justin and B.J. Upton this offseason for about $7 million apiece and have a payroll around $88 million, more than double the Marlins'.
All teams will get a significant boost from MLB's new national television deal, which will double the annual payout per team to about $52 million beginning in 2014.
There is also a trickle-down benefit from the teams that are hitting the local TV jackpot, as all 30 clubs are required to contribute 34 percent of their net local revenue to a revenue-sharing pool that is distributed equally.
But teams are finding ways to hold onto a larger portion of their local TV windfalls by receiving some of the money through equity stakes agreements with their broadcast partners, which don't have to be shared in baseball's revenue pool.
In addition, the Dodgers, because of an agreement when the team was in bankruptcy, only have to count the first $84 million of their TV money (it raises 4 percent a year) in the revenue-sharing equation.
"The biggest danger in our game today is the ability of teams to avoid revenue sharing through their TV deals and how they are putting them together," Marlins President David Samson said.
Those at the other end of the spectrum take exception to low revenue-producing teams receiving more than they contribute to the pool. The Marlins look forward to correcting some of the inequity with their next local TV contract.
"We liked our deal when we signed it. Now we don't," Samson said. "Anyone who signed in the 2004 or '05 time frame is under market now. That's just how it goes, so we don't complain about it.
"Our next deal will be quite a bit different from this one, I can tell you that."
A troubling sign for the Marlins is their average audience last season on FSF was 32,000, fourth-lowest in MLB. However, the Astros and Padres scored their big deals with smaller viewership.
But Zimbalist has doubts that the next generation of local rights deals will adhere to the current astronomical arc.
"Those numbers are likely to flatten out or go down," said Zimbalist, who sees a confluence of factors driving the market to dizzying heights. "In the Los Angeles area you have a special factor, which is competition between Time Warner and Fox. That affected also the Padres deal to some extent."
The current trend has sports programing in vogue with TV networks due to lower production costs than scripted or reality shows, he said. And in the DVR age, sports are particularly appealing to advertisers because most of the audience watches games live rather than recording and fast-forwarding through the commercials.
One possibility that could stem the escalation of TV dollars would be government action to control rapidly rising rates on cable and satellite programing, Zimbalist said. Naturally, consumers are paying the price as teams and leagues line their pockets.
"It's not clear if the higher and higher price that has been charged is something that politicians will stand for or that the FCC will stand for, and maybe they'll start mandating a la carte programing instead of standard-basic, which is what you have now," he said.
Like dinner time at a boarding house, it pays to be in line early for the jumbo portions of TV dollars. It may be slimmer pickings for those who come later.
The Miami Marlins are among those missing the gravy train due to being locked into a long-term broadcast contract. A prominent sports economist believes the bonanza may be over by the time their deal with Fox Sports Florida expires in 2020.
"Bad timing. Absolutely bad timing," said Andrew Zimbalist, a Robert A. Woods professor of economics at Smith College. "All of this, I think, is coming to a head now and it's not likely to continue going forward."
The Los Angeles Dodgers just got a staggering 25-year, $7 billion deal with Time Warner worth as much as $280 million a year. That eclipses the $147 million annual haul the Los Angeles Angels got through a 17-year package from Fox in 2011.
Even smaller market teams are cashing in with lucrative annual rights fees, including the San Diego Padres ($60 million), Houston Astros ($80 million) and Cleveland Indians ($40 million).
The Marlins' annual revenue from local television is believed to be in the $16 million-$18 million range.
While there are skeptics to owner Jeffrey Loria's claim that the Marlins lost "tens of millions of dollars" in 2012, the team's payroll reduction has more to do with limited local television revenue than disappointing attendance.
"We have the worst TV revenue in baseball, and we have another two or three years to go before we can negotiate that," Loria said.
The Marlins aren't alone in being tied to deals well below the current market value. Ironically, the Atlanta Braves, once known as America's Team when all their games were televised nationally on TBS, are also among the have-nots with an under-market cable deal.
The Braves entered into a 20-year deal in 2007 that pays less than $20 million a year, and some accounts place it closer to $10 million. But resourceful teams find a way to stay competitive.
Braves CEO Terry McGuirk said earlier this year that the team has found other ways to enhance revenue. The Braves were able to add outfielders Justin and B.J. Upton this offseason for about $7 million apiece and have a payroll around $88 million, more than double the Marlins'.
All teams will get a significant boost from MLB's new national television deal, which will double the annual payout per team to about $52 million beginning in 2014.
There is also a trickle-down benefit from the teams that are hitting the local TV jackpot, as all 30 clubs are required to contribute 34 percent of their net local revenue to a revenue-sharing pool that is distributed equally.
But teams are finding ways to hold onto a larger portion of their local TV windfalls by receiving some of the money through equity stakes agreements with their broadcast partners, which don't have to be shared in baseball's revenue pool.
In addition, the Dodgers, because of an agreement when the team was in bankruptcy, only have to count the first $84 million of their TV money (it raises 4 percent a year) in the revenue-sharing equation.
"The biggest danger in our game today is the ability of teams to avoid revenue sharing through their TV deals and how they are putting them together," Marlins President David Samson said.
Those at the other end of the spectrum take exception to low revenue-producing teams receiving more than they contribute to the pool. The Marlins look forward to correcting some of the inequity with their next local TV contract.
"We liked our deal when we signed it. Now we don't," Samson said. "Anyone who signed in the 2004 or '05 time frame is under market now. That's just how it goes, so we don't complain about it.
"Our next deal will be quite a bit different from this one, I can tell you that."
A troubling sign for the Marlins is their average audience last season on FSF was 32,000, fourth-lowest in MLB. However, the Astros and Padres scored their big deals with smaller viewership.
But Zimbalist has doubts that the next generation of local rights deals will adhere to the current astronomical arc.
"Those numbers are likely to flatten out or go down," said Zimbalist, who sees a confluence of factors driving the market to dizzying heights. "In the Los Angeles area you have a special factor, which is competition between Time Warner and Fox. That affected also the Padres deal to some extent."
The current trend has sports programing in vogue with TV networks due to lower production costs than scripted or reality shows, he said. And in the DVR age, sports are particularly appealing to advertisers because most of the audience watches games live rather than recording and fast-forwarding through the commercials.
One possibility that could stem the escalation of TV dollars would be government action to control rapidly rising rates on cable and satellite programing, Zimbalist said. Naturally, consumers are paying the price as teams and leagues line their pockets.
"It's not clear if the higher and higher price that has been charged is something that politicians will stand for or that the FCC will stand for, and maybe they'll start mandating a la carte programing instead of standard-basic, which is what you have now," he said.
Like dinner time at a boarding house, it pays to be in line early for the jumbo portions of TV dollars. It may be slimmer pickings for those who come later.
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