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Wednesday, February 05, 2014

Grantland: Keri: For the Birds

Jonah Keri’s “Big-ass feature on the Orioles, the Nationals, the TV deal that’s bringing the 2 teams to blows…”

In 2013, the O’s spent just a few million more on payroll than the Milwaukee Brewers, who play in the league’s smallest geographic market, and just $10 million more than the Kansas City Royals, who ranked second to last in total revenue last year. It’s no great surprise that a franchise that ranked in the middle of the pack in payroll last season and 23rd as recently as five years ago didn’t suddenly drop $400 million on two players.

On the other hand, it’s hard to understand why the Orioles aren’t spending at all. After winning 178 games the past two seasons, the O’s appear to be at a place on the win curve where minor upgrades could make a big difference — and where a major move could provide massive returns in both the win column and team bank account. Yet Peter Angelos’s team has failed to act, with $72 million currently committed to 15 players and a few low-impact arbitration rulings to come. Barring any impending signings, Baltimore seems to have settled for a roster that figures to be one of the cheapest in all of baseball despite boasting revenue streams to support more.

More than almost any other team, the Orioles are in a state of limbo. To figure out why, and to diagnose where they should go from here, we need to consider a dizzying array of factors, including an honest evaluation of team talent and AL East competition, the incredibly opaque realm of team finances and TV deals, and the riches-to-rags-to-riches recent history that’s affected both the team’s record and bottom line.

Repoz Posted: February 05, 2014 at 02:52 PM | 26 comment(s) Login to Bookmark
  Tags: nats, orioles

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   1. Joyful Calculus Instructor Posted: February 05, 2014 at 04:51 PM (#4652210)
Yeah, looking over the Orioles roster, this would have been the perfect roster for adding Robinson Cano. Around the turn of the millennium, Baltimore had one of the higher payrolls.
   2. The Yankee Clapper Posted: February 05, 2014 at 05:16 PM (#4652235)
. . . we need to consider a dizzying array of factors, including an honest evaluation of team talent and AL East competition, the incredibly opaque realm of team finances and TV deals, and the riches-to-rags-to-riches recent history that’s affected both the team’s record and bottom line.

Owner motivation is the key, as the article makes clear. RTFA.
   3. the Hugh Jorgan returns Posted: February 05, 2014 at 05:33 PM (#4652254)
Around the turn of the millennium, Baltimore had one of the higher payrolls.


Not sure about the Davey era(late 90's) though as they were very successful then; drawing over 3.5 mil fans also.

Did that high payroll carry over to the oughts? Because they have truly sucked since then until recently. Maybe they looked at Tampa and Oakland and thought, "hell, the key is to not spend money, then the wins just come!"

Seriously though if you are drawing nearly 2 mil less fans(1997-3.7 mil...2011-1.7 mil, doesn't that equate to like a minimum of $100 mil less in revenue per year?

It doesn't really seem like complicated science that if they can put a decent product on the diamond, they'll draw between 2.5 and 3 mil consistently, that's $50 mil more in revenue per year to spend on the Cano's of this world.
   4. TerpNats Posted: February 05, 2014 at 06:18 PM (#4652285)
Until Cuban Pete comes to some sort of agreement with the Nationals over $, I have next to no sympathy for him.
   5. Pleasant Nate (Upgraded from 'Nate') Posted: February 05, 2014 at 06:54 PM (#4652310)
What I found interesting is that the article says that MLB pays the Nationals money every year. It's basically bribe money to prevent a lawsuit over the O's/Nat's MSN deal. How is that legal? Why do the other teams allow this? Where does the money come from?
   6. cercopithecus aethiops Posted: February 05, 2014 at 08:53 PM (#4652379)
I would guess that the money for that sort of thing comes from MLB's "Industry Growth Fund." That is, Bud's luxury tax slush fund.

The O's were consistently in the top three to five in payroll in the mid to late nineties, once the OPACY gravy train kicked in. George Steinbrenner actually used to complain that there was no way anybody could compete with Angelos unless they got new ballparks too. Then he started his own TV network instead. But I digress. Anyway, when the high-priced late nineties teams started to underacheive, Pete decided that there wasn't much difference between finishing fourth with 80 wins and finishing fourth with 90 losses, and it made more sense to spend $50-60M than $90-100M if he was going to finish fourth either way.
   7. The Yankee Clapper Posted: February 05, 2014 at 09:02 PM (#4652383)
Supposedly, Angelos bought the Orioles because even though he was filthy rich, he was so unknown he couldn't get a good table in the better restaurants. Since he's accomplished his main goal, why would he worry about actually winning if it's going to put his money at risk?
   8. Srul Itza Posted: February 05, 2014 at 09:07 PM (#4652386)
Supposedly, Angelos bought the Orioles because even though he was filthy rich, he was so unknown he couldn't get a good table in the better restaurants.


Given what he's done to the team, I would be surprised if they even let him in the better restaurants.
   9. God Posted: February 06, 2014 at 02:00 AM (#4652484)
So if the good people of Baltimore want a winning team, I guess all they have to do is refuse to seat Angelos in the better restaurants until the Orioles win a division title.

Reading TFE reminded me of the way the Dodgers were run under McCourt. Take a high-revenue team, slash the payroll to small-market levels, and pocket the difference. If you can also set up a phony charity that exists only to have your relatives on the payroll, all the better.
   10. Joey B.: posting for the kids of northeast Ohio Posted: February 06, 2014 at 01:07 PM (#4652644)
Until Cuban Pete comes to some sort of agreement with the Nationals over $, I have next to no sympathy for him.

I agree with the no sympathy part, but the fact is that the old POS has no incentive to make any agreement. He has the Nationals by the balls, and he's smart enough to know it.

The Lerners of course should never have agreed to the horrible terms the way that they did, but they didn't really have any choice, because otherwise the old POS would have sued the commissioner and all the rest of baseball. Suing people is really the only thing that he's good at.

If the Lerners really had balls, they would refuse to take the bribe money and would just take him to court, but they would most likely lose. The good news is that the bastard is 84 and will probably be dead in the next few years. When he finally kicks the bucket, there's a much better chance that this lousy deal made under threat of extortion will finally be voided.
   11. donlock Posted: February 06, 2014 at 05:24 PM (#4652811)
Two points from the big article:

The deal that Baltimore got to allow the Nats into the territory isn't over and done. Letting DC into the market basically hamstrings both franchises from ever getting 3 million in attendance. Baltimore lost a lot of lucrative population to DC. They can't expand in any meaningful direction geographically, nor can DC. The O's attendance heyday also came when there wasn't much competition for Camden Yards. Since then, the Ravens have come to town, The U of Md has a new arena, The Redskins, Nats and Wizards/Caps have a new arena. The fan base and corporate sponsorship is stretched with two overlapping markets.

I can't imagine a trade for Matt Wieters or Chris Davis bringing in scads of valuable prospects when they both will be free agents soon and the receiving team will immediately have to pay huge money to these Boras clients. Can't think of a great young player who yielded lots of future major league talent in recent years (2000's) anyway.

I know Angelos is Satan Incarnate on this board but the article shows some balance in describing the history of the franchise and the difficulties adding another team to a market can have. This is a cautionary tale for the Oakland As moving to San Jose , the Portland area gaining a franchise and other options. A new team takes a big bite out of media money and fan base. When MLB attempts to counteract this with a sweetheart TV deal or just saying no, the fan base screams that the existing franchise is evil and greedy.
   12. toratoratora Posted: February 06, 2014 at 05:53 PM (#4652842)
A third perhaps more critical point:
MASN generates far less revenue than it should. According to TFA (paraphrasing)

"MASN properties made $167.8 million in total revenue in 2012.5 They have 5.4 million consumers paying $2.14 a month. That’s well below the $2.47 industry average for 2012 and $2.69 projection for 2013. They should be getting much more. Comcast SportsNet Mid-Atlantic, which primarily airs Washington Capitals and Wizards regular-season games, got $4.02 per month in 2012"

In a TV market as wealthy as the Baltimore/Dc metro area, it boggles my mind to think that the O's only get $29 million annually in revenue. That seems real low, especially given that the Dodgers will average $340 mil annually over the life of their new deal.

Mayhaps the real problem isn't that Angelos is clueless about how to run a baseball team, it's that he's inept in running a TV network.

Either way, I have no sympathy. As the article makes clear, the O's had a massive lead in the Nineties that Angelos refused to capitalize on. He also could have heavily advertised in Delaware and Southern PA while the Phillies sucked and picked up a fan-base there. Not to mention that the Orioles via MASN make two teams TV money (The Nats got 10% of MASN at inception and pick up 1% a year) and still don't spend.
That's simply wrong.
Screw Angelos. He made his bed. Now he gets to lie in it.

And the restaurant table story is true.He made the comment to an ex-boss of mine. The kicker is that while he's now recognized at fine dining establishments, his food is likely to get the Tyler Durden treatment.
   13. Joey B.: posting for the kids of northeast Ohio Posted: February 06, 2014 at 07:16 PM (#4652905)
Angelos would rather fail, cry poor-mouth, and continue to try to make the Nationals the scapegoat for his failures than try hard to compete and succeed and prove that there's really no problem. Never mind the fact that most of his failures took place before the Nationals ever arrived.

Everyone will be a whole lot better off when they finally have a new owner, especially Orioles fans.
   14. Belfry Bob Posted: February 06, 2014 at 07:33 PM (#4652917)
I know Angelos is Satan Incarnate on this board but the article shows some balance in describing the history of the franchise and the difficulties adding another team to a market can have. This is a cautionary tale for the Oakland As moving to San Jose , the Portland area gaining a franchise and other options. A new team takes a big bite out of media money and fan base. When MLB attempts to counteract this with a sweetheart TV deal or just saying no, the fan base screams that the existing franchise is evil and greedy.


Wow, a reasonable response. Who knew this was possible when Angelos is the subject?

As the article points out, teams are now media-revenue driven more than attendance-driven. Two teams within 30 miles of each other that aren't in Chicago, NY, or LA is a tough way to go always - and especially in the current environment. At least the Nats can try to build to the south...the O's bump into Philly pretty quickly.

I do think that if Peter doesn't want to play ball under the way things are now, he should sell the club to someone who would. Mark Cuban would be nice, if he would be interested...
   15. donlock Posted: February 07, 2014 at 11:34 AM (#4653155)
Not sure why LA TV market is worth 340 mil and Baltimore is only 29, other than the enormous difference in size. Kinda think the DC/Baltimore markets have some wealthy folks but not a lot of them and again , you are soon competing with Pittsburgh and Philly markets.

Hard to believe that tightwad, greedy, etc Peter Angelos got snookered on the deal and he should be getting 200 million or so. He has a rep as a shrewd negotiator. I think he might have squeezed as hard as he could.
   16. jmurph Posted: February 07, 2014 at 12:47 PM (#4653206)
Kinda think the DC/Baltimore markets have some wealthy folks but not a lot of them...


The area has 7 of the 13 richest counties in America (and the city of Falls Church, which is weirdly on the same list). It's an incredibly wealthy area, and TV should be an absolute cash cow for both teams. Incompetence is the only explanation.
   17. toratoratora Posted: February 07, 2014 at 12:51 PM (#4653210)
I hope your kidding. The counties surrounding DC in both MD and VA are among the wealthiest in the nation. Plus Angelos couldnt have gotten oiybargained on the MASN deal- the O's own MASN. LA might be larger population wise but the baltimore\dc\nova area is densely populated and has tons of cash and education. MD/NOVA has more than enough loot to carry a far larger deal. Heck- the Caps make twice as much
   18. donlock Posted: February 08, 2014 at 11:52 AM (#4653622)
I agree with everyone about the wealthy parts of the combined market but Baltimore doesn't get to count DC in its contract. DC is the better market and they have a separate contract based on their own area. Again The Orioles had to give up media outlets as well as geography to make the DC franchise work.Baltimore is 26th and DC is 9th in market size. Hard to negotiate to get a big media deal when you are the size of Raleigh and Indy, even if you are master lawyer Peter Angelos. He makes money out of both deals but his is the smaller market by far.

At one time the Nats had the lowest tv ratings in baseball. It takes a while to build up a fan habit of watching games on TV.



Market size:
1 New York
2 Los Angeles
3 Chicago
4 Philadelphia
5 Dallas-Ft. Worth
6 San Francisco-Oakland-San Jose
7 Boston
8 Atlanta
9 Washington, DC
10 Houston
11 Detroit
12 Phoenix
13 Tampa-St. Petersburg
14 Seattle-Tacoma
15 Minneapolis-St. Paul
16 Miami-Ft.Lauderdale
17 Cleveland-Akron
18 Denver
19 Orlando-Daytona Beach-Melbourne
20 Sacramento-Stockton-Modesto
21 St. Louis
22 Portland, OR
23 Pittsburgh
24 Charlotte, NC
25 Indianapolis
26 Baltimore
27 Raleigh-Durham
28 San Diego
29 Nashville
30 Hartford-New Haven
   19. Joey B.: posting for the kids of northeast Ohio Posted: February 08, 2014 at 12:06 PM (#4653628)
I'm pretty sure that donlock is an Angelos stooge. He parrots the Angelos self-pity propaganda to the letter.
   20. cercopithecus aethiops Posted: February 08, 2014 at 12:28 PM (#4653637)
The Dodgers don't own Time Warner, but the O's and Nats do co-own MASN. The O's get 85% of MASN's profits on top of their $29M rights fee. The Nats only get 15% on top of their $20M. That's the real problem, isn't it?
   21. toratoratora Posted: February 08, 2014 at 12:45 PM (#4653639)
The Dodgers don't own Time Warner, but the O's and Nats do co-own MASN. The O's get 85% of MASN's profits on top of their $29M rights fee. The Nats only get 15% on top of their $20M. That's the real problem, isn't it?

Which is where my beef is.
The O's are crying poor but really they're hiding profits in MASN.
Not just that but MASN generates a whole heckuva lot less income than one would expect. Especially in a market as large as Baltimore/DC/NOVA. Their rates are below industries norms and almost half those charged by the Caps/Wizards network.
That's absurd.
The Caps have fans in the region, but the Wizards are a joke.
While they don't come remotely close to the level of popularity the Snyders and Ravens enjoy, the O's and Nats are far more popular than the Caps/Wizards. That MASN makes so little is either fishy or ineptness.
   22. TerpNats Posted: February 08, 2014 at 02:43 PM (#4653672)
MASN's main problem, primarily in Washington, is that once baseball season ends, there's little reason to watch. YES has the Nets, NESN the Bruins (not sure if any other MLB-owned team channels carry an NBA or NHL franchise), but MASN has no pro winter sports tenant -- and worse for the channel, ACC rights belong to CSN Washington/Baltimore. (It should have made a quick strike for Big Ten rights once Maryland announced it was joining, but that's probably too late now.) You can watch some George Mason, George Washington and Georgetown games on MASN, but that's about it. Without an NBA/NHL team, MASN essentially becomes invisible from October through February.

Angelos might be best off selling majority control in MASN to Comcast, which could put the Nats on CSN Washington, the Orioles on CSN Baltimore, with guarantees both channels would be aired by all participating cable systems. Going from MASN to CSN would drastically boost the Nats' profile among D.C.-area viewers.
   23. cercopithecus aethiops Posted: February 08, 2014 at 03:02 PM (#4653676)
I just read a Forbes piece from last October that put the O's 2012 TV rights fee at just under $40M and estimated MASN's 2013 net cash flow at $29M (86% of which would have gone to the O's). Maybe $65M is still paltry compared to the mega-markets, but it's a helluva lot more than $29M.

The Nats are still getting screwed either way.
   24. toratoratora Posted: February 08, 2014 at 04:16 PM (#4653694)
MASN's main problem, primarily in Washington, is that once baseball season ends, there's little reason to watch. YES has the Nets, NESN the Bruins (not sure if any other MLB-owned team channels carry an NBA or NHL franchise), but MASN has no pro winter sports tenant -- and worse for the channel, ACC rights belong to CSN Washington/Baltimore. (It should have made a quick strike for Big Ten rights once Maryland announced it was joining, but that's probably too late now.) You can watch some George Mason, George Washington and Georgetown games on MASN, but that's about it. Without an NBA/NHL team, MASN essentially becomes invisible from October through February.

Angelos might be best off selling majority control in MASN to Comcast, which could put the Nats on CSN Washington, the Orioles on CSN Baltimore, with guarantees both channels would be aired by all participating cable systems. Going from MASN to CSN would drastically boost the Nats' profile among D.C.-area viewers.


Which is why I suggested that maybe the problem isn't that Angelos is a bad baseball owner, it's that he's a bad TV exec.


As for Forbes $40 mil, I buy that, but TFA makes the point that all teams have to kick in, IIRC, maybe 25%, and that the O's get 29 mil after that deduction.
   25. donlock Posted: February 09, 2014 at 12:55 AM (#4653767)
MLB and the Orioles made a deal to permit DC into the O's market. In return for giving up a sizable part of his attendance area(the DC suburbs in Maryland) and a number of media outlets, Angelos agreed to be compensated annually by making money off the TV network that shows both teams' games. It may be unfair but this is the deal that both sides agreed to. Otherwise , the Orioles gave it all up and got nothing in return.

Now there is nothing in this agreement that keeps the Nats from drawing 3 million fans a year to their games or getting more money for ads and billboard and luxury boxes. They could keep this profit to line the owners' pockets or put it into free agents. This should happen because the team is young, has stars, has a affluent population in Northern Virginia, a new stadium, etc.But it hasn't and I don't think it will because there are not enough people available to draw 3 million fans to both stadiums. These are the teams that did that last year:

1 LA Dodgers 3,743,527
2 St. Louis 3,369,769
3 San Francisco 3,326,796
4 NY Yankees 3,279,589
5 Texas 3,178,273
6 Detroit 3,083,397
7 LA Angels 3,019,505
8 Philadelphia 3,012,403
9 Boston 2,833,333
10 Colorado 2,793,828
11 Washington 2,652,422
12 Chicago Cubs 2,642,682
13 Atlanta 2,548,679
14 Toronto 2,536,562
15 Cincinnati 2,534,369
16 Milwaukee 2,531,105
17 Minnesota 2,477,644
18 Baltimore 2,357,561

I think numbers would lead one to suppose that it is really hard for a mid or small market team to draw 3 million fans. St. Louis and San Francisco and are the closest comps for DC from the top 10
in terms of population. The teams without the big population bases are generally not jumping in to grab all the free agents. They try to stay in a budget and take a ride every now and then but generally aren't your biggest spenders. It would be unwise for the Os or Nats to spend large sums of money on players as the fans want them to.
   26. toratoratora Posted: February 09, 2014 at 11:48 AM (#4653818)
See, I just don't buy that. With the exception of a few disparate teams, the majority of teams create their own market. This applies to the O's more than anyone. They had a massive lead in the 90's. They choose not to build their brand, heavily market, become a serious TV player in the area by broadcasting HTS (MASN's predecessor to Southern PA, Delaware and VA all the way to Richmond. They could have been/should have been a regional monolith. That they failed to take the steps needed, or took the wrong steps, is on them.
The Phillies were a "small market team" in the early aughts-they even got luxury tax payments. Look where they are now. The Angels were the Dodgers poor lil offspring. Now they spend money (Albeit foolishly)and until recently were taking a run at the Dodgers for kings of LA. The Giants were a terrible poorly run franchise that played in a freezer and drew nobody for most of my life and not that long ago were considering moving to places like Phoenix and Raleigh.
Hell, even the Yankees built their damn beastly brand into the giant it is. When George 3 bought em, he paid 2 million bucks, the team had been in decline for a decade (At least)and the Mets not only outdrew them, but clearly had captured the hearts of NY.
Look at where those two teams stand now and don't tell me that George didn't just crush the Mets-one has an income stream of billions, the other can barely remain solvent.
So I don't buy the crying poor excuse. You spend money to make money. The key is to do so intelligently.

And this is all pretty much a straw man anyhow. The new TV money dwarfs that of attendance. The real driver has lots less to do with butts in the seats and far more to TV's per region, ratings and such things.
And the O's sit smack dab in one of the wealthiest, best educated areas in the nation, one in which they had a monopoly for 30 plus years. They get the revenue for not one but two teams. Yet somehow, they make slightly more money per year in TV revenue than the Royals. The freaking Royals!
That's all sorts of fubar.

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