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MLB kicks money to the Nationals to keep them from suing over the MASN deal

Feb 5, 2014, 3:15 PM EDT

Peter Angelos

Jonah Keri has a great, in-depth story about the Orioles today. Specifically about their status as a team that rakes in money yet spends relatively little on payroll. He traces the arc of the team from the mid-90s to today, speaking with former Orioles officials and telling a really illuminating story about the team got to where it is. There’s a lot in there that we either didn’t know before or didn’t know quite as clearly.

There’s also a passage in the middle that discusses the Oriole’s TV partnership with the Nationals and the MASN regional sports network. Jonah explains it in detail, but the short version is that, while both the O’s and Nats get the same amount in rights fees from MASN, the Orioles own a much larger percentage of the network than the Nats do. The O’s reap huge profits — profits that are not subject to evenue-sharing — while the Nats get a relative pittance. Meanwhile, there’s a strong argument that the network’s subscription rates are undervalued, keeping even more money away from Washington.

At times there have been negotiations to change this arrangement and at times there have been threats of legal action by the Nationals to get a bigger piece of the pie. Keri reports, however, that there’s a good reason why no one has been sued yet:

For now, the MASN status quo remains. The Nationals aren’t completely helpless, though: According to a source close to the Washington franchise, MLB 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 becomes more balanced.

That’s pretty astounding. It’s been pretty effective so far, sure, but it’s still pretty astounding. It’s also, one may assume, unsustainable. And in any case it is pretty telling of a system that is increasingly inequitable. If you own your network or struck your deal at just the right time, you’re flush. If not, you’re not. And if you’re flush you have a far greater ability to shield money from revenue sharing than the poor sisters are.

And that’s not very sustainable either.

  1. chacochicken - Feb 5, 2014 at 3:33 PM

    This seems like a very problematic situation. So I’m guessing Bud plans on being on the retirement side before this gets resolved? Kind of like he expects to be long dead before his blue ribbon panel deals with the A’s.

  2. rcali - Feb 5, 2014 at 3:59 PM

    So let me get this straight, the Nats paid their extremely expensive legal team to negotiate a tv contract, they dropped the ball, and it’s the Orioles/MLBs fault. Looks like the Nats organization fits right in with the rest of the Washington D.C. “leaders.”

    • David Proctor - Feb 5, 2014 at 4:01 PM

      MLB negotiated the deal when they owned the Nationals. The deal was in place before the Lerners bought the team. Please know what you’re talking about, or read the article, before commenting.

      • alang3131982 - Feb 5, 2014 at 4:02 PM

        So what though? The legal owners of the team negotiated a binding agreement. The Nats owners new the agreement when they purchased the team. So what exactly can they reasonably complain about or legally change?

      • David Proctor - Feb 5, 2014 at 4:03 PM

        Read the actual article and you’ll better understand it.

      • alang3131982 - Feb 5, 2014 at 4:10 PM

        did read the article. the article which read. So, what exactly are you arguing? it appears you took issue with rcali for saying the Nats owners negotiated the deal, which he was wrong about. But, just because MLB negotiated the deal doesnt mean much because the deal was signed…MLB had to give Angelos something for not suing when MLB moved the team to DC and into his territory.

        “In 2005, MLB and Angelos worked out a deal allowing the Nationals to operate in D.C. in exchange for a new local TV deal that overwhelmingly favored the Orioles. In July 2006, the Mid-Atlantic Sports Network launched a full-time sports programming slate headlined by O’s and Nats games. The terms dictated that each franchise would receive the same amount in rights fees, but that Baltimore would control a 90 percent share of MASN and any MASN-owned spinoff networks at the start; the Nationals would pick up an additional 1 percent stake each year after an initial two-year wait, until eventually reaching a 33 percent cap. Angelos got his lopsided deal, while the Nationals, who play in the nation’s seventh-biggest market,4 got screwed.”

      • David Proctor - Feb 5, 2014 at 4:20 PM

        MASN Angelos has to pay the Nats market broadcast rates (now soaring) under the terms of the contract. But he can’t actually do that. First, he would have to pay Orioles the same amount, which would bankrupt MASN. Not to mention the fact that Baltimore TV rates are not actually worth what Washington TV rates are. Second, on top of that, he would then have to pay 33% revenue sharing of the astronomical rights fees paid to Orioles Angelos back to the league instead of keeping it in his MASN pocket.

        When the Nationals and Orioles were unable to agree on the renegotiated fees, MLB stepped into arbitrate it. They could not. Because any agreement that satisfies the Nationals will lead to the Orioles suing and vice-versa, because MASN is simply not financially solvent under any reasonable terms. This money being sent to the Nationals is, depending on how you look at it, buying MLB time to arbitrate a settlement or delaying the inevitable lawsuits.

      • tcostant - Feb 5, 2014 at 4:47 PM

        They knew about the deal when they purchased the deal, it included an ever 5 year re-set of the rights fees. That is what is in dispute.

      • natstowngreg - Feb 6, 2014 at 1:40 PM

        Right. When the Lerners bought the team, they bought into the MASN deal. That deal included a means for the Lerners to renegotiate, to get more of the pie. MLB knows it’s on shaky ground, if the Lerners went to court. They must know that the Nats have a case, that one party to the contract (Angelos) isn’t abiding by one of its terms.

        So, MLB resorts to what was called, back in the Watergate days, “hush money.” Or, to use the term Craig is carefully avoiding (with good reason), bribery. Not that it’s actual bribery, but it really looks bad.

  3. alang3131982 - Feb 5, 2014 at 4:01 PM

    I dont quite get the problem here.

    MLB wanted to bring baseball to washington.

    Baltimore owned the territory.

    MLB and Angelos made an agreement that, in exchange for certain concessions, caused Angelos to feel comfortable allowing another MLB team nearby.

    Just because there are new owners in Washington doesnt mean the agreement exists.

    What’s the difference between the nats arguing for a more equitible share of the TV rights and the O’s arguing that the Nats should be moved?

    The Nats would certainly earn more money with a different TV deal. The O’s would make more money and have a far more reliable fiscal future if the Nats werent in Washington…

    • deelizzle - Feb 5, 2014 at 4:33 PM

      Baltimore did not own the territory. That was a concept unheard of in Baseball until Angelos raised a big enough stink.

      Note that Washington did not cry foul when the St. Louis Browns moved to Baltimore to form the Orioles. Why? Because there was no concept of territory.

      • DJ MC - Feb 5, 2014 at 10:34 PM

        I think you need to check your notes. The Senators definitely considered Baltimore part of their territory in the early 1950s. But because it was a different era and they didn’t have the transportation and media options as today, it was easier to convince the Griffiths to allow a team to move in for the greater good of the American League.

    • natstowngreg - Feb 6, 2014 at 1:44 PM

      Yes, MLB agreed to a bad TV deal to get a team into the Washington market. But that deal has an out clause, where the Nats could renegotiate. As noted above, the renegotiation timeframe has come and gone, without serious renegotiation. That’s the problem.

  4. inserthandle - Feb 5, 2014 at 4:09 PM

    How did Angelos make his fortune? Oh, right.

    If the Lerners didn’t like the terms they shouldn’t have bought the team. The Nats play in Baltmore’s territory. They get table scraps. Those are the terms.

    • David Proctor - Feb 5, 2014 at 4:31 PM

      No, those aren’t the terms. The terms of the contract are laid out pretty clearly. You do not get to fantasize about your own terms.

      By the way, the Orioles stepped on the Washington Senators’ turf in 1954. I guess they should have been forced to “get table scraps.”

    • tcostant - Feb 5, 2014 at 4:51 PM

      Your just not getting it, the agreement includes a re-set of the rights fees to a market based amount. They can’t agree and MLB (for some reason) refused to step in and make a ruling…

    • voteforno6 - Feb 5, 2014 at 8:38 PM

      @inserthandle:

      Probably the most ludicrous thing about your post is the notion that Washington is part of the Orioles’ territory. Not many people in Washington thought of the O’s as their team, even when they were the only game in town. They certainly don’t now.

      • nolanwiffle - Feb 6, 2014 at 10:10 AM

        Amen.

  5. billybawl - Feb 5, 2014 at 4:19 PM

    It’s explained pretty well in the article. Fees were open for negotiation after 5 years and structure of deal creates incentives for Orioles to keep money with MASN, instead of paying fees to Nats and O’s. That hurts all other MLB teams who miss out on revenue sharing. Rather than allow this to blow up in court, where anything can happen, MLB apparently stepped in with some $ to appease Nats for short term. It was probably a mistake not to see this coming when they created MASN, but to be fair, they likely didn’t realize how much money was available from local TV. Maybe Angelos had this foresight, but the article makes a good case that the O’s aren’t benefiting from this either.

  6. jerrahsucks - Feb 5, 2014 at 4:23 PM

    Send the bitches back to Montreal. would be a good place for Harper and Strasburg

    • David Proctor - Feb 5, 2014 at 4:30 PM

      Only if you send the O’s back to St. Louis. They stepped on the Washington Senators’ turf in 1954.

      • jm91rs - Feb 5, 2014 at 5:05 PM

        And you still haven’t gotten over that?

      • David Proctor - Feb 5, 2014 at 5:06 PM

        I’m over it and O’s fans should get over the Nationals being in DC.

      • gloccamorra - Feb 5, 2014 at 6:38 PM

        Hey, then you can bring the original Senators back from Minnesota, and the expansion Senators back from Texas! Which Senators team will play in Baltimore, and which in Washington?

  7. APBA Guy - Feb 5, 2014 at 4:32 PM

    Still, a key component of team spending is that national tv rights for 2014 increase for every team by $ 26M, The A’s are spending that (Jim Johnson from the O’s, welcome to the Big Ballpark!). But the Orioles are not, at least, not yet. That money is independent of the local TV rights issue which captures most of the attention.

    Interesting that the GM’s all say the fault for these lousy teams was not necessarily with Angelos. I have a hard time with that from the outside, since the owner “owns” the results of his team, especially over such a long period of futility.

    • billybawl - Feb 5, 2014 at 4:42 PM

      In hindsight, do you think the O’s success in 1996-97 was because, or in spite, of Angelos?

      Contrast Angelos with an owner like Arte Moreno, who if anything seems to be acknowledging more responsibility for the Angels’ disappointing results than he deserves.

      • APBA Guy - Feb 5, 2014 at 7:59 PM

        That’s a tough question. It seems like, in hindsight, it might have been one of those “vortex” things, where Anglelos could justify the spend based on attendance, the baseball people had assembled some veteran talent (like Alomar), and the guys that the club had nurtured (like Mussina) performed at a high level.

        I wish I could say I was sure about any of that, but it’s really just a deduction (ie, guess) based on what I remember at the time, Jonah’s article, some reading today about that period, etc..

  8. tcostant - Feb 5, 2014 at 4:37 PM

    They should just sell the MASN Network to Fox Sports.

    • deelizzle - Feb 5, 2014 at 4:42 PM

      Selling MASN would be great, but much better for the Nats than the O’s. I imagine Angelos is completely uninterested in selling the Nats’ stake in MASN.

      • tcostant - Feb 5, 2014 at 4:56 PM

        Angelos would walk away with 87% of around $500M (Est in 2013 in the article) and get a market based rights fee. I think that is more than he paid for the O’s. Seems pretty good to me.

  9. righthandofjustice - Feb 5, 2014 at 5:00 PM

    Baseball, in the tenure of Selig, is the most scandalous U.S. sport by a landslide. Selig has been very predictable in handling all these scandals by giving a portion of the money he and his owner friends scammed back to the victims.

    It is unfortunate to real fans who want baseball as a CLEAN sport that the minority owners of the Expos let Selig and Loria off the hook over the Montreal/Washington move issue. Imagine if they insisted to bring that issue to court, Selig and Loria could be prosecuted as criminals and probably in jail, and Americans would not have to hear all these PED, collusions and government probes every few weeks.

    • billybawl - Feb 5, 2014 at 5:28 PM

      Sports commissioners serve for the benefit of owners, period. Not for fans, not for players and not for the game. The fact that those interests may sometimes coincide doesn’t change the bottom line.

      • righthandofjustice - Feb 5, 2014 at 5:44 PM

        Selig and Loria were sued by minority OWNERS of the Expos. Are you trying to tell us minority OWNERS are not OWNERS? Are you trying to tell us sport commissioners serve only to unjustly enrich the majority owners in the expenses of the minority owners?

      • gloccamorra - Feb 5, 2014 at 6:43 PM

        Sounds like you’ve got it figured out, righthand. So waht’s the problem?

      • righthandofjustice - Feb 5, 2014 at 7:13 PM

        Definitely not my problem because I am not a minority owner, investor, debtor or whatnot of such corrupted MLB organization. It is the problem of those who trust their money with Bud Selig and some majority team owners, whether they are private investors or the government.

    • emdash01 - Feb 5, 2014 at 5:38 PM

      There is literally zero chance they would have been sent to jail for any of that.

      • righthandofjustice - Feb 5, 2014 at 5:46 PM

        Check out the truth story of this decade old lawsuit. MLB and Selig were sued under the RICO status, that is, they were being as criminal organization. Criminals go to jail, just like Al Capone.

      • emdash01 - Feb 5, 2014 at 5:57 PM

        Has a sports team owner or commissioner ever gone to jail for shady business practices? If so, I’m betting that’s a pretty short list.

      • righthandofjustice - Feb 5, 2014 at 6:48 PM

        There are only a handful of sport teams owners and commissioners. If you take a sample of neighbors in your block and find nobody has been sent to jail then say it is a long shot for criminals to be sent to jail then you are definitely wrong.

        If there were no merit for that suit 10 or so year ago it would have been dismissed from the get go, let alone allowed to proceed under the RICO status. The plaintiffs must have submitted substantial evidence in order to get Selig, Loria, MLB, et al sued as a criminal orgainization. If Selig and Loria were not scared to death, they would not have to agree to pay for a settlement.

    • churchoftheperpetuallyoutraged - Feb 5, 2014 at 8:16 PM

      MLB has a long way to go before it catches the NFL, let alone the key of corruption that is boxing.

      Also baseball has never been a clean sport. Let’s stop trying to pretend that it ever was.

    • Jonah - Feb 5, 2014 at 8:32 PM

      Actually the Expos’ minority owners did bring Loria and Selig to court over the ownership exchange. In fact they filed a RICO suit, alleging a grand conspiracy dating back several years. The case went to arbitration, and the panel voted 3-0 against the plaintiffs.

      • righthandofjustice - Feb 5, 2014 at 10:25 PM

        Jonah, despite of the arbitration ruling, MLB still paid the plaintiffs an undisclosed amount of money to keep them quiet.

        They may be able to keep some minorities owners, players or employees quiet by kicking back some money they scammed but it is not that easy when the ones they have to deal with are the government. Let’s see how they fare when the dust settles with San Jose, FDA, Florida Department of Health, Department of Labor, Boca Raton police, etc. One can only go to the well a certain number of times.

      • simon94022 - Feb 6, 2014 at 2:00 PM

        The RICO claim was one of the most far fetched cases in recent history. The Expos minority owners had no basis for a lawsuit — they had signed an agreement with Loria allowing their ownership interests to be diluted if he put money into the team and they failed to proportionately match it. They refused to come up with the cash, their interest was properly diluted, and then they got frustrated and sued when Loria sold his controlling interest to MLB. Tough.

        Montreal’s problem always came down to the same issue: No one was willing to invest money to run a baseball team in that market. As long as that was the case, allegations that the team was “stolen” from Montreal are pretty ridiculous.

  10. Eugene in Oregon - Feb 5, 2014 at 5:43 PM

    The problem, which a lot of the commenters seem to be missing, isn’t necessarily with the ‘deal’ (although it’s a mess), but with the fact that the O’s haven’t honored it. There was supposed to be a reset to market-based rates after five years. The O’s stonewalled. MLB (Bud Selig) let them get away with it and is still letting them get away with it. And MLB seems to be paying some version of ‘hush money’ (or whatever you want to call it) to keep the Nats from suing.

    • gloccamorra - Feb 5, 2014 at 6:50 PM

      According to the story, the reset would bankrupt MASN, hurting both teams and their fan bases. MLB is just trying to get the teams to untie the Gordian Knot without the courts getting involved.

      • DaveB - Feb 5, 2014 at 8:44 PM

        Glocc … I agree with your conclusion about MLB trying to buy time to untie the Gordian knot. However, the terms of the reset in “the deal”, and the resulting probable bankrupting of MASN, would hurt Angelos MUCH worse than the Nats (since he owns the vast majority of MASN), and so it is Angelos that is basically refusing to honor the deal. Since the deal also says that MLB is responsible to act as arbitrator if the two sides can’t agree, and MLB has failed to be able to do that, Selig is apparently making this payment to buy time. Will be interesting to see how it sorts out.

  11. simon94022 - Feb 5, 2014 at 9:44 PM

    Orioles territory never included any part of the Washington DC market. What the Orioles had were broadcast rights in DC. The MLB Constitution clearly states that broadcast rights can be assigned and adjusted at any time by the MLB Executive Committee. Doesn’t even require an ownership vote. Despite the weakness of this claim, and the absence of any large number of Oriole fans in the Washington metro area, Angelos threatened to sue and generally raised heck about Washington getting a team.

    Selig does not want an unhappy owner in the club. With multiple deep pocketed groups lined up to pay hundreds of millions of dollars to MLB for the Nats, it was easy for him to hush up Angelos by creating the MASN deal. But the MASN deal requires – in exchange for perpetual rights to Nats broadcasts — that MASN pay “market rates” for those rights. MASN can’t afford to do that, so now MLB has to make payments to them to avoid a lawsuit.

    • DJ MC - Feb 5, 2014 at 10:39 PM

      I’ve seen information from people who worked in the ticketing department of the Orioles in the early 2000s, and they say the Washington area accounted for at least 25 percent of the season-ticket base. So to say that there was an “absence” of Orioles fans around DC is just not true.

      • simon94022 - Feb 6, 2014 at 2:08 PM

        That’s always been the Orioles’ unverified claim. And it might even be true if you stretch the definition of Washington area to include, say, Howard County or Anne Arundell County in MD.

        But in the core DC metro area, and especially in Northern Virginia where a majority of the population lives, the Orioles never had more than a small niche fan base. It is quite possible, in fact, that the area has more Yankees and Red Sox fans than Orioles fans. Certainly the former are more vocal and more likely to wear their team’s caps and other gear.

      • DJ MC - Feb 6, 2014 at 3:53 PM

        No one is stretching DC out to Howard or Anne Arundel counties.

        If you want to argue that the people coming up from DC were less actual “fans” of the Orioles and more corporate and government types taking advantage of the closest baseball team, that might be fair. But that’s still a significant portion of the team’s attendance that evaporated in 2005.

      • deelizzle - Feb 7, 2014 at 12:33 PM

        Even if this were true, it does not _entitle_ the Orioles any territory.

  12. wogggs - Feb 6, 2014 at 12:33 AM

    I seem to recall that the creation of MASN and the Orioles’ large ownership of it was part of the deal to move the Expos to Washington. The Orioles considered Washington part of their territory, and this was the concession made by MLB to get them to sign off on the deal. I expect the same sort of thing will eventually happen between the Giants and A’s, if the A’s are to move to San Jose.

    • tcostant - Feb 6, 2014 at 9:28 AM

      Again, the agreement includes a re-set of the rights fees to a market based amount. They can’t agree on what that amount should be and MLB (for some reason) refused to step in and make a ruling…

    • simon94022 - Feb 6, 2014 at 2:18 PM

      The issues are different because the A’s want to move to San Jose, which really is part of the Giants’ territory as spelled out in the MLB Constitutions. Taking away a team’s official territorial rights requires an amendment approved by 3/4 of the owners. It has never been done before (all the pre-1971 franchise moves happened before the merger of the two major leagues and adoption of the MLB Constitution), so many owners will worry about the precedent.

      The Orioles never had legal territorial rights to DC or any of the counties around it. They “considered” it their territory because they had been awarded provisional TV rights there and tried in various ways to market the Orioles to Washington area fans. But it was a much, much weaker claim than what the Giants have to San Jose, which is why that issue has never been resolved.

  13. scoutsaysweitersisabust - Feb 6, 2014 at 11:25 AM

    This was probably the best written, unbiased article detailing the past two decades of the Organization I have ever read. I know everyone is focusing on the MASN deal, and that is certainly a key component, however there is a lot of very interesting information here, including some very nice inside info from former front office personnel. Unfortunately the article paints a very bleak outlook. It present a very interesting option that I had not considered, which was trading away Wieters, Davis, and Johnson in the past offseason in an attempt to really rack up some serious talent. If they had done that, I probably would have traded away Hardy as well and seen if there was much interest in Markakis in an attempt to really stock up the team for the next 15 years. Of course the fanbase would have rioted, but if successful, everyone would have comeback in two-three years when the team began to dominate.

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