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The Nationals and Orioles dispute over TV money is about to explode

Jul 29, 2014, 4:58 PM EDT

MLB Commissioner Bud Selig speaks during a news conference in New York

For years now, the Nationals and Orioles have been at odds over TV revenue. It’s about to explode.

The back story: in order to allow the Nationals to start up business in Orioles territory back in 2005, the Orioles got a sweet TV deal. They got (a) majority ownership of the network, MASN, that broadcasts both Nats and Orioles games; and (b) they got way more in rights fees from the network for their games than the Nats got for theirs. Indeed, the Nats got a pretty undervalued amount, per the deal.

Starting in 2012, that undervalued piece ended and the Nats were to begin receiving rights fees from MASN that represented “fair market value.” They still haven’t received it as MASN — which, again, is controlled by Peter Angelos and the Orioles — has repeatedly balked. To placate the Nationals, Major League Baseball has been kicking back money to the Nats. Bud Selig also set up an arbitration, with a panel made up of other baseball owners and executives to determine what “fair market value” is.

The Hollywood Reporter has a bombshell of a story today in which it notes the following:

  • That arbitration panel ruled in favor of the Nationals;
  • The Orioles/MASN have still ignored it and haven’t paid;
  • The Nationals and Orioles/MASN have each started getting testier with one another via attorney letters;
  • Bud Selig wrote both clubs — and Hollywood Reporter has the letter — warning them that if they sue over this they’re in DEEP TROUBLE suggesting that they may have “the most severe sanctions” leveled against them if they do; and
  • Both the Nats and Orioles seem to be ignoring Selig and are on a collision course in court.

This is a huge story inasmuch it (a) involves something huge like broadcast rights fees at a time when such fees dictate almost everything about the game; (b) shows that Bud Selig’s greatest strength as Commissioner — keeping the peace among clubs — is failing him in this case; and (c) we have the distinct possibility of club vs. club litigation, which means actual financial and business information in open court and THAT JUST DOESN’T HAPPEN IN MAJOR LEAGUE BASEBALL.

Oh, and those “most severe sanctions” Selig threatened the O’s and Nats with? Those include the sorts of sanctions that cost Frank McCourt ownership of the Dodgers. Of course McCourt was a wounded animal at the time. Would Selig dare try to go after Peter Angelos or the Lerners like that?

A big, big story. Great work by the Hollywood Reporter to get this out there when Major League Baseball’s m.o. is to never air its dirty laundry in public.

UPDATE: The Orioles and Attorneys for MASN just contacted me with official comments on the matter. From the Orioles:

“As those who follow the Clubs are aware, the Settlement Agreement between Baseball, the Orioles, and the Nationals established MASN to compensate the Orioles for the loss of market share and other damages caused by the relocation of the Nationals to Washington, D.C. Contracts are meant to be honored and the Orioles have every expectation that this contract will also be honored. The Orioles continue to work with the Office of the Commissioner to try and resolve this dispute.”

And from Thomas J. Hall, counsel for MASN:

“MASN has honored the terms of the Settlement Agreement, including the formula in that contract for resetting the Nationals’ telecast rights fees and expects all parties will do the same. That contract specifically includes an agreed upon and historically applied formula for resetting the Clubs’ telecast rights fees that has been applied by Baseball to virtually every other club-owned regional sports network. MASN is confident its contract will be honored and looks forward to further discussions with all parties to try and resolve this matter amicably. Our loyal viewers should understand this is a business dispute and will have no impact on the telecast of the Clubs’ games.”

Note the complete lack of reference to the arbitration Selig put together? Did the Orioles not participate in it, or are they just refusing to acknowledge its legitimacy now that it has resulted in a decision they don’t like?

One thing I do know: Peter Angelos is, more than anything, an able lawyer. And if he’s not running the show himself, he has people in place that are running it the way he’d like it to be run, and he has never feared going to court. Meanwhile, the Lerners did not get rich by being walked-over rubes. They are as litigious and determined as the next high-powered businessman, and likely more so.

Buckle your safety belts.

104 Comments (Feed for Comments)
  1. tearlw - Jul 29, 2014 at 7:24 PM

    Why not threaten breach of contract and just pull the Nats from MASN? What are the relative audience numbers on MASN for the two teams? Does one get better numbers than the other? If the Nats get better ratings on that network than the O’s, wouldn’t the biggest threat to Angelos (and most likely threat to get him to fold) be taking away the Nats broadcast rights from MASN to another (non-Angelos) network?
    Actually, they wouldn’t even need to be bigger numbers, just big enough to be missed. Which I imagine they would be, but don’t know for sure.

    • dugly2ugly - Jul 29, 2014 at 7:41 PM

      A lot more viewers for O’s games. Their ratings in Baltimore are about 3x those of the Nats in DC. Even with the larger DC market, there are still more eyeballs on O’s games.

      That doesn’t even count the O’s fans watching in DC (good number) vs. Nats fans in Baltimore (almost non-existent).

      • tearlw - Jul 29, 2014 at 7:49 PM

        So they (the Nats) merit a smaller slice of the pie from MASN revenue. How much are they asking for vs. how much they earn as a percent of revenue for the network? It sounds like they deserve more, but not an even split. When they are debating “fair market value” what are the numbers each side are claiming as fair?

      • Craig Calcaterra - Jul 29, 2014 at 8:21 PM

        The Nats were asking for around $100M a year. They were making $29M a year. The O’s are contract bound to give them fair market value, which is probably closer to $100M than $29M and has risen over the past two years as TV deals got more lucrative and the Nats have won more games. The O’s are rumored to have offered only modest raises over $29M. The panel arbitrating this — made up of owners — ruled in favor of the Nats, though it’s not clear what the Nats number was in the arbitration (they may have asked for less than the $100M)

      • dugly2ugly - Jul 29, 2014 at 8:43 PM


        Would it be fair to guess that part of the O’s issue with the arbitration process is that the panel was made up of other owners? Other owners who would probably want nothing more than to have as high a number possible, regardless of “fair market value” or what MASN can even afford. That way they have more leverage and favorable “comparable” deals when it comes time to negotiate their next TV contracts.

      • tearlw - Jul 29, 2014 at 9:01 PM

        But the contract should be (and normally is for TV) based on ratings not games won. Unless you mean the ratings rise along with the wins. But, the basis would still be ratings.
        It doesn’t say in the article if the arbitration committee (consisting of the Mets COO, the Pirates Pres., and the Rays owner) put a dollar amount to their decision, only that they sided with the Nats. If they just did a player salary style arb. and gave the Nats what they were asking for, then there might be a good reason for Angelos to bellyache about it. (As a 43 year old, life long Yankees fan, you can’t imagine how painful that sentence was to type.)

      • dlgdc - Jul 30, 2014 at 8:29 AM

        Craig: The agreement stipulates that the O’s are to be paid the same fee as the Nats. If the Nats were to get $100M, which you seem to think is fair market value, then the O’s get $100M. That’s $200M coming from a network that grossed $168M. Your math and your definition of fair market value don’t work.

      • jrbdmb - Jul 30, 2014 at 10:03 AM

        OK, then give each team $75M, and they still have $18M to pay to run the network, etc. I suspect that the O’s are willing to pay far less than $75M, and that one way or another they are making far more than $29M.

      • dlgdc - Jul 30, 2014 at 10:43 AM

        You probably can’t broadcast 324 baseball games with $18M, but I get your point…$29M to the Nats is not nearly enough but the Lerners need to ask for a more realistic number. They’re not going get $100M. That money doesn’t exist.

    • voteforno6 - Jul 29, 2014 at 8:30 PM

      My guess is that it’s about more than ratings. There’s a lot more wealth in the D.C. area than in Baltimore, so if the Nats pulled out of MASN, that would really hurt that network – probably kill it.

      • timsizzle83 - Jul 30, 2014 at 10:51 AM

        That has little to do with it. They can’t leave masn anyway, or should I say how would they? Angelos allowed them to impose on their market share only because he’s getting his cut. You can’t agree to give a guy a cut to get your foot in the door and then try to change the deal. He knows his legal rights and he doesn’t have to budge why would he? The nats aren’t a draw and the only thing keeping them afloat financially is its baltimore market share.

    • simon94022 - Jul 29, 2014 at 9:44 PM

      The contract, which I have read, states that after the initial period of fixed annual fees, the Nats are entitled to fair market value for the rights to their games. It does not require MLB to determine FMV through whatever ridiculous formula the Orioles and MASN are staking their claim on. Nor does it involve splitting revenues based on the ratings of the two teams. The Nats are entitled to fair market value even if that means MASN goes bankrupt. Too bad. MASN holds the rights to Nats games forever, so the FMV clause is the only protection the Nats have.

      The agreement also states that if the Nats and MASN cannot reach agreement, the dispute is to be settled by binding arbitration through a process chosen by the Commissioner. If the Hollywood Reporter story is accurate, that arbitration has taken place, the Nats won, and therefore MASN (really Peter Angelos) is in breach of contract.

      • slappymcknucklepunch - Jul 30, 2014 at 1:11 AM

        And you just Know Angelos does not want to part with any of that Mesopilioma Lucre he won over the years.
        At least the Lerners are actually trying to compete year in and year out.They over pay to get FA’s not so much Angelos.The only reason Baltimore is in contention this year is that the Sox, Yankees and Rays are underperforming big time.

        If the Nat’s win the pennant next year and Angelos is still determined to be buried with all his money and the O’s end up back in fourth or fifth in the division,well I would say screw MASN.

      • snafudc - Jul 30, 2014 at 5:05 PM

        MLB is not a disinterested third party, they have skin in the game, so this should be resolved by a judge, not a committee appointed by the commish.

    • 1ncubu5 - Jul 30, 2014 at 12:12 PM

      Craig, I have to disagree with your valuation of around $100M for the Nats’ rights fee. The $100M is largely influenced by recent deals made by The Dodgers and Angels, both of which play in the 2nd largest media market and have much higher viewership ratings. While the Nats play in an almost large media market, their viewers show much lower ratings, in large part to the existing Orioles fans in the area, also because of the transient nature of their population.
      I would like to see some hard numbers comparing all 29 US teams ratings juxtaposed with their TV rights to get a clear picture. I wish someone would compile this data.
      Also, the Nats agreed to the terms in order to move into the area, Angelos and the Orioles could’ve just said no, we don’t want another team in the area (like The Giants have done to San Jose) and DC wouldn’t have a team at all. The Orioles are in a legal stronghold that both MLB and The Nats agreed to and a decade later they are realizing they were shortsighted.

      • bangzoomgothefireworks - Jul 30, 2014 at 3:06 PM

        Please realize that when the Expo’s moved to Washington they were owned by MLB. Private ownership would never had accepted such a lopsided deal. Nats fans have been treated like second class citizens by MASN for years and the first year and half much of the DC area couldn’t receive the broadcasts because of the Comcast lawsuit with MASN.
        Secondly, it was the Orioles who moved into Washington’s area in 1954 (from St. Louis).

  2. buffalo65 - Jul 29, 2014 at 9:22 PM

    Solution. Go back to Montreal. Never should have left. Looks good on bud.

    • bangzoomgothefireworks - Jul 30, 2014 at 3:12 PM

      Agree, Baltimore should go to Montreal and become a NL team. Washington can return to the AL, they were an original AL team. The St. Louis Browns moved to Baltimore in the ’50’s.

  3. simon94022 - Jul 29, 2014 at 9:28 PM

    There aren’t enough Orioles fans in the DC area to keep MASN viable without the Nats. DC and Baltimore are separate media markets, and there’s not much sports fan overlap except in the Maryland suburbs that separate the two areas.

    MASN should never have been created in the first place. The Nats didn’t infringe on the Orioles territory when they moved to DC, only on the “Broadcast Territory” which MLB rules state can be changed at any time by the MLB Executive Committee. The Orioles were contractually entitled to ZERO compensation but Bud gave them MASN because he doesn’t want an unhappy owner in the ranks. Now the Orioles are refusing to abide by the MASN agreement.

    Best resolution here would be something involving stripping Peter Angelos of his franchise. That would make fans in both Washington and Baltimore happy.

    • slappymcknucklepunch - Jul 30, 2014 at 1:13 AM

      Agreed fine Sir.

    • jrbdmb - Jul 30, 2014 at 10:10 AM

      Or less drastic, release the Nats from their current deal that MASN refuses to abide by, and let the Nats get a true FMV from either MASN, Comcast Sportsnet DC, or a new RSN.

      • voteforno6 - Jul 30, 2014 at 10:27 AM

        That would be more drastic, from the Orioles’ point of view. Without the Nats, MASN will die, and the Orioles will lose their visibility in a good chunk of the (rather wealthy) D.C. suburbs.

    • sophiethegreatdane - Jul 30, 2014 at 10:32 AM

      “The Nats didn’t infringe on the Orioles territory when they moved to DC”

      You’re crazy. I commuted from Baltimore to Washington for years, in the late 90’s/early 2000’s, and DC back then had A LOT of Oriole fans. We all commiserated with the plight of the Orioles during the summers, and we argued Ravens vs. Redskins in the winter.

      Your assertion that the Orioles somehow gave up nothing when the Nats moved into the area is patently absurd, and damn near a flat out lie.

      DC is no longer Orioles territory, but it certainly WAS prior to the Nats moving to DC. Any assertion otherwise is wrong. For that reason alone — that another team moved in and took fans away, forever — Angelos was able to negotiate a deal that made up for the loss of that revenue. It’s what any good business would have done.

      It’s what you yourself would do if someone tried to move into your backyard.

      • simon94022 - Jul 30, 2014 at 11:29 AM

        Each MLB franchise’s “Territory” is defined precisely in the MLB Constitution. No part of the Washington, DC metro area – DC, Virginia, Montgomery or PG Counties in MD has ever been part of the Baltimore Orioles’ defined Territory. Nor did the move of the Nats to DC involve any modification of the Orioles’ Territory.

        So DC may have felt to you like Oriole Territory (having lived here myself during that time, it felt more like Yankee/Red Sox territory to me, but whatever). But contractually it never was. And this is a contract dispute.

      • simon94022 - Jul 30, 2014 at 11:44 AM

        Of course, DC and NoVA were part of the “Orioles Television Territory” as the MASN lawyers like to call it. But the MLB Constitution treats broadcast territories very differently from a team’s official geographic Territory (which is always much smaller).

        Territorial rights can not be changed without the consent of the team affected or an amendment of the MLB Constitution via 3/4 ownership vote. This has never happened in the 20 years or so since the MLB Constitution was adopted.

        Broadcast territories can be and routinely are changed by a simple decision of the MLB Executive Committee. The affected teams have no veto rights and no right to compensation.

        When the Nats came to DC, only the broadcast territory of the Orioles was affected. Selig decided that ownership harmony required compensating Peter Angelos anyway, and he created MASN as a win-win arrangement. The problem was that after the initial fixed fee period, the MASN settlement agreement provides that the Nats are entitled to receive fair market value for their TV rights — in exchange for licensing those rights to MASN forever — as determined by arbitration established by the Commissioner.

        The arbitration process has been completed according to the contract, the Orioles lost, and now they are making up lame excuses not to pay up, and threatening litigation in the hope that Bud Selig will pay them or the Nats off in order to make this just go away.

        Peter Angelos is 100% in the wrong here, and there is not much room for debate about it.

  4. tearlw - Jul 29, 2014 at 10:28 PM

    Okay, this is interesting. Through the first week of July the Nats games are getting a 1.90 rating and the O’s are getting a 5.58. Both are down from last year, but the Nats are down much more of the two.

    And, according to the Baltimore Sun: “The Nationals and Orioles each received $29 million for their TV rights in 2011, but that number increased to $34 million in 2012 and is expected to reach about $46 million over the first five-year reset period. The teams share the profits from MASN, but the Nationals currently hold only a 14 percent stake in the network. That will increase by 1 percent per year until the Nationals’ equity share reaches 33 percent.”

    So, the teams get the same dollar amount from the deal directly, but the O’s get more profits because they own a bigger share of the network. So the question now is, how much money does MASN clear every year.

  5. gargamelsmentor - Jul 29, 2014 at 10:34 PM

    I’m wondering if this is all hurting the Orioles chances of hosting the 2016 All Star game. For a long time, it seemed like a lock, however no announcement has been made. Now, hearing about this just makes me wonder.

    • slappymcknucklepunch - Jul 30, 2014 at 1:15 AM

      Great point.I never even thought of that.

  6. drs76109 - Jul 29, 2014 at 11:30 PM

    MASN is so poor Amber Theoharis had to move to LA, lvg MLB for the NFL. So for the love of God, boys, please settle it!

  7. corvusrex96 - Jul 30, 2014 at 11:00 AM

    Prior to the Nats move to DC the Os market is for York Pa to Northern North Carolina . MASN shows both teams in the entire broadcast region . the orioles have not given up any market region and just b/c a team is in DC doesn’t change that Os games will still be broadcast in Norfolk Va

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