"When the Lerner family bought the Nationals in 2006, it was saddled with this lemon of a deal, in which neither it nor the team’s first president, Stan Kasten, had any say. The terms stipulated that the deal could be renegotiated after five full seasons, and the Nats took their first opportunity to challenge the terms after the 2011 season. When that challenge dragged into 2012, those terms looked even more unfair. After spending years rebuilding a franchise that had been decimated by penny-pinching and mismanagement in Montreal, the Nats finally made the playoffs for the first time, winning 98 games and the NL East title. That same year, the Orioles made the postseason for the first time in 15 seasons. MASN viewership skyrocketed, enhancing the network’s already rising economic profile, but the Nats saw just a fraction of the returns.
"Since the Nationals couldn’t contest the equity element of the deal, they tried for higher rights fees, asking for $100 million a year. The Orioles countered with a 20 percent raise, to about $35 million. There’s no hope in hell of an easy compromise when the two sides are that far apart, and the Orioles have good reason to dig in their heels. Remember that while RSN rights fees are subject to revenue sharing, the money left after those rights fees have been paid out is not. Remember, too, that the O’s and Nats must make the same amount in rights fees every year. So if Washington succeeded in getting $100 million a year in rights fees, Baltimore would have to pay itself $100 million a year, too. That would force the Orioles to pay the 34 percent revenue-sharing tax on $100 million instead of on the current $29 million. It would also leave MASN broke.
"One potential resolution would be for the Nationals to acquire a big enough chunk of MASN from the Orioles to make the teams 50-50 partners. A 2013 Bloomberg report pegged MASN’s market value at $492 million, so the Nats would need to pay the Orioles slightly more than $167 million to acquire the 34 percent needed to get to 50-50. Other rumors have circulated. A committee of representatives from the Rays, Mets, and Pirates is brainstorming ways to resolve the MASN dispute, and if MLB eventually forces the Orioles to pay out considerably more in rights fees without receiving any financial consideration in return, it would significantly affect the team’s finances. While Angelos and his representatives on Baltimore’s business side declined to comment for this story, that would be the most logical defense to offer critics who say the team is raking in MASN cash but refusing to increase payroll.
“That’s the other side,” said Tella. “That [Angelos] has been cautious with his approach to the team, not knowing what could happen given the massive shift that could go against him.” 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."
The terms of the MASN deal were that the deal could be renegotiated after five full seasons, and the Nats took their first opportunity to challenge the terms after the 2011 season. The Nats requested $100M. They were receiving $29M. Angelos refused the $100M and countered with $34M. The Nats requested that the three team arbitration panel made up the Rays, Mets, and Pirates owners review the deal. No one outside of MLB knows how much they decided. Their decision or recommendation was given to Bud Selig and kept from the media. For arguments sake, let's say that the panel recommended that $75M be paid to the Nats by MASN. That's a difference of $46M per season over the past three seasons, 2011, 2012, and 2013, for a total of $138M cumulative in arrears. We do know that MLB is paying the Nats an undisclosed sum annually to keep Lerner out of court who could sue MLB and MASN for failing to fairly compensate him for the true market value of his TV rights. Lerner has several things going for him in court. All Lerner has to do is point out how much teams are being paid for their RSN deals. The Phillies just agreed with Comcast for $100M annyally. Not only that but the findings of the three team arbitration panel are binding. Angelos must pay up. I do know that the original terms of the MASN deal called for binding arbitration by the three team panel if an amount could not be agreed upon. If the Rays/Pirates/Mets recommended $75M annually then Angelos is stuck by the very terms of the deal that he originally accepted. MASN now owes the Nats $138M and the Orioles $138M. MASN is contractually obligated to pay each team exactly the same amount annually. If MLB has given Lerner $138M then MASN nows owes MLB $138M. That money has come out of the pockets of the other owners and eventually MASN must make restitution to MLB. The meter is running, so to speak. Now you can undersatnd why Angelos cannot increase his payroll or simply will not. If MASN is forced to pay the Orioles $46M more per year then Angelos has no valid excuse why he does not raise the team's payroll. What is also true is that an additional $92M total being paid to the Nats and the Orioles annually would probably bankrupt MASN. Angelos is being caught in a cash squeeze by his own making. He demanded these terms from MLB in 2005 but did not ever figure that the TV rights of the Nats would increase potentially so quickly and so drastically. Angelos can no longer afford his own RSN! My guess is that this situation will and must be decided by MLB in Lerner's favor. Lerner will be given 50% of MASN's equity out of Angelos's own pocket. Remember that if MLB eventually forces the Orioles to pay out considerably more in rights fees without receiving any financial consideration in return, it would significantly affect the team’s finances. Angelos and MASN owes back to MLB whatever MLB is now paying to Lerner. That MASN debt to MLB will be used by MLB to apply to a purchase of enough equity of MASN to make Lerner and Angelos equal 50-50 partners immediately. Angelos, in effect, will pay for Lerner's increased equity out of MASN's own pocket. Angelos cannot go to court because he agreed to the provisions of the MASN deal which commited him to binding arbitration by the three team panel of arbitrators. Angelos would have no other choice but to sell his RSN or lose it. If the arbitrators publicly rule in favor of Lerner at Selig's direction, then MASN must pay all arrears to the Nats as well as the Orioles. That could total as much as $92M x 3 years (2011, 2012, 2013) or $276M. MASN would go bankrupt immediately! That is why Angelos has no choice. He must give the Nats and Lerner an equal say in RSN management decisions or lose his RSN! The situation will continue to worsen for Angelos if he does not agree to this deal. After the 2015 season, another review must be done on the amount of compensation being paid to Lerner. What if the arbitrators raise the amount to $100M to $125M for each the Nats and the Orioles? Angelos and MASN would be dead in the water! Making Lerner and Angelos dead equal partners should eliminate the acrimony. All profits would be split down the middle for both teams. Again, Angelos has no choice other than to sell his RSN or to lose it.
Personally, I would like to see the Nats get their own RSN but that would harm the Orioles. Angelos admitted in 2005 that Baltimore is not a big enough market to sustain itself without piggybacking on top of Washington. Angelos admitted that the Orioles are not situated in a market by itself that could sustain an Orioles-only RSN. Rather than harm the Orioles (which does not benefit the Nationals), I would be okay with a 50-50 partnership that would benefit both markets and their fans. Orioles tickets would be sold at Nationals Park and Nats tickets would be sold at OP@CY. Joint marketing would be done by both teams and possibly a joint fanfest could be held in Howard County. Both teams could even do something that was radical with the permission of MLB. How about a Orioles game with an AL opponent to be held at Nationals Park? How about a Nationals game with an NL opponent at OP@CY? Angelos has made both teams and many of their fans enemies of each other. It doesn't have to be that way. The fans of each team and city could learn to respect each others teams if Angelos would stop with his hatred of Washington baseball.
Edited by StevenJB, 12 February 2014 - 03:35 PM.