MLB teams looking to boost rosters with TV money at winter meetings
There is unprecedented wealth among Major League Baseball clubs. Gone are the days when only the largest markets could compete for high-priced talent. The recent bounty of national and regional television deals means that even relatively small markets will be able to become free-agent players and candidates for salary via trade. Let’s take a look at the league to see the deals that have been closed recently.
First, we need to establish that Major League Baseball has signed an 8-year deal worth $12.4 billion with Fox and TBS for national broadcast rights. This money is divided equally among the 30 teams. A quick split tells us that each team will get roughly $50 million per year from this national rights deal. This will, of course, be handsomely supplemented by the various local broadcasting rights deals which are exclusively negotiated by the clubs and not shared to any great extent with the other clubs. Let’s take a look at some of the local streaming deals in the news:
In San Diego, the O’Malley family, which previously owned the LA Dodgers, in partnership with professional golfer Phil Mickelson, bought the Padres this summer for about $800 million. The deal was closed with the full knowledge that the club was negotiating a long-term broadcast deal with Fox Sports San Diego. The 20-year deal is worth $1.2 billion. This brings the average annual return to $60 million. Add this to national television revenue and the Padres will have $110 million per year from television before selling a single ticket or piece of merchandise. In 2012, the Padres’ player payroll was just $55 million. With this new bounty of cash, the Padres are surely ready to spend on players and increase their payroll.
The LA Dodgers would never be mistaken for a small market. They are the second largest market in the country and are currently negotiating a deal with Fox Sports that would bring in approximately $240 million per year in a deal that may last 25 years. The recent sale of the Dodgers to the group led by Magic Johnson has already begun to spend some of this huge imminent television money by trading with the Boston Red Sox the contracts of Adrián González, Carl Crawford and Josh Beckett, whose salaries are valued in more than $250. million until 2018.
Recently, the Texas Rangers and Los Angeles Angels of Anaheim signed local broadcast deals that bring in approximately $150 million per year each. Last year, the Angels splurged on Albert Pujols and his 10-year, $240 million contract, while the Rangers splurged on Yu Darvish with a transfer fee and salary commitment totaling $111 million. The Rangers are expected to remain heavily involved with No. 1 free agent Josh Hamilton. Giving up Hamilton appears to be a priority and Hamilton’s history of injuries and addictions seems to hamper any deal compared to the cost of his contract.
In Toronto, it’s hard to know exactly how much local TV rights are worth. The team is owned by Rogers Communications, a cable company that also operates its own sports network called Sportsnet. All 162 games are broadcast on Sportsnet and it is believed that even with the tough and injury-filled year in 2012, the Bluejays’ ratings were pretty good. The Bluejays recently made a trade with the Miami Marlins to acquire more than $150 million in salary commitments. Clearly, the benefits of TV revenue must be significant because attendance, while better than 2011, was not enough to expect such an investment in new players.
Clearly, television rights are key to improving an MLB roster. Teams benefiting from rich local TV deals are likely to be the most active teams at winter meetings in Nashville. There’s no question that top free agents Josh Hamilton, Zack Grienke and Anibal Sanchez will likely land in these new rich markets.