The New National TV Deals, The Rise of the Dodgers, And the Effect On the Pirates

On Tuesday, Major League Baseball announced the 2nd and 3rd legs of the new national television rights deal.  Maury Brown over at the Biz of Baseball has a great breakdown on each individual deal.  All of the deals run from 2014 to 2021 (8 seasons) and have a combined worth of $12 BILLION dollars (if you want to say it like Dr. Evil, be my guest), which equates to $1.5 billion per season to share among 30 teams.  That means each team will get $50 million right from Jump Street, or just $1.9 million less than the Pirates’ opening day payroll of $51.9 million.

Under the current deal, set to expire at the end of the 2013 season, each team is getting $23.7 million, so this is more than double the current rate.  Hey, now the Pirates can have a payroll in the mid-$70 million range like their equivalent markets in Milwaukee and Cincinnati!  Not so fast, now those teams (if they choose to do so) will be potentially raising payrolls by $27 million, too.

What this could do is make the Pirates more competitive for signing free agents or extending their own players.  The flip side to all this largesse from the national networks is, “What will the Players Union say about salaries during the next Collective Bargaining Agreement?”  When even the Pirates, theoretically, can sign Albert Pujols now that they have $27 million more to burn, you have to think that this will lead to an inevitable spike in player salary demands.  In essence, these hugely inflated TV deals could just lead to (more) hugely inflated player salaries and the Pirates will be right back in the same pauper-at-the-ball mindset.

This doesn’t even account for my personal white whale of regional TV contracts, which leads into the rumors of the LA Dodgers of LA’s new potential TV deal.  As per this Bloomberg report, the new owners of the Dodgers may have cooked a deal coming out of bankruptcy proceedings that will cap the amount of any “shared” portion of a new TV deal at $84 million ($2.8M per team).  With TV rights experts pegging a potential deal at $225 million per year for the Dodgers, they could potentially get $141 million dollars just from local TV rights.  Coupled with the national deals and the Dodgers will get $191 million just from the privilege of having baseball on TV.

From the “no kidding” file, a report today on MLB Trade Rumors says that the Dodgers are prepared to spend big in the offseason.  Coming off the Massachusetts Purchase in July at the deadline, the Dodgers already have $193 million in salary commitments that does not even account for arbitration-eligible or min-scale players.  The Dodgers have already stated they are not concerned about the luxury tax threshold of $178 million next year or the $189 million level in 2014.  The Guggenheim Group that bought the Dodgers for $2.15 billion this year is also exploring the possibility of buying the Anschutz Entertainment Group package of the LA Kings, Staples Center, and 120 (!) other sports and entertainment facilities around the world.  With part of their holdings including the potential $1.2 billion downtown stadium being constructed to attempt to lure the NFL back to LA, the Guggenheim Group could potentially have a nigh-monopoly on LA sports.

In case it wasn’t evident when the Dodgers were sold for $2.15 billion, and in case it wasn’t crystallized when the Dodgers took $250 million in long-term contracts from the downtrodden Red Sox, this article should really hammer the point home that this is a major ground shift in the MLB landscape.  For months, the Yankees have been openly talking about paring payroll in an attempt to get below the $189M luxury tax threshold in 2014, then here come the Dodgers trumpeting from a mountaintop that they are going to blow right past $200 million and not think twice about it.

In 2001, the Yankees, Red Sox, and Dodgers all have nearly equal payrolls of $109-$112 million.  All of that changed in 2002 and the Yankees went soaring into the stratosphere and have distanced themselves from the next closest team (primarily the Red Sox) by tens of millions of dollars for the past decade.  What changed in 2002 for the Yankees?  That was the year the YES Network (Yankees Entertainment and Sports) was created by the Yankees and gave them their own network and rights fees to control.  A Ministry of Propaganda, if you will.

Now the Yankees are not alone at the top of the food chain.  Starting as soon as 2013, depending on some decisions the Yankees have to make in the offseason, the Yankees may no longer be the highest spending team in MLB anymore, which will take some time to get used to.  As for the Pirates, they’ll get an infusion of cash into the operation.  Not all of it may go directly into the payroll, as there are non sexy things like debt payments to attend to as well, but the vast majority of this “found money” should be put into the on-field product.  Whether it will be just to exist in the umbra of the Dodgers’ shadow remains to be seen, although they didn’t exactly set the world on fire after their trade deadline acquisitions this year.

Author: Kevin Creagh

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