We learned recently that the Phillies had reached agreement with Comcast SportsNet on a 25-year, $2.5 billion TV deal that also grants the club an equity stake and rights to ad revenue. (Though the advertising split is not yet known, that is a somewhat unusual provision that could add significant value, note Matt Gelb and Bob Fernandez of the Philadelphia Inquirer.) The deal, which kicks in for the 2016 season, had long been rumored to be in the works.
The new, $100MM average annual revenue stream certainly promises to provide a boost over the $35MM average the club enjoyed under its previous deal. But the cash flow will not jump to nine figures overnight: by my calculations, with somewhere between a 3 and 4% annual bump built into the deal, the Phils will start out drawing something in the realm of $65MM for 2016. (And, of course, the future revenue streams must be discounted in assessing their present value, though that fact is equally true of other teams' deals.)
Comparing the $100MM average across the league, Philadelphia's deal seemingly places it in roughly the position that was expected for the size of its market. (Click here for an earlier update from Wendy Thurm of Fangraphs on league-wide TV deals.) When factoring in revenue, equity, and other components, the Philadelphia pact falls in the realm of the Rangers' and Angels' recent deals, according to Maury Brown of Forbes. Thurm tweets that the terms are "in line" with expectations given the market size, while noting that the MLB franchises in Los Angeles, New York, and Boston all have greater packages when network equity is accounted for. (Twitter links.) Gelb and Fernandez call the deal "commensurate with recent packages across baseball."
Ultimately, however, the deal does not appear to provide a basis for a serious leap in the club's current or future payroll as against the rest of the league's well-off franchises. As Ryan Lawrence of the Philadelphia Daily News wrote just over two months ago, it seemed possible that the new deal would boost the previous $35MM annual revenue figure to over $200MM per year, with an annual figure above $150MM "highly probable." Those kinds of numbers would have outpaced other recent TV contracts.
Though Lawrence acknowledged that predicting deals based on recent comparables constituted "guesswork," his earlier discussion indicates that the Phils did not ultimately break new ground with their deal. In other words, it does not appear that Philadelphia landed the "Dodgers-esque" deal that some observers thought possible — at least in terms of impact on relative spending capacity. With the club's ratings dropping a remarkable 40% in each of the last two seasons, going from first in the game to seventh in the process, one can't help but wonder what impact the team's on-field downturn may have had on negotiations.
Depending upon one's perspective, then, the deal could be seen as something of a disappointment. But there is value in holding serve, especially with some predicting a looming bubble. It could be that the run-up in the TV deal market is at an end, and at a minimum the Phillies appear to have secured their market position as one of the league's top spenders.
As Lawrence reports, the team seems to be characterizing the deal as a continuation of its current trajectory. According to team president David Montgomery:
"[The new contract] might not represent quite a significant change as what occurred in other markets. But we continue to believe, thanks to the tremendous fan support, that we'll continue to be one of the top five clubs in payroll each year. … But, as we proved last year, payroll alone doesn't guarantee success. We want to focus on making the best player decisions possible."
Montgomery echoed those comments in explaining that the club's payroll was not expected to undergo major changes, as Gelb reports:
"I don't see us going any higher than where we've been. For us, the secret is to spend it well, not necessarily tied to how much. Since we moved in here, we have been able to be a club that is substantial in its payroll. I assume we will continue to be in the top four or five of the game. Hopefully we'll make some good decisions and people will see an improved club in 2014. That's what we believe."
Indeed, as those comments would indicate, Philly has pursued a strategy of fairly measured offseason spending. While time will tell how the new TV deal impacts the Phillies and the broader market, the early indication is that it will not provide a dramatic new infusion of cash into the marketplace, but will allow Philadelphia to retain its foothold amongst the more financially flexible MLB clubs.
Matt Gelb writes the Phillies were not interested in a bidding war for the rights to Televise their games. Something is not adding up Montgomery is a business man am I missing something wouldn’t a bidding war have brought the Phillies even more money?
The deal seemed rushed, possibly for the purpose of signing Tanaka.
I don’t think I would characterize it as a rushed deal. It’s been common knowledge in Philly that a deal has been in the works for the better part of the last year. What is surprising is that it doesn’t appear there was any encouragement of competition in the bidding process. Rumors have been flying around for over a year that Fox Sports was very interested in the Phillies broadcast rights because it was one of the only east coast teams not already locked up by some other deal or the team owning its own network — i.e. New York, Boston, Baltimore, Washington.
Montgomery also stated in this Gelb story the Phillies payroll will be still around 170M if thats the case Isn’t Tanaka out of the picture?
big picture==no matter what the Phillies offer this guy, I think the Yankees will top it….AND, the guy is probably going to take a little less money, say 2nd or 3rd offer to play in the city of his choice…I doubt the city of Philadelphia or the team is his first choice, but I sure hope Im wrong!
Naahh Tanaka doesn’t fit the type of player the phillies go after. He’s too young and too good.
Rene, your insults don’t make sense. Too good? I believe they won the WS 5 years ago and have spent money on really good players when they can. As far as age, show me really good players that are FA at that age?
Brett Tomko is available, Phillies will probably offer a multi year deal.
The Phillies have signed a lot of good players. Their mistake has been that they gave out contracts that went way past the expiration date of several of those players. The same mistake the Yankees are paying for right now.
Really??? You call Marlon Byrd a good signing?
I wouldn’t have done it, but if he plays anything like he did in 2013, it will be a good signing. The Phillies have all of those untradeable contracts for veterans, and they almost have to try to double down for the next couple of years, and hope enough of the vets have good years to keep them afloat. They did this once before and it worked, 31 years ago when they dragged in the fossils of Joe Morgan and Tony Perez on a team already full of old guys, and won 90 games and a pennant. As long as they don’t throw any future Hall of Famers into trades for more veterans this time, it won’t hurt them in the long term.
The idea that a $2.5 billion investment would be entered into for the sake of contracting a pitcher whose contract might equate to 4% of the tv deal’s volume doesn’t wash. If anything, it would have been the other way around. And the article is clear that there won’t be any payroll impact until 2016.
Serious question: With whom would the ‘bidding war’ have been conducted? Who else was interested?
Fox Sports. They were reportedly looking for an east coast hub (with the Yankees and Red Sox already on contracts/their own networks) – Philly was the next logical choice.
Actually Fox Sports bought part of Yes sports from the Yankees so they would have a east coast hub as part of their new 24 hour sports channel….at least that is what I have read….
If I’m remembering correctly, they only got a small part of the Yankees tv schedule (I want to say less than 30 games a year). They seemed to be looking for another team on the east coast where they could be the main carrier of the games.
I read the same thing and Fox Sports was looking to add Philly as that team. Now maybe they will look to the Nationals who with baseball’s help are looking to get out of that deal they made with Baltimore, who is taking the bulk of the TV revenue on the local TV contract…
Wish part of the contract prevented Chris Wheeler and Tom McCarthy from commentating.
Amen!!
Sarge…all game, every game. I think, by about game 8 in the season, the talking would have absolutely nothing to do with what was happening on the field. But it would be some good commentary.
Now if Montgomery would actually start improving the club. Firing Bozo Amaro would be a good first step.
For MLBTR: I appreciate this ‘originals’ (whether about player deals or other aspects of the baseball business. One recommendation: An original piece on the MASN fiasco in Washington and Bud Selig’s refusal to impose a settlement.
Agreed. Looks like the learners and mlb would have to by out the contract to really make any head way.
At this point, these reports of new deals just has me hoping my team (the Cards) can get their new deal before the proverbial bubble bursts.
It will be interesting to see what kind of contract the small market teams will be able to get since Philly being in the 5th largest TV market VS Cards in the 21st largest TV market got a 100 million AAV over 20 years. Only 6 MLB teams have smaller markets that the Cards.
Yeah, I’m personally really hoping that the Cards being 2nd overall in TV ratings will help counteract that.
We are Cardinals fans all around the world.
Hope you are right but ratings are not the same as market size. The Phillies were #1 in ratings and #2 in viewers for a couple of years then lost like 40% of their viewers for each of the past 2 years. I think that really hurt them in negotiations. There was speculation that they were going to get at least 4 or 5 billion on a new deal because of what the Dodgers got. I don’t see how a cable company like Time Warner will ever be able to recuperate 7 to 8 billion in the LA area, there are just to many sports teams to watch and other things to do to justify that much money to a single team….
Agreed on all counts. That’s also a reason why I’m cautiously optimistic (if they can get a new deal before the bubble). St. Louis had other sports, sure, but there is no mistaking it for anything other than a baseball town.
I actually wonder if StL would benefit from the sort of TV deal that the University of Kansas recently signed. If you’re not familiar, it involves signing on with a large cable company in the area. It enables much further distribution of the product in that it is aired on the cable company’s sports channel throughout the U.S., and the CC and team can also split revenue from selling rights for other local cable companies to be able to air the game, as well. It’s enable the Cards to capitalize on fans like those John Carte mentioned above. Fans like me, as well. 🙂
But yeah, it’ll all boil down to the interpretations of our ratings and market size.
haha, gotta love Sarge….they should really move Franzke and LA to the prime spot…their radio play-by-play is the best
whoops, sorry…….wrong spot
haha, gotta love Sarge….they should really move Franzke and LA to the prime spot…their radio play-by-play is the best
The Cardinals have a large national fanbase, which allows them to command more than most teams in similar-sized markets. I’m in North Carolina and I know several Cardinals fans who have no ties to that part of the country, and it’s been the same everywhere I’ve ever lived. In that sense, they are more like the Yankees and Red Sox than like their neighbors, the Kansas City Royals.
That has nothing to do with Market size or ratings for local TV contracts. Unless you purchase the Direct TV package for MLB or subscribe to MLB -TV or go to a sports bar you can’t get the Cards games in North Carolina and none of those will affect local TV revenue for the Cards…..
Phillies pushed some of the annual money over into the 25% equity stake plus the ad-revenue split, which is pretty unique to the Phillies. The best part of all this of course is that neither the equity nor the ad-revenue is subject to baseball’s revenue sharing unlike the straight tv rights.
Best part for who? The fans? I doubt the Phillies team see 1 cent of the dollars from the equity stake/ad-revenue. They will fit nicely into the owners other pocket. However, if they put a good team on the field they probably won’t need it since the fans have proven they will come.
Well, the Phils currently put 129M with the 35M from the current TV contract. Even if the owner pockets the equity stake/ad-revenue, the phils still get 100M from the tv deal alone. 100M+129M=229M, or 65M+129M= 194M for 2016, so really owner greedyness is not an issue. Blame Amaro who is more willing to give Juan Uribe a 10 year/240M contract.
This deal means they could easily push payroll up into the $200 million range…they simply choose not to because their ownership has always historically been very cheap. They’ll simply pocket this extra revenue and laugh all the way to the bank.
So from 2009- 2011 when the Phillies were competitive they were #1 in attendance .# 1 in TV ratings. #2 in overall TV viewers behind only the NYY. 10,000 less daily viewers than the Yanks. NYY 307,000 the Phillies 297,000. Next closest was the Red Sox ay 190,000.
So how in the world does that translate into the Phillies signing a TV deal that is 1/3 of the LA Dodgers? How on earth are they going to compete with the Dodgers for the next 25 years with revenue streams 1/3 of the Dodgers?
because money doesn’t win championships, as big-market teams prove time and time again
The Phillies were really the only franchise that could keep LAD in- check financially. Anytime a premiere FA hits the market the LAD basically has no competition now. If the Dodgers want want a FA they get him -no questions asked. Phillies owners left $2 B-$3 B on the table. They have been small time losers since they bought the team in 1983. This is just the latest incident.
If that’s all that mattered, the New York Yankees would be in the World Series every year. I don’t even remember seeing them in the playoffs this year.
Like I just said, the Phillies for the past few years have pretty much matched the Red Sox in payroll. Over the last 10 years, the Red Sox have won more championships than anyone else, leading to the conclusion that’s plenty of money to build a championship team if your front office knows what it’s doing.
You’re using numbers from 2 years ago. From a marketing/advertising view, those are ancient. The best you can do with those is say “this is what we can max out at” (which really, it was maxing out because they had fan favorite players, coming off a WS win, and had the most wins in 2010 and 2011).
The author gives a pretty good opinion why they couldn’t attain the deal everyone thought they would: “With the club’s ratings dropping a remarkable 40% in each of the last two seasons, going from first in the game to seventh in the process, one can’t help but wonder what impact the team’s on-field downturn may have had on negotiations.”
Also, market size plays a large significance into the deal that a team gets. The Dodgers’ market (although somewhat split with the Angels) is around 18 million. The Phillies’ market sits at 6.5 million (by the last estimates). Dodgers can reach nearly 3 times as many people. They may only have 1.5 times as many watching as the Phillies, but they have the ability to reach much more.
Dude history has proven that the large majority of LA households could care less about watching the Dodgers, So LA market potential is overblown and irrelevant . Sports is a religion in Philadelphia, its an afterthought in LA.
Last year with the Puig sensation, Kershaw, and the great Dodger run they still only averaged 150,000 TV viewers. The same team in Philly would have averaged 300,000 Tv viewers.
The Phillies owners signed for a lesser deal than Seattle,Tex,LA Angels and in the same realm as Houston Astros who had a 0.0 rating in a few of their recent games. That is absolutely asinine. When you put a decent product on the field the Philllies are the second biggest baseball conglomerate behind the NYY. They left a couple Billion dollars on the table.
When the Mike Trout’s,Matt Harvey’s of the world ever get to free agency the Phillies will have ZERO chance at competing with the LAD, A lesser baseball market. ,
But historically in Philly sports is religion. In LA , sports is an afterthought. Overall size in this case as strange as it may seem is irrelevant.
The Dodgers averaged 150,000 viewers in 2013. If that same team played in Philadelphia they would have been watched by 300,000 Tv viewers.
Historically, Eagles are a religion. That’s it. Phillies fans usually only show up when the team is good. There are the small minority that are die hards (and usually, those are the people you run into on the internet) but in general, people in and around Philly don’t watch the Phillies unless they are good.
Overall size may not matter to you, but to a company that has to look at the long term picture – it is huge. You build a TV deal based on the size of the market you can reach. Our market size falls right in between the Rangers and the Astros – and, when all is said and done, this deal will probably make more than the Rangers (already set to make more than the Astros without the ad revenue money).
You can throw out hypothetical scenarios all that you want about what the Phillies viewership would have been had they had a different team out there last year – but they didn’t. All the Phillies had to negotiate was the numbers they actually had. Which were not on par with the Dodgers.
So a 25% equity stake is worth how much, about 400 million? Why wouldn’t that be subject to revenue sharing since it’s revenue diverted from the team for its broadcasting rights into an equity share.
It Michaels, great post, I don’t understand how the Phillies would not want a bidding war between Comcast and Fox this deal kind of makes no sense are we all missing something?
The Phillies already have more than enough money available to them to have a consistent winner. The past few years, they’ve been in Red Sox territory on the payroll, and if you can’t win spending that much money, you’ve screwed up. I would think this would at least allow them to carry $150MM consistently going forward.
Now that they have a deal in place they should start to liquidate the assets and old guys.
Huge lifelong Phillies fan, but this deal is akin to getting the last first class cabin on the Titanic. Big Cable is dead, they just don’t know it yet. In 5 years no one will be paying Comcast to provide television content, unless/ until they offer a la carte subscriptions, which they will only do as a very last resort and probably 2 years too late to make a difference.
The end of bundled cable (an inevitability as more and more people cut the cord) will be great for the consumer, but will spell the end for low-rated trainwrecks lile MTV and MSNBC who only survive on crumbs that fall from the bundled table.