Braves Rumors

While prior reports have indicated that the Braves re-negotiated aspects of their oft-bemoaned television rights package, the magnitude of the impact remained unknown until today, as Tim Tucker of the Atlanta Journal-Constitution reports. Greg Maffei, the CEO of Liberty Media (the Braves’ publicly-held corporate owner), said on a quarterly conference call today that the renegotiated contracts would add “probably in the order of $500MM of incremental revenue over the life of the contracts of value to us.”

The original set of contracts was never fully publicized, but were often referred to — even by team executives — as sub-market in comparison to the more recent mega-deals being locked up around the league. “They were at-market deals when they were done, but the market has changed,” team chairman and CEO Terry McGuirk said in early 2012. “We will have to look elsewhere for the increases that we will need in revenue to continue to build this franchise. It’s what the owners at the time decided to do, so we have to live with it.” While the situation may not have been crippling, it imposed an obvious limitation on the team’s spending capacity.

It now appears that the Braves will not have to live with those out-of-date TV revenue streams — for the most part. Maffei noted in his remarks that the original contracts ran through 2027, but did not specify the timeline of the reworked terms. A key aspect of the ultimate, bottom-line impact of the renegotiation thus remains unknown; as Maffei said, the estimated $500MM revenue boost is a sum that will be spread across the still-unreported “life of the contracts.” Much as in the case of a pre-arb player giving up future free agent seasons, it seems implicit that the Braves may have sacrificed some future years to find relief from a set of deals that reportedly included no mechanisms to force a renegotiation.

For some context, consider that the Phillies’ recent TV deal came in at $2.5B over 25 years (and also gave the Phils certain equity and ad revenue rights). As I explained at the time, that contract (unsurprisingly) did not spread that revenue evenly, but rather increased it year-over-year. From a present-value perspective, of course, the greater future annual payouts would take a larger hit. Likewise, in the Braves case, Maffei hinted at a similar situation. Calling the reworked rights situation “very positive,” he noted that it “adds a lot of value even on a present value basis to the Braves.”

Even if the down-the-line earning potential is not a full half-billion dollars in today’s money, though, it is clear that the impact on the club’s bottom line is substantial. If nothing else, that $500MM figure represents a solid 20% of the total rights fees achieved in the Phillies deal, which seems impressive given the limitations facing the organization.

And, of course, we know that Atlanta has already embarked on a rather remarkable extension spree. In the first five months of 2014, Atlanta has guaranteed over $300MM to six already-controlled players over a total of 30 seasons. Prior to this run of new deals, the Braves had not extended a player with less than five years of service during the six-year term of GM Frank Wren. The team also paid up for Ervin Santana at the last minute after an early spate of pitching injuries threatened the chances of contention this year.

It would appear, then, that at least some payroll impact has already been felt. The club had carried a payroll in the low-to-mid $90MM level since breaking nine figures back in 2008, but that mark jumped to over $112MM for 2014. And the team’s future salary obligations, which stood at 24th in the league heading into the offseason, have increased more than five-fold in the meantime. (As I noted at that time, the Braves had among the lowest ratios of future commitments to recent high payroll.)

Of course, the television component is only part of the overall picture. When Atlanta’s recent spending began, it seemed that the primary driver was the recently-announced Cobb County ballpark and development project. Maffei acknowledged the role of that deal as well, saying that “the new stadium and the complex around it … are going to create a lot of value for the Braves.” With management having “created a great product with a controlled payroll,” said Maffei, the Braves “have been a profitable team” and are an “asset [that] has gone up quite nicely in value over the last several years.”