Many Go; Few Understand

Tuesday, May 31, 2005 From The Washington Times (http://washingtontimes.com/op-ed/20050530-094022-8609r.htm):

The initial round of bidding for the Washington Nationals begins today, when the nine prospective owners who have deposited $100,000 with Major League Baseball (MLB) are expected to put their offers on the table. As Eric Fisher of The Washington Times has reported, MLB, which owns the Nats, has asked each bidder to make two offers: one for the ballclub and another for the team plus MLB's 10 percent equity stake in the Mid-Atlantic Sports Network (MASN).
   
Making matters worse, the bidding will take place in an atmosphere muddied by lawsuits and counterclaims. MASN is a regional sports network recently created by MLB and Baltimore Orioles owner Peter Angelos in order to control, market and auction the long-term broadcast and cable-television rights of both teams throughout the region. Comcast SportsNet (CSN), which has the local pay TV contract to televise about 80 Orioles games a year through 2006, has filed suit in Montgomery County Circuit Court against the Orioles, MLB and MASN. CSN claims that the Orioles' plan to shift their local pay TV games from CSN to MASN in 2007 violates CSN's exclusive negotiating rights through November 2005 and CSN's contractual right to match any third-party offer after November.
   
Nobody knows how the lawsuit will be resolved, a fact that introduces a huge amount of uncertainty into the bidding process. Even before the legal battle erupted, however, MLB had already sabotaged the long-term interests of the Washington Nationals by unilaterally forcing the team to accept a hugely unequal position in a regional sports network that the Nationals' ultimate owners almost certainly would never have agreed to join.
   
Indeed, under no rational conditions would the eventual owners of the Nationals ever agree to split a regional sports network with the Orioles. But the deal that baseball commissioner Bud Selig has forced upon the prospective Nationals owners is far worse than 50-50. Mr. Angelos will initially own 90 percent of MASN. Over the next 30 years, his majority stake will gradually decline, but it will never fall below 67 percent. In other words, even though Baltimore is a vastly inferior market to Washington, Mr. Angelos will receive an overwhelming majority of the profits, beginning with 90 percent and never falling under 67 percent. Moreover, MLB has warned the bidders thatit may decide to retain its equity stake in MASN. In doing so, MLB would deny the prospective owners any control over an asset that traditionally generates more cash than any other revenue source except ticket sales.
   
Just how inferior is the Baltimore market compared to Washington's? According to Nielsen rankings, Baltimore is the 23rd-largest media market in the nation, while Washington is the eighth-largest. The Washington market has more than twice the TV sets that Baltimore has. In terms of personal income, the Washington metropolitan area is the nation's fourth-largest ($214 billion in 2003) and the nation's largest metropolitan area with only one baseball team. The Baltimore metropolitan area, whose population is half of Washington's, has 43 percent of Washington's personal income. Yet Mr. Angelos and the Orioles will receive 90 percent of MASN's profits.
   
John McHale Jr., MLB's executive vice president of administration, insists that "[u]nder the MASN agreement, the Nationals will never receive below-market rights fees." But just this March we learned that MLB's much-ballyhooed steroids policy was far weaker than fans and Congress were led to believe. While MLB publicly referred only to suspensions beginning with the first violation, the agreement's fine print revealed that relatively tiny fines could be anonymously assessed against a player for his first four positive tests. In other words, MLB's word should be taken with a grain of salt, to say the least.
   
Mr. McHale also points to the endorsement of the MASN arrangement by D.C. Mayor Anthony Williams and Councilman Jack Evans. Well, aren't these the same two gentlemen who got taken to the cleaners by MLB negotiator Jerry Reinsdorf, the Chicago White Sox owner who walked away with a commitment from D.C. leaders to use taxpayer subsidies to finance 100 percent of a new stadium (currently, $581 million and counting)? In a Sept. 23 meeting in Mr. Selig's office, Mr. McHale and MLB President Robert DuPuy "methodically laid out [Washington's] offer" for the Montreal franchise, The Washington Post has reported. "When they finished, mouths were agape. The District would pay for the whole stadium, right down to the kitchen equipment for the concessionaire. 'Jerry had taken the last crumb off the table,' " one attendee said.
   
Just as MLB took our mayor to the cleaners, baseball is now ready to take the Nationals and their newowners there, too. As long as baseball enjoys its uniquely expansive antitrust exemption, its leaders will continue to act with unrelenting arrogance.

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