Mets faring OK in new TV landscape

January, 7, 2014
Jan 7
9:00
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A recent wave of local television megadeals are making some major league teams big winners in new revenue.

That is highlighted by the Los Angeles Dodgers reaching an $8.5 billion agreement with Time Warner Cable over 25 years -- for an average of $340 million a season.

“It’s in a different stratosphere from the rest of the league,” says Laurence DeGaris, an associate professor of sports marketing at the University of Indianapolis, who previously worked for the Bonham Group, a Denver-based sports-marketing consultancy. “Everybody is chasing that deal. No one will reach that level, but I don't think there's any question that the Dodgers' deal raised the bar.”

The most recent deal belongs to the Philadelphia Phillies -- reportedly $2.5 billion over 25 years in rights fees.

So where do the Mets, who partnered to create SportsNet New York for the 2006 season, stand in the revenue landscape amid this new wave of megadeals?

The short answer: It’s complicated. But the Mets’ arrangement appears marginally better than the Phillies’ deal with Comcast, according to DeGaris.

One reason it is difficult to analyze is because the Mets own 65 percent of SNY, whereas the Phillies will get a reported 25 percent stake in Philly’s regional Comcast sports channel as part of their deal.

So a straight comparison of the rights fees -- $100 million per year for the Phillies, versus an estimated $52 million by SNY to the Mets annually through 2030 -- is not a valid comparison in itself because it leaves out the respective ownership stakes in the TV networks, according to DeGaris.

“Though it's difficult to pinpoint exactly, I would say with their new TV deal the Phillies have closed the gap on the Mets in terms of local TV revenue, but still lag a bit behind, primarily because of the differences in ownership stakes of the networks (Phillies’ 25 percent to Mets’ 65 percent),” DeGaris said.

DeGaris noted it is particularly important these days for a team to have an ownership stake in the network televising its games because of the big fees cable companies are paying sports networks -- known as carriage fees. (That’s the dollar figure, for instance, Cablevision pays SNY or YES or ESPN per customer to carry that network.)

“That the new Phillies deal now includes an ownership stake in the network demonstrates the growing importance of carriage fees relative to advertising sales,” DeGaris said. “The traditional media rights model in broadcast television was that a media company would buy the rights and then profit from the deal by selling advertising.

“Televising live sports events has become one of the few types of programming that prevents consumers from cutting the cord from cable TV altogether. If you're just interested in movies and shows, you can get them for $8 per month on Netflix. The carriage fees paid to sports networks have risen accordingly.

“Long-term, I think the Mets’ higher percentage of ownership will outweigh the Phillies’ greater cash-rights fees.”

DeGaris noted a second benefit to a team deriving its TV revenue from an ownership stake in a network as opposed to signing up with a regional sports channel it does not own and just getting a rights fee: MLB taxes the rights fees. It does not grab a share of profit from ownership of the TV network.

“Media-rights fees are included in MLB’s revenue sharing, whereas carriage fees are not,” DeGaris said. “Since the Phillies intend to remain among the biggest MLB payrolls, that could be significant.

“Keep in mind that about a third of rights fees are paid back to the league in revenue sharing, so that difference [between the Phillies and Mets in rights fees] is narrowed. Add in the respective value of the networks and I think the deals are pretty close in value, with an edge to the Mets because of the higher ownership stake.”

Of course, it’s still not even that simple.

How the rights are paid are crucial, too,” DeGaris added. “The escalators built into these agreements to account for inflation can make a huge difference. $100 million in 2039 dollars is probably less than half of $100 million in 2014 dollars.

“I'll also add that the Mets are vulnerable with SportsNet New York because the only other live events on the channel [have been] Big East basketball. The Yankees [on YES] have the Yankees. As a long-suffering Mets fans, I'll concede the Mets are not the Yankees. But YES also has the Nets. MSG has the Rangers and Knicks, so they're solid.

“SportsNet New York has the Mets; in contrast, the Phillies get an ownership stake in a network that includes the Flyers and Sixers, which means that local cable companies MUST have that channel and will pay a premium for it.

“There's a growing concern, which is valid, that sports-rights fees will price sports out of the market for cable providers. It's not an idle threat. About a quarter of San Diego residents don't have access to Padres games. Time Warner decided not to pay. The rights fees and carriage fees paid to sports properties get passed on to cable customers. While sports programming helps to keep customers connected to cable, it can also drive away non-sports fans. There's a fine line between monetizing value and pricing yourself out of a market, and regional sports networks are walking it.”
Adam Rubin has covered the Mets since 2003. He's a graduate of Mepham High School on Long Island and the Wharton School of the University of Pennsylvania. He joined ESPNNewYork after spending 10 years at the New York Daily News.
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TEAM LEADERS

BA LEADER
Daniel Murphy
BA HR RBI R
.301 9 53 73
OTHER LEADERS
HRL. Duda 26
RBIL. Duda 76
RD. Murphy 73
OPSL. Duda .845
WB. Colon 12
ERAZ. Wheeler 3.44
SOZ. Wheeler 155