Since baseball returned to Washington in 2005, the Nationals and Baltimore Orioles have tried to develop a rivalry on the field, even as — until this season — both languished at the bottom of the standings. But off the field, a more important and far more bitter dispute rages over the Nationals’ television rights and how much they are now worth.
The Orioles control those rights, an arrangement unique in professional sports that essentially gives a rival franchise 45 miles to the north a say in how much the Nationals have to spend on virtually every aspect of their organization.
This year is the Nationals’ first opportunity under the agreement to appeal for a larger rights fee. It comes as the Nationals are headed toward their first winning season, one that has them in first place in the National League East with the best record in baseball. The teams’ deep divide over the amount of TV money the Nationals should be paid has called attention to their unusual television partnership, and to the question of whether the Nationals could get a higher fee on the open market.
“Essentially, to have a potential revenue source this important for a local team being run through another entity has got to be very concerning because you can’t always control your own destiny,” said David Carter, executive director of the University of Southern California’s Sports Business Institute.
The Nationals are asking the Mid-Atlantic Sports Network (MASN), which is controlled by the Orioles and broadcasts both teams’ games, for between $100 million and $120 million per year, at least three times the $29 million they received last season, according to one person familiar with the proceedings. MASN proposed paying $34 million this season, according to another individual, who also spoke on condition of anonymity because of the sensitivity of the issue.
With the two sides far apart, a panel comprising representatives of three other teams has been charged with reaching a settlement. The talks have dragged on for months and have missed two deadlines for a resolution.
MLB Commissioner Bud Selig has said little publicly on the matter, but during the All-Star Game in Kansas City, Mo., last month, he expressed frustration with the slowness of the negotiations. “We are in the middle of very intense discussions,” he said during a luncheon with the Baseball Writers Association of America. “Very intense. That’s all I can tell you at the moment.”
When asked for when he wanted the issue resolved, he replied, “A month ago.”
Orioles get exclusive rights
The source of the impasse is the arrangement hammered out by Selig and Orioles owner Peter Angelos to allow the Nationals to move into a territory that baseball has recognized as part of the Orioles’ exclusive commercial and broadcast region.
But its roots go deeper. When the Senators left Washington for Texas in 1972, leaving only the Orioles in the region, baseball awarded Baltimore exclusive rights for much of the mid-Atlantic. Back in cable’s infancy, few paid attention to the issue. Today, however, cable TV broadcasts are one of the biggest revenue engines for sports franchises, worth tens if not hundreds of millions of dollars.
The Orioles’ territory, as spelled out in the 2005 agreement between MLB and the Orioles, encompasses all of Maryland; Virginia; the District; Delaware; seven counties in West Virginia; 13 counties and three cities — York, Lancaster and Harrisburg — in central Pennsylvania; and most of central and eastern North Carolina.
So when MLB, which owned the franchise known until 2004 as the Montreal Expos, was trying to arrange the team’s move to Washington, the Orioles argued that they should be compensated for having to share their territory. MLB brokered an arrangement in which the Orioles would convert their existing Orioles Television Network into a larger one, MASN, and buy the Nationals’ television rights. The contract has no termination date, according to someone familiar with the deal.
The deal also stated that the Orioles would own the majority of the network; the Orioles’ equity stake in MASN would begin at 90 percent, with the Nationals’ stake at 10 percent. After a two-year start-up period, the Nationals’ stake would increase by 1 percent each season until it reached a cap of 33 percent. Also guaranteed in the contract: The Orioles are to be paid the same rights fees by MASN as the Nationals. Those rights fees can be revisited once every five years beginning this year.
“There would not have been a team in Washington” without the deal, said Tony Tavares, the Nationals’ team president when they were still owned by the league.