Monday, July 28, 2014
Inquirer Daily News

TV and $$: A FAQ

The feedback from Tuesday's column about the future windfall the Phillies stand to gain when their TV rights are for sale again has been enormous. I'm sifting through the emails and tweets, and some readers have asked pertinent questions I didn't have space to address or completely overlooked. So here's an addendum.

TV and $$: A FAQ

Phillies president David Montgomery (left) says it´s unlikely that the team will form its own television network. (David M Warren/Staff file photo)
Phillies president David Montgomery (left) says it's unlikely that the team will form its own television network. (David M Warren/Staff file photo)

The feedback from Tuesday's column about the future windfall the Phillies stand to gain when their TV rights are for sale again has been enormous. I'm sifting through the emails and tweets, and some readers have asked pertinent questions I didn't have space to address or completely overlooked. So here's an addendum. 

Why Comcast? The Phillies brand is strong enough to sustain its own network. So why not cut out the middle man?

Certainly, a team-owned network is an option. But, at this juncture, it appears to be a decided long shot. Last week, David Montgomery suggested as such during an interview with The Inquirer.

"It's not out of the question," Montgomery said. "It's a possibility. But that's an enormous undertaking. We've had enough trouble figuring out how to run a baseball franchise without also trying to run a TV property. But you never know. This is Comcast's home market. They're proud of that. We're the Philadelphia Phillies and we're a big part of their network. Hopefully, in time, we'll get together."

The Phillies have a longstanding relationship with Comcast. More importantly, the Phillies don't think their own network would be able to compete with SportsNet in the hours other than 7-10 p.m.

Seventeen months ago, our Frank Fitzpatrick asked the same question. And the answer then was also an unequivocal "No."

Firstly, if the Phillies were to turn down Comcast's offer for the rights and create their own network, who's to say Comcast would agree to carry it without a substantial fee? They are the primary carrier in the region and if there were hard feelings about losing the rights, they could charge the Phillies network an exorbitant fee. Remember, this happened when the Yankees created YES. Cablevision carried their games and when the Yankees went elsewhere, Cablevision decided not to carry the YES network for a full season. 

Secondly, the Phillies would need to create 24/7 programming. And while they could re-air old games and have a Wheeler's Corner show, it's easy to see how competing with the established networks could be a challenge.

"Comcast is so big in Philly," said Dave Buck, the Phillies' senior vice president of marketing and advertising, in 2010. "We'd need to program our own station 24 hours a day, seven days a week. Phillies games themselves would be one part of it, but then you'd need to be in the business of being a TV station.

"And since Comcast already has that in Philly, what would our Sports Night look like? Our other programs? To go head-to-head with them on the 6 o'clock news, the 10 o'clock news, the wake-up news, I'm not sure it would work."

With the rise in payouts for TV rights, creating a team-owned network appears to be less of a necessity. The Phillies are still looking at (likely) $5 billion or more from selling their rights.

Why is the current payout only around $24 million?

When Comcast SportsNet started in 1997, the Phillies had a minority stake in the company. That money, at the time, was better than the Phillies could do than selling the rights to their (low-rated) games. A few years later, the Phillies decided they would be better off selling the rights and sticking to running a baseball franchise. But, in this amicable split, the Phillies told Comcast they wanted to retain the advertising sales and revenue.

So the value of the rights only, according to Forbes, was around $24 million in 2010. That does not include the revenue the team makes from selling TV ads. That figure is unknown.

What we do know is the annual total of rights and ad money is nowhere near, for example, $150 million. That's how much the Los Angeles Angels will receive yearly for a 20-year, $3 billion deal they recently signed with Fox Sports West. The Angels had the fourth worst local ratings in 2011.

A sticking point in negotiations could be the ad sales. The Phillies wanted to keep the advertising revenue, which in the early 2000s wasn't nearly as profitable or attractive today, to avoid conflicts. For example, if one of the Phillies' top sponsors at the ballpark is Citizens Bank, they did not want Comcast selling ads on the broadcast for PNC Bank.

The ads for live sporting events, however, come of great value now in the age of DVR and TV Everywhere.

I own a satellite dish and live in the Greater Delaware Valley. Death to Comcast!

OK, that's not a question, but a sentiment expressed by many who reacted to the story. Yes, Comcast still enjoys incredible leverage thanks to the days of Prism. Comcast does not uplink its signal to a satellite and is not required by law to do so because of an anachronistic FCC loophole. So those with DirecTV or Dish in the Phillies' blackout area cannot watch the Phillies, other than the 40-or-so games on PHL17. In recent years, the FCC revoked some of Comcast's liberties and in out-of-town markets, the Comcast feed has been shown on the MLB Extra Innings package, which is available to satellite subscribers.

And if your cable provider is someone other than Comcast and you live in the area, you're also out of luck. Although now that SportsNet is shown on Verizon FIOS, I'm not sure there are many who fit this category since Comcast cable has such a monopoly on the region.

So satellite people, you're rooting for the Phillies to create their own network or someone else to make a bid.

What incentive does each side have to make a deal before 2016?

The current 15-year rights deal expires in 2015. Comcast, seeing the rising costs of securing TV rights, could want to rip up the remaining years and negotiate a new deal now. That would prevent the Phillies from changing their stance on a team-owned network or any other potential outside bidder stealing the rights.

The Phillies have notched the highest local ratings in all of baseball for each of the last two seasons. Their brand has never been better. But payroll expenses are rising and notable young core players like Cole Hamels, Shane Victorino and Hunter Pence are nearing free agency. A deal now, when ratings are at their highest, guarantees a huge payout.

Then again, as noted in the column, the Los Angeles Dodgers' current TV deal expires after the 2013 season. They are expected to negotiate a record-setting deal. During the team's bankruptcy trial, a sports media analyst testifying on behalf of Fox Sports valued the Dodgers' TV rights at $100 million annually. That was before the Lakers signed a 20-year, $3 billion contract with Time Warner. And they play half as many games as the Dodgers.

So the Phillies could be best served waiting for the Dodgers to set the market value. 


Have a question? Send it to Matt Gelb's Mailbag.

Matt Gelb Inquirer Staff Writer
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The place for up-to-the-minute Phillies coverage from The Inquirer beat writer Matt Gelb and columnist Bob Brookover.

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