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    Why RSNs Create Class Warfare in MLB

    24th February 2006

    Yesterday, Fox purchased Time Warner’s Turner South holdings for $375 million. This number was nearly double what some analysts had predicted. The day before, Arthur Blank, who owns the Falcons, broke off talks on the purchase of the Braves from Turner due to the $400 million asking price.

    Fox sees a Regional Sports Network (yes, they will still hold the rights to TV classics such as “Junkins”, but have thankfully looked to pure sports) that will cover the Braves, Hawks and Thrasher.

    With the RSN no longer part of the deal with the Braves sale, it could be a serious consideration for whoever wishes to purchase the club. Why? RSNs shield clubs from revenue sharing.

    I’ll be detailing this more on Monday in an article for The Hardball Times, but there has been an increased proliferation of RSNs since the current contract was agreed to in 2002. Not that it wasn’t there before, but with the sheltering of revenues through club controlled RSNs (I’ll get into how stadium development is adding fuel to this fire in a later article on THT), you create more class warfare between the haves and the have-nots. This will place further pressure on management to come up with some more creative methods of increasing revenue sharing to those clubs that do not have the advantage of being tied directly into an RSN in the next round of collective bargaining.

    Off the top of my head (and I will be updating this table as I come across other RSNs I missed — comments from those that see me missing any would be appreciated), here’s a list of some RSNs that are controlled, or partly controlled by MLB clubs:

    Regional Sports Network
    Franchise Association
    (New England Sports Network)
    Red Sox
    (Mid-Atlantic Sports Network)
    (Yankee Entertainment Sports Network)
    (Rogers SportsNet )
    Blue Jays
    (Turner Broadcast Station)
    Comcast SportsNet Philadelphia
    Comcast SportsNet Chicago
    White Sox
    (Royals Sports Television Network)
    SportsNet NY
    SportsTime Ohio

    Failed RSNs: Victory One Sports – Twins

    6 Responses to “Why RSNs Create Class Warfare in MLB”

    1. maury Says:

      Updated table with the RSN for the Indians (SportsTime Ohio). Also noted the failed attempt at an RSN by the Twins.

      As a note…

      There is a level of gray area on RSNs and clubs. Turner South, while owned by Time Warner, would have made the cut here as Time Warner owns the Braves. RSNs such as the regional Fox holdings like Fox Sports NW, would not be included as these RSNs are not owned and controlled in some fashion by one of the clubs. WGN, for example, is owned by the Tribune Co., which owns the Cubs.

      So, to recap, it’s RSNs with clubs attached to the ownership of the RSNs that is the discussion.

    2. maury Says:

      By the way… Some are asking how the RSN shields owners from revenue sharing.

      This is called Transfer Pricing.

      From the current CBA on revenue sharing:

      (2) “Defined Gross Revenue” shall mean the aggregate operating revenues from baseball operations received, or to be received on an accrual basis, as reported by each Club on an annual basis in the Club’s FIQ. “Baseball Operations” shall mean all activities of a Club that generate revenue, except those wholly unrelated to the business of Major League Baseball. Baseball Operations shall include (by way of example, but not by way of limitation)…

      (3) “Central Revenue” shall mean all of the centrally-generated operating revenues of the Major League Clubs that are administered by the Office of the Commissioner or central baseball including, but not limited to, revenues from national and international broadcasting agreements (television, cable, radio and Internet), Major League Baseball Properties, Inc., Baseball Television, Inc., Major League Baseball Enterprises, Major League Baseball Advanced Media, Inc., the Copyright Arbitration Royalty Panel, superstation agreements between the Commissioner’s Office and the Clubs whose games are transmitted on a distant signal (“Superstation Agreements”), the All- Star Game and national marketing and licensing.

      (4) “Local Revenue” shall mean a Club’s Defined Gross Revenue less its share of Central Revenue.

      (5) “Actual Stadium Expenses” shall mean the “Stadium Operations Expenses” of each Club, as reported on an annual basis in the Club’s FIQ.

      (6) “Net Local Revenue” shall mean a Club’s Local Revenue less its Actual Stadium Expenses.

      (7) The “Base Plan” shall be a 34% straight pool plan. The amount of net payment or net receipt under the Base Plan for each Major League Club shall be determined as follows: Each Club contributes 34% of its Net Local Revenue to a putative pool; that pool is then divided equally among all Clubs, with the difference between each Club’s payment into the putative pool and its receipt therefrom producing the net payment or net receipt for that Club.

      The emphasis above is mine. RSN revenues are not considered to be “wholly related” to the business of baseball. While this seems odd, say advertisement for the Bruins is going well NESN, but sales for the Red Sox, are not. It is this commingling aspect that creates the shading between what is truly MLB related revenues and those outside of MLB related revenues.

    3. jkelly312 Says:

      The Cubs and the White Sox, along with the Blackhawks and Bulls all are part owners of Comcast Sports Network in Chicago.

    4. dbvader Says:

      A few years back when the current CBA was being negotiated, the owners published a spreadsheet with team revenues and expenses. (It may have been the blue-ribbon report.) Among other things that raised an eyebrow (like Pohlad having interest payments on the Twins, which he had bought for under $100 M 20 years ago while he is or is close to being a billionaire and an owner of a regional bank) was the absurdly low television revenue that the Dodgers received. Of course, the team was owned by the Fox. The same thing is going on with the Red Sox. The owners claim poverty regarding the team, but are raking it in off of NESN.

    5. maury Says:

      True on the graphs from the Blue Ribbon Panel. If you have Acrobat Reader, you can read click to read The Blue Ribbon Panel Report (PDF)

    6. maury Says:

      Table updated with Comcast SportsNet Philadelphia and Comcast SportsNet Chicago added