Thursday, October 3, 2019

The A's Troubling TV Rights Dynamic

There are at least 54,005 A's fans in the Bay Area, as evidenced by last night's Wild Card game (of which we shall not speak).

The Coliseum was loud and full. It comes against the backdrop of baseball continuing to suffer league wide attendance declines, as chronicled in a recent New York Times article. The A's were actually up year-over-year with an average of 20,521 fans a game in 2019 versus 19,427 a game in 2018.

One can be skeptical of A's President Dave Kaval's ultimate "rooting" in Oakland (as I am), but it is undeniable that the ballpark is much improved from a fan standpoint in the last five or so years. A's Access, The Treehouse, Championship Plaza, all easy, feel-good moves that make fans feel valued and that they are getting value.

But, as the Times piece points out, butts in the seats may not be worth as much as it is generally assumed.

...league revenue, which topped $10 billion in 2018, is up more than 70 percent from a decade ago, thanks in large part to increasing media rights fees, which reached an all-time high this year.

Those diverging trend lines — fewer fans in the ballpark, but richer media fees and overall revenues — make up an uncomfortable truth about baseball in the 21st century. Ticket sales, long the bread and butter for the sport, are no longer the central driver of the business at a time when the sport’s digital business is ascendant....

Meanwhile, fees from baseball media rights are growing at a much faster rate. That explains how revenue can soar while attendance plummets. Baseball’s new television agreement with Fox included a 39 percent increase over the previous deal.

Also, numerous teams, including the Los Angeles Dodgers, Texas Rangers, Los Angeles Angels, Seattle Mariners and Philadelphia Phillies, have signed long-term, multibillion-dollar deals with regional sports networks in recent years. The Tampa Bay Rays recently signed a new television deal that reportedly quadrupled their average payment.

“You can’t raise the prices of tickets, whether they be suites or regular tickets, anywhere near the value that the media rights are increasing,” [Todd Lindenbaum, chief executive of SuiteHop, an Airbnb-type service for luxury suites] said.

Rays Deal as Harbinger

Lamentable as it may be to old-school baseball purists, but terrestrial radio rights are not very valuable. This is why the A's are partnered with right-wing-low-wattage radio KTRB as their "flagship," but really primarily with the streaming service TuneIn.

As, in my opinion, regrettable it is to have radio bedfellows like Rush Limbaugh on KTRB, the TuneIn channel is excellent and is an ocean of A's content for a fanbase that had been regularly deprived.

Still, when it comes to money, TV is still the name of the game.

The Times excerpt above notes that the similarity "small market" Rays "reportedly quadrupled" their average TV rights payment. A quick Google shows that it may have only been a modest uptick and the Rays partially see the lower amount attributable to increased cord-cutting.

From a Feb. 9, 2019 Tampa Bay Times article:

But it’s not nearly as much as the Rays had once hoped, given a sports industry-wide drop in rights fees as a fallout from cord-cutting and other issues, or that some of their competitors got previously. 

And it’s “well, well, well under” the $82 million annual average over 15 years that was reported last spring (of 2018) by Sports Business Daily, (Rays Principal Owner Stu) Sternberg said, declining now, and likely ever, to reveal what the exact number is, or how much it could boost payroll or help pay for a new stadium. 

 “It’s going to be an increase of where we are,’’ Sternberg said, estimating the new deal would rank about 20th in the majors. “Much of the reason we’ve spent all that we have is because we knew we had some more revenue (coming) off of TV. Unfortunately it’s going to fall reasonably short of what we anticipated four years ago.’’

A's-Comcast Deal: Known Unknowns

The best(?) information on the A's deal with Comcast on NBC Sports California on FanGraphs suggests that the team is receiving between $43-$48M annually in a deal that runs through 2029 and has an opt-out in 2023. (The San Francisco Business Times reported that the deal runs through 2033.) Does anyone have the source info on the deal? It's hidden pretty deep on the web if it exists.

Assuming what has been reported is accurate, the A's are locked out of even a Rays-like windfall for now, all while more and more people drop cable. This could have major, major implications for the team -- especially if we are to believe that media rights (local+national) are more valuable than raw attendance figures.

A bad TV deal also hurts the team's value, should majority owner John Fisher be looking to sell.

The 2023 opt-out is mighty interesting. You may recall that 2023 is the date that the Howard Terminal stadium should be opening, if all goes to plan. If it is approved, it seems likely that the A's would opt out and roll the dice with Comcast on a new deal.

Alternately, although Comcast continues to add broadband subscribers, the dynamics of its video side may be such that -- assuming the opt-out is mutual -- it exercises the option to try and squeeze the A's or cut the annual payout.

The biggest risk of the A's deal is that it has no equity component in NBC Sports California, unlike the Giants deal with sister station NBC Bay Area. This means it has no say on programming and far less leverage. The A's reported deal, given the big Bay Area media market (fifth largest), is modest, at best.

The Digital White Knight?

The A's TuneIn deal was heresy in some respects -- the first MLB team to go essentially streaming first. Why not do the same with TV? DAZN would be an ideal candidate for an overpay.

In 2018 the billionaire-owned streaming service headed by former ESPN head honcho John Skipper paid $300M to MLB to air "Changeup," a nightly clip show. They have lots of money and big ambitions. The second biggest contract in sports, with the highest annual payout is DAZN's deal with boxer Canelo Álvarez -- $365M/5 years. Yikes.

A deal with the A's might break the RSN lock on teams and re-juice the sports TV contract market.


The other way to get a plum TV deal? Move to a new market where you aren't treated as second-fiddle and you are moving into a gleaming new ballpark as the talk of the town.

Let's hope it doesn't come to that.

Or Even...

The A's could start their own streaming service. But, as the kids say, "A bird in the hand is worth two in the bush." (OK, they don't. But guaranteed cash payouts and pre-built infrastructure is far less risky than DIY.)

Wednesday, October 2, 2019

Wild A's Days -- Lawsuits, Dive Bars and Payrolls

Lawyer Ball, for Real

The A's are set to host the AL Wild Card game, but their front office team feels like it has already lost with a recent, somewhat rogue Oakland lawsuit challenging the pending deal Alameda County has to sell its share of the Coliseum complex to the A's

The lawsuit itself is a little wild, given that the mayor does not support it, but what's more wild is that A's non-equity President Dave Kaval went on "The Build" on A's Cast and basically dumped on the lawsuit and the city to a certain extent. His comments were all middle-of-the-road, but he toned a very irritated Chris Townsend down not at all.

Most companies, as a policy, do not comment on pending litigation. Townsend called the suit a "low blow" and the city's effort to champion different spots for a ballpark as "a mirage." Kaval didn't push back on him.

The presiding judge in the matter may not like Kaval's "transparency" as Townsend calls it. It all begs the question, is Kaval -- the A's seemingly head negotiator and, in title, a member of its executive team, also its designated spokesperson? If so, have the A's lawyers OK'd these types of appearances?

Side Note -- One of the great mysteries of the summer is why, given Kaval's role, "Chairman Emeritus" Lew Wolff was the one to push back on the Raiders in August after Mark Davis vented to the media about how the team made life difficult in the Coliseum for them. The linked to article even calls Wolff the "A's owner." Was the otherwise loquacious Kaval suffering from a throat problem?

Meanwhile, in this trivial matter and in the material Coliseum land lawsuit matter A's majority owner John Fisher remains mute.

A Love Letter to the Last "Dive Bar" in Baseball

New York Times reporter Jack Nicas in today's paper authored the piece "The Beauty of America's Ugliest Ballpark," all about the Coliseum:

Yes, the Coliseum is ugly, but it is cheap, gritty and fun. The spacious confines allow fans to roam around, spread out and enjoy a comprehensive view of the game. And the park’s dinginess fosters a freewheeling atmosphere, where bleacher die-hards bang drums and heckle outfielders, while upper-deck denizens pack picnics and pass joints. 

It all adds up to a baseball experience that stands out in the increasingly homogeneous ballpark landscape. If Marlins Park is the flashy new nightclub, and Fenway Park and Wrigley Field are the historic pubs, the Coliseum is baseball’s last dive bar....

So when I relocated to Oakland four years ago, it came as a surprise that I fell in love with the Coliseum. 

The streets around Fenway and Wrigley are lined with lively bars and restaurants hawking overpriced beers and gourmet sausages. At the Coliseum, fans stream through a caged walkway over an industrial site where vendors sell bacon-wrapped hot dogs and cans of beer for a few bucks. (Prices are negotiable.) 

 While Fenway and Wrigley are cramped and packed, the Coliseum is cavernous and half empty on a good day. Have a large group, or need to take a private phone call? Take a section of the upper deck to yourself. (Smaller crowds also increase your shot at a Jumbotron appearance, which is important for an aggressive mid-inning dancer like me.)

Interesting, Kaval pops up and speaks about the A's need for a new ballpark:

There is an urban renaissance, especially among younger millennials. So that’s one reason we’ve been focused on the downtown waterfront location.

Umm, just to be clear, you are speaking about attracting a monied "urban renaissance" crowd, right? I don't think it was intentional, but Kaval is throwing shade at East Oakland. For a team facing criticism of a sweetheart deal with the county for the Coliseum at the expense of potential affordable housing development, is this the best public messaging?

A's are Cheap, Rays are Cheaper

Think the A's $92M payroll is cheap, think again as it dwarfs the Rays as The Wall Street Journal details in today's paper:

The Rays opened the year with a budget of about $60 million, the lowest in the major leagues. They still managed to finish with 96 wins and earn a spot in the postseason for the first time since 2013, with a matchup in the division series against the Houston Astros on the line.

Other teams have put together brilliant seasons with even lower payrolls. The A’s, for instance, spent less than $60 million to build the roster that claimed the AL West crown in 2012. Back then, however, the average payroll registered at about $100 million. Now, that figure has risen to nearly $134 million, meaning the Rays landed at more than 55% below average.

That almost never happens. In fact, only one team since 2000 has made the playoffs with a payroll that far below league average—and once again, it was the Rays, whose 2011 payroll clocked in at 56% below average.