Commissioner Bud Selig has argued the last few seasons that Major League Baseball has solved its competitive balance issues by levying a luxury tax against teams that spend too much, but local television deals may be bringing those issues back with a vengeance.
Teams on the West coast with new ownership groups, television contracts and competition for popularity were the biggest winners of this year’s non-waiver trading period, which ended a few hours ago.
In the National League, the Los Angeles Dodgers and San Francisco Giants competed for the top honors, trading respectively for outfielders Shane Victorino and Hunter Pence on deadline day. I’ll give the trading period edge to the Dodgers due to their additional acquisition of Hanley Ramirezfrom Miami.
In the American League, the Rangers trumped the Dodgers at the deadline by acquiring Chicago Cubs starter Ryan Dempster. But the Los Angeles Angels of Anaheim had already made their big rotation move, adding Zack Greinke.
One similarity among all those teams is HUGE new television contracts that are dwarfing the numbers being housed by teams in the Midwest. The Dodgers were purchased for $2.15 billion in March by Magic Johnson and Mark Walter in a deal that stunned sports industry observers.
Part of what made the deal work, according to the Wall Street Journal, is the opportunity the team will have in 2013 to either launch a regional sports network in the second largest market in the country or “hold an auction for the rights to telecast Dodgers games.”
Recent rights deals signed by the Angels and Rangers are reportedly worth $150 million a year. Lee Berke, a sports media consultant, told the Journal the Dodgers’ status as the top brand in the market could command even more than $150 million annually – perhaps as much as $300 million annually, according to the Journal’s story.
It’s no coincidence that with these new windfalls, the West Coast teams have been splurging. Albert Pujols joined the Angels for $240 million over 10 years this offseason, spurning offers to stay in St. Louis. The LA Angels of Anaheim also added Texas starter CJ Wilson; the Rangers countered by adding Japanese pitcher Yu Darvish, spending $111 million to do so.
The Giants don’t have the same windfall as the Rangers, Angels and Dodgers, but they do get 30 percent to 33 percent of total revenues generated by Comcast Sports Net under a 25-year deal signed with Comcast Sports Net before the 2008 season, according to the San Francisco Chronicle.
Compare these deals to teams in the Midwest. The Minnesota Twins, a team with a new stadium that that has generally been fairly successful for the last decade up until last year, get roughly $29 million per year for their television rights.
The Detroit Tigers – big spenders compared to many Midwest teams – in 2009 inked a 10-year deal with FSN Detroit that will net them $400 million through the life of the deal.
The Milwaukee Brewers lost star Cecil Fielder to Detroit and just traded Greinke to the Angels, in part, because their television rights don’t generate enough to make the nine-figure offers it takes to retain such star power. Fox Sports Wisconsin reportedly pays the Brewers about $12 million per year for broadcasting rights. Cleveland gets about $30 million per year from SportsTime Ohio, according to the Cleveland Plain Dealer.
Certainly there are more “haves” and fewer completely hopeless “have-nots” than there were a few years ago when the payrolls of the Yankees and the Red Sox would annually dwarf those of the rest of the league’s other 28 teams. But as long as Major League Baseball teams are able to negotiate hefty local television rights deals based on market size, parity in baseball will be a long, long way off.
And the deals struck by those West Coast clubs as Tuesday’s July 31 non-waiver trade deadline expired just emphasized that fact.