Following years of litigation, the Baltimore Orioles and Washington Nationals have come to terms on a deal for media rights fees between the 2012 and 2016 seasons. Seventy-seven percent of Mid-Atlantic Sports Network (MASN) is owned by the Orioles, while the remaining 23% is held by the Nationals. MASN has reportedly agreed to pay the Nationals $100 million for the incremental rights fees after several court rulings and mandates from Major League Baseball. Since the creation of MASN was conditioned on equivalent rights payments to both teams, the Orioles will also be paid $100 million. The New York Court of Appeals upheld MASN owing the team a $100 million payment in unpaid media rights fees this past April.
While the payment for five seasons has now been determined, the next step will be coming to terms on payments for the five-year periods of 2017-2021 and 2022-2026. If agreements are not reached during the negotiating period, the decision will be made by the Major League Baseball Revenue Sharing Definitions Committee (RSDC). MASN believed making the $100 million payment to the Nationals would endanger the network’s profitability, but doing so will allow the sides to move past what has become a sustained complication.
The legal dispute between the Beltway rivals first commenced in 2011 when the teams did not come to an agreement on how much money the Nationals should be paid for media rights fees. Complications arose when the Nationals moved to Washington, D.C. after spending 35 seasons in Montréal as the Expos, and the local media rights were granted to the Orioles-owned MASN in perpetuity.
While MASN was supposed to pay both teams “fair market value,” the two sides did not have the same definition on what that encompassed. Lawyers representing the Orioles protested the decision, affirming that the law firm representing the Nationals encompassed an inherent conflict of interest since it had also represented Major League Baseball. Even when a new law firm was hired and the Revenue Sharing Definitions Committee restructured, the conclusion was still reached that the Nationals were owed $100 million.
The Nationals were put for sale by the Lerner family, but it was reportedly put on pause until the MASN dispute was settled. Once the team is able to present its television revenue, the expectation is that a sale of the franchise could be easier. The frontrunner in the race is thought to be Ted Leonsis, chief executive officer of Monumental Sports and Entertainment, which owns 100% of NBC Sports Washington. Additionally, it is the majority owner of the NHL’s Washington Capitals, NBA’s Washington Wizards and WNBA’s Washington Mystics in addition to other sports and entertainment properties. Leonsis had previously offered the Lerner family over $2 billion and expressed interest in purchasing MASN as well, but the deal was declined.
The MASN payment comes during a particularly turbulent time for the regional sports network model highlighted by Diamond Sports Group’s ongoing dispute with Major League Baseball. The company declared Chapter 11 bankruptcy to convert $8.1 billion in debt to equity while trying to reduce its media rights fees. As testified by Major League Baseball Commissioner Robert D. Manfred Jr., Sinclair Broadcast Group executive chairman David Smith demanded direct-to-consumer (DTC) broadcast rights in order to make media rights payments in full.
The league did not agree, and the company, which operates the Bally Sports-branded regional sports networks, is now selectively rejecting contracts in an effort to eliminate deals with negative profit margins. As a result, Major League Baseball prepared its own division to produce local games with the same familiar team-employed announcers and freelance production personnel.
