What We Don't Know About MASN

My previous post discussed what we know about MASN. In this post, I'd like to take a look at some of the things that we don't know in this post. Just to recap from last time, here's the table I printed at the end of last post with everything that known in it.

I’d like to start with a thought experiment. Suppose that the MASN deal provided an equal amount of equity stakes profits each year. In other words, suppose MASN paid out 50 million in equity stakes profits in 2014, 50 million in 2015, 50 million in 2016 and so forth. If so (it isn’t), then the Nationals would receive 22.5% of the equity stakes profits while the Orioles would receive 77.5%. This is because the average of the Nationals equity stake from 2012-2031 is 22.5%.

Now in 2012, the Nationals received an amount between $7 and $7.3 million in equity stakes profits. In 2013, the Nationals received between $8 and $8.3 million in equity stakes profits. And in 2016, the Nationals are projected to receive between $11.5 and $12 million in equity stakes profits. We don’t know what they are projected to receive in either 2014 or 2015 but we can presume that the amounts are between $8.5 and $11 million. Otherwise, this would indicate that the Nationals received more money in either 2014/2015 than they did in 2016 or less than they did in 2013. It also seems reasonable to surmise that the number in 2014 is smaller than the number in 2015.

If this is all correct then the Nationals will receive an amount between $45.5 million and $48.5 million in equity stakes profits between 2012 and 2016. Suppose that amount is actually $47 million. 

Now suppose the Nationals will receive $47 million in the first five year span and an equal amount in equity stakes profits from 2017-2031. If so, the Nationals should be projected to receive 24.2% of all equity stakes profits. Now suppose that the Nationals will receive 47 million in the first five year span, a similar amount the next fifteen years with a 2% bump for inflation and all the rest of the money in the last five years. In that case, the Nationals will receive 26.3% of all equity stakes profits. I don’t believe that either of these cases are what will happen or what is projected to happen. 

What they tell me though is that the Nationals will receive an amount between 24 and 26.5% from this deal or that the Nationals will receive roughly one out of every four dollars in equity stakes profits from 2012-2031. If so then if as the Washington Post reported that the Nationals are projected to receive $600 million from equity stake payments than the Orioles should be projected to make roughly $1.8 billion from equity stake payments give or take $50 million over the twenty year period.

POSSIBLE MODELS

Using what we know from the previous post, I attempted to build a model that would project what MASNs revenue, media rights payments, equity stake payments and operating expenses look like. I was able to come up with one model based on the revenue numbers that Keri stated in his article and another model based on the revenue numbers that I’ve heard. Both models presume that operating expenses go up by a fixed amount per year while revenue goes up by a fixed amount per year plus an extra increase for each incremental year. This is because the revenue numbers that are known increase by a larger percentage each year.  

The financials using my revenue numbers may look similar to this. All numbers are in millions.

Using the revenue numbers provided by Jonah Keri the data might look like this.

The model using the revenue numbers provided by Keri has an annual operating expenses amount similar to that of CSN Houston. The model using the revenue numbers that I heard has a more linear amount of revenues. I feel that including both is helpful. Fortunately, each model results in a similar amount of equity stake payments paid to the clubs and therefore end up with the same results describing how much the Orioles and Nationals will receive from MASN from 2012-2031. I tried building a number of models and the relationship between the Orioles and Nationals equity payments remained roughly the same. 

 

The last unknown is the future value of MASN. As stated earlier, the Nationals will control 33% of MASN while the Orioles will control 67% of MASN at the end of 2031. Unfortunately, I have been unable to find any information about how much MASN is projected to be worth at the end of 2031. 

This Washington Post article, quoted Bloomberg as currently valuing MASN at $600 million. If so, 33% of this is $200 million. If MASN doesn't gain any value between now and 2031 than the Nationals stake will be worth $200 million. But this seems unlikely.

This article from the Philadelphia Daily News suggests that CSN Philadelphia might grow by 10% per year. If MASN grows by 10% per year than MASN will be worth $4 billion in 2031 and the Nationals stake will be worth $1.3 billion. The Nationals stake will grow by 20% from 2012-2031 and the Nationals will have received another $800 million in equity.

To sum up, both teams are receiving $1.5 billion in media right fees. The Orioles are receiving roughly $1.8 billion from equity stake payments while the Nationals are receiving $600 million from equity stake payments. If MASN is worth $4 billion in 2031, than the Nationals will have received $800 million in equity due to this deal bringing them to a total of $1.33 billion while the Orioles will own $2.66 billion in equity. The Orioles will have received $3.3 billion in money payments and will own an asset worth $2.66 billion while the Nationals will have received $2.1 billion in money payments and an extra $800 million in equity while owning an asset worth $1.33 billion.

Now that I've discussed MASN's financial situation and what each team receives from MASN on a year-by-year basis, next I'd like to compare what the Orioles and Nationals receive from MASN to what other teams receive from their media deals.