The Rays' New Media Deal Won't Help Them Compete With The O's

According to the Sports Business Journal, the Rays are in discussions to sign a long-term extension with Fox Sports Sun. Fox is expected to offer roughly $50M in 2019, and offer an average of $82M per year. If this is accurate, and presuming a linear rate of increase, this would result in an increase of 6.5% per year.

Such a large annual increase would be odd. Normally, baseball media rights deals result in a yearly increase between 3% and 4%. It’s worth noting that a 3.5% linear yearly increase of a 15 year deal starting at $50M would result in the Rays receiving $82M in the last year. This makes me wonder if the deal doesn’t offer $82M per year, but rather $82M in its final year. If this is in fact the case, the Rays would receive $980 million for 15 years as opposed to the $1.2 billion over 15 years they’d receive if they did get an annual increase of 6.5%. Then again, the Rays received $15M in 2012 but the Sports Business Journal claims they received $35M in 2017.

In recent years, both the Diamondbacks and Cardinals have signed new media rights deals and details of these deals have made it into the media (the Reds also extended their media rights deals, but no one has been able to report the terms). Here’s how the Rays' deal (using both 3.5% annual increases and 6.5% annual increases) compare to the Cardinals' and Diamondbacks' deals.

Depending on which annual increase is used, the Rays' deal is either slightly better than the Cardinals' and Diamondbacks' deal or slightly worse, but either are in a similar category. In either case, the Rays would start out earning slightly less than the Diamondbacks or Cardinals, but could end up receiving slightly more depending on the final terms.

While it has been reported that the Rays aren’t allowed to broadcast their games in the Miami DMA, both MASN and the RSDC stated in the MASN case that the Rays media territory includes the Miami DMA. Presuming this is accurate, then the Rays' media territory has roughly 7.2 million cable and satellite subscribers, of which 1.7 million are in its core market of the St Petersburg DMA. Note that all of these subscribers may not have access to Fox Sports Sun. This is significantly larger than the Cardinals' media territory which has 5.1 million subscribers and a core market of 1.2 million as well as the Diamondbacks' territory which has 4.1 million subscribers and a core market of 1.6 million subscribers. However, the Cardinals always have high ratings and had an average of 94,000 viewers per game in their core media market in 2017. The Diamondbacks had above average ratings and on average 66,000 viewers per game. The Rays have below average ratings and only 52,000 viewers per game in their core market. Unlike the Cardinals and Diamondbacks, the Rays don’t have particularly good attendance, suggesting limited interest in the Rays. The Rays may have a stronger market than either the Diamondbacks or Cardinals, but both those teams have stronger fan interest.

The Orioles/Nationals shared media market is far larger than the Rays, Cardinals or Diamondbacks media market but includes two teams instead of just one. MASN's core DMAs of Washington and Baltimore are roughly the same size as Miami and Tampa Bay combined and has 9.5 million total cable and satellite subscribers as well as 3.2 million subscribers in its inner core. However, MASN has roughly 5.9 million subscribers compared to the Rays 5.6 million subscribers in part due to MASN's failure to gain carriage in North Carolina. Based on solely a market size analysis, it would be reasonable to expect the Nationals and Orioles combined to receive slightly higher media fees than the Rays and Marlins combined. That stated, the Nationals and Orioles have higher ratings than the Rays and Marlins and are in more valuable markets making them clearly more valuable properties.
It is hard to determine how much MASN will pay the Nationals and Orioles in media rights fees because the rates are set to change every five years based on network revenue. In addition, Allen and Co, MASN, the RSDC and the Nationals each have their own drastic ideas of how fair media rights should be determined.

Allen and Co, on behalf of Comcast, offered a deal in which Comcast would offer both teams starting in 2012 a media rights fee of $42.5M and increasing by 4% annually until 2032. This would result in both teams earning roughly $1 billion each over the fourteen years from 2019-2032, or roughly the same as what the other teams in this sample are receiving. Given that the Nationals and Orioles are in a stronger market than all of these teams, this offer would be disappointing. Unsurprisingly, MASN didn’t accept Allen and Co’s offer.

Instead, MASN proposed their own rights fee for 2012-2016, as did the Nationals. In addition, the RSDC made a decision about the appropriate rights fee for 2012-2016 that was ultimately overturned. Any attempt at guessing what any of these parties might request over 2019-2032 requires a lot of conjecture.

That stated, MASN offered $45.7M in 2016 with a 7.7% annual increase. That rate of increase projects to roughly $57M in 2019 -- or more than any other team in the sample received. This doesn’t take into account that MASN was likely to receive an increase in revenue as a result of renegotiating its contract deals with other cable providers.

The RSDC felt that $66.7M was fair value for 2016. This is significantly higher than what any other team in the sample received in 2019 -- and presumably the teams’ rights fees would go up from 2017-2019. It’s likely that such an amount would only be reasonable if the Nationals/Orioles shared media territory is significantly more valuable than any of the other teams in the sample.

Meanwhile, the Nationals requested $127.4 million in 2016. Such an amount would be larger than any of the teams in the sample received in 2032. It’s likely that the Nationals request for 2019 would be roughly the same as what the Cardinals, Rays and Diamondbacks receive all together. This seems to be an awfully optimistic request.

Based on my understanding of the economics, I project that MASN's offer was on pace to be worth $1.45 billion over the fourteen year period, the RSDC's offer was on pace to be worth $2.1 billion over the fourteen year period and the Nationals' offer to be worth $3.7 billion over the fourteen year period. If so, the deals look like this.

These graphs always look a bit weird when I include the Nationals' request. Here's how the chart looks without them.

It appears that the Rays' media deal appears to be fair value compared to what the Diamondbacks and Cardinals received. It is likely that the Rays will receive less in media rights fees than what the Nationals and Orioles will receive in rights fees from MASN, but that is because the Nationals'/Orioles' media territory is more valuable. This media deal isn’t going to change the Rays' financial situation and likely means they’re going to struggle to maintain a competitive payroll going forward.

Offense Picks Up Hammel, Puts Up Runs on Price, McGee

I'm not going to be writing regular game recap posts, but I did notice at least one interesting thing about the Orioles' 7-4 opening day win over the Rays:

• Jason Hammel (6 IP, 3 H, 3 ER, 2 K, 1 BB) was fine in this game, but the offense, primarily in a five-run seventh inning, was the main contributor in the win. The O's collected 13 hits and four walks, with 11 of those hits and three of the walks coming against two very talented lefties: David Price (2.56 ERA in 2012) and Jake McGee (1.95 ERA in 2012). Last season, the O's only had seven such games:

Rk	Date	Tm	Opp	Rslt	PA	AB	R	H	2B	3B	HR	RBI	BB	IBB	SO
1	2012-09-17	BAL	SEA	W 10-4	46	42	10	15	3	0	2	10	4	0	6
2	2012-04-16	BAL	CHW	W 10-4	51	46	10	15	3	0	4	10	5	0	15
3	2012-09-22	BAL	BOS	W 9-6	55	50	9	15	6	1	2	9	5	1	11
4	2012-09-16	BAL	OAK	W 9-5	49	39	9	13	4	0	2	9	9	1	7
5	2012-07-27	BAL	OAK	L 9-14	46	40	9	15	2	0	2	9	5	0	13
6	2012-05-06	BAL	BOS	W 9-6	69	59	9	15	4	0	4	9	10	0	15
7	2012-07-14	BAL	DET	W 8-6	59	47	8	14	4	0	3	8	9	2	8

Provided by Baseball-Reference.com: View Play Index Tool Used
Generated 4/3/2013.

• The Orioles scored at least eight runs in all seven of those games last season, though they only scored seven runs yesterday (while stranding eight baserunners). Oddly enough, the O's also managed to strand at least nine runners in all seven of those 2012 games.
• In those seven 2012 games, though, four of them were extra-inning games: the April 16 win over the White Sox (10 innings), the crazy, Chris Davis-pitched win on May 6 against the Red Sox (17 innings), the July 14 win over the Tigers (13 innings), and another win over the Red Sox on September 22 (12 innings). So the Orioles really only accomplished the (at least) 13-hit, four-walk effort in only three nine-inning games last season -- all against AL West teams (twice vs. the A's and once vs. the Mariners).
• A couple other quick notes: Steve Pearce was the only O's batter without a hit or a walk. And Nick Markakis (single) and J.J. Hardy (double) were the only batters to reach base only once.

Looking at Lineup Construction and the Move to Bat Machado Second

I tend to focus on batting lineups a little too much when something seems off. And I wouldn't say that batting Manny Machado second is necessarily a bad decision, but I was legitimately surprised when the opening day lineup was announced yesterday. Maybe I simply dismissed that move as an unrealistic option. For anyone who missed it, the O's will be sending out the following lineup against lefty David Price and the Tampa Bay Rays today:

Nick Markakis, RF
Manny Machado, 3B
Adam Jones, CF
Matt Wieters, C
Chris Davis, 1B
J.J. Hardy, SS
Nolan Reimold, LF
Steve Pearce, DH
Brian Roberts, 2B

A few notes on the lineup:

1) I'm glad to see Markakis leading off. He's the best on this team at getting on base, and he should be batting as many times as possible.

2) I'm also a fan of Roberts in the ninth slot. Sure, he used to bat leadoff and was very good at it, but until he can prove himself again, there's nothing wrong with him hitting last. Regardless, it'll be interesting to see how he plays and it's hard not to root for him to both stay healthy and contribute.

3) Buck Showalter smartly moved Hardy down the lineup. Hardy's not adept at reaching base (career .314 OBP), so he certainly shouldn't bat second like he did all of last season. It would be helpful if his power returned, though.

As hinted at above, the unexpected part of the lineup is Machado batting second and Reimold batting seventh. One reason I can think of for the decision is this:

Machado vs. LHP: 53 PA, .344 wOBA
Reimold vs. LHP: 321 PA, .339 wOBA

Sample size is an issue, but their numbers aren't that different, anyway. Then again, Hardy has a career .351 wOBA against lefties and he'll be batting sixth, so the split stats explanation might be inconsequential. Machado being the everyday third baseman also may factor in, though Reimold should be in the lineup as much as possible as well, either in left field or as the designated hitter.

The Orioles are expecting Machado to eventually be a better hitter than Reimold, but I'm just not sure that will happen this season. Reimold has already demonstrated the ability to get on base more often and hit for a bit more power, and he's probably the team's fastest runner (at least down the first base line). But he just hasn't been able to stay on the field, so I wonder how much Showalter actually trusts him. The Orioles have also been steadfast in challenging their young stars whether in the minors or majors the last couple years, so maybe this is just another case of seeing what a young and promising player can handle.

It's important to note that while lineup concerns can be fun to complain about, they aren't THAT significant. Per Baseball Musings' lineup tool, the O's opening day lineup is projected to score 4.795 runs per game. The best two lineups offered for these nine players (Markakis-Reimold-Wieters-Davis-Jones-Machado-Hardy-Pearce-Roberts and Markakis-Jones-Wieters-Davis-Reimold-Machado-Hardy-Pearce-Roberts) are projected to score 4.865 runs per game. So, yeah, not a big difference -- maybe worth one win over a full season, but that's assuming Showalter sticks to the same lineup and never adjusts, which won't happen.

And before getting too upset, let's also note that 1) it's the first game of the season, and 2) Showalter will deploy a different lineup against right-handed pitchers. Nate McLouth will most likely be in the lineup for most of those match-ups, as will Wilson Betemit when he comes off the disabled list. (I'm intrigued to see where McLouth bats in the lineup.) It'll probably take Showalter some time to find the lineups he likes the most, and I'd still be surprised to see Machado batting second every day. Then again, I didn't think Machado would handle his initial debut as well as he did, and it's possible that he starts the season out well and is comfortable batting behind Markakis for the entire season. Maybe Machado has a fantastic second season and keeps hitting for power while improving his getting-on-base skills.

That's the fun part, after all. We don't know what's going to happen.

Connecticut would do good for a bad team.

This past week NESN's own Peter Gammons stated that there have been some (probably minimal) discussions about relocating the Tampa Bay Rays to either New Jersey or Connecticut. The idea is spurned by the fact that the Rays have been around for about two decades and have been recently successful, yet they have proven to be a tough draw. They were 11th in the AL with a draw of 1.875 million people. Their average ticket price was $18.35 and their premium seats were averaged at $59.82 last year. In comparison to the Orioles, the average ticket price is cheaper ($23.42), but the premium price is more expensive ($42.86). The final price index shows going to either the Orioles or Rays games to be rather similar in cost.

Again, the problem is that the best the Rays can do when they are coming off a World Series is the best the Orioles can do after more than a decade straight of losing records. That is pretty much the definition of a poor market. Moving to an area with more cash flow would be ideal. The is where New Jersey and Connecticut come up first. They have money and they have well established markets to set up in. Problem is though that they will be in the Red Sox and Yankee markets in Connecticut or in the Yankee/Mets/Phillies market in Northern Jersey. It would seems that the people in these markets who would follow a team probably already have sworn allegiance to a club. Furthermore, the Yanks and BoSox have been incredibly successful, so even the band wagon fans are appeased at this point. The money generated by a new club will probably be more about siphoning money already in the market as opposed to generating a new, money laden fanbase.

The big negatives:
1. Yanks, BoSox, Mets, and Phillies may need to be given a monetary incentive for letting another team in their markets. It would probably be cost prohibitive for any owner to meet these prices and set up shop in a new locale and it might not be something the MLB office wants to handle.
2. Little new revenue. MLB probably won't get richer because the money in these markets is probably already spoken for.
3. Stadium and infrastructure construction. No MLB ready existing facilities are available in the region, so new facilities and infrastructure related to those would need to be built. We are probably talking somewhere between 700-1000 MM. Neither state would be willing to help out.

So, knowing all of that . . . it is unlikely that the Rays will move in either of these locations. It will probably take a building/tax boom as well as the Rays outright tanking and watching their awful attendance halving before a move would be considered.

That would not make this a fun column though, so after the jump . . . what may be the most cost effective way to get either of these places to work. Be weary, this is kind of long and rather rambling.


The first assumption is that the Rays would be able to get tax cuts to equalize Tampa and their new home. This might be a faulty assumption. The second assumption to be made is that there will be little to no money available for stadium construction. In light of this, it will be necessary to use existing stadium that would be modified slightly to fit baseball uses. Stadium size will also be an issue because the team would rely greatly on Red Sox and Yankee travel to boost income. This will help on a couple fronts as it would prevent the need to immediately invest a great deal of capital into construction and it would allow the team to saunter around and find a suitable place to build a stadium several years down the line.

So, what level of support would make the Rays break even?

As mentioned earlier, the Rays pulled in about 1.875MM fans last year. Each person paid roughly $41.35 based on the fan cost index (FCI). In comparison, Yankees fans FCI was $102.75 and the Red Sox FCI was $81.61. As this is an Orioles blog, I'll note that the average cost for an Oriole fan is $40.92. So you can see why Camden Yards is full of BoSox and Yankee fans, particularly on weekends. You can get much closer to the action and break about even if you carpool and get a room with a person or two next to the stadium. The way a Connecticut team would work would be by bankrolling on these two fan bases. As this region only has a population of 3.5MM, it probably makes sense to use more than one stadium. Smaller stadiums for non-BoSox/Yanks games and temporarily convert a football stadium for BoSox and Yank games.

So, if the FCI for premium games was set at $70 with the non-premium games at $40, what would be needed for the teams to break even?

Assuming, at $70 you are able to pull in 50,000 for Yankee games and 40,000 for Red Sox games then, in those 18 games, the Rays will have earned 73% of their current annual revenue. Although incredibly unlikely, if the premium games were sellouts at 57,000, that would account for 92% of the current income. An average of 61,250 would generate the same revenue that the Rays currently enjoy. Under the 45,000 average assumption, the rest of the home games can depend on a relatively small fan base for the remaining money (20.8MM).

Stadiums to use for non-premium games:

New Britain Stadium in New Britain , Ct
capacity 8,200
14 years old

The Ballpark at Harbor Yard in Bridgeport, Ct
capacity 5,500
12 years old

McCoy Stadium at Pawtucket, RI
capacity 11,800
64 years old

Sixty three non premium games will be played each year. A non premium game is defined as a game played against someone not named the Yankees or Red Sox. Each stadium here would serve as a home field for 21 games. The specific series for each stadium would be decided before the season and adjusted for what the team desires. For instance, the season may be split into three sections with each stadium serving as the home field for two months.

Perhaps the nicest stadium of those three will also be the most difficult to include. The Ballpark at Harbor Yard has a capacity of 5,500. Each game has to make 330k to break even with the Rays mark assuming the Yanks and BoSox can average 45,000 for each game. That would make a FCI of $60.60, which would be a very expensive ticket. Based on the current design of the ballpark about 1,000 temporary seats could be erected for games. That would bring the cost down to $51.28, which is still rather expensive. More serious construction could probably maximize the stadium at 7,500, which would drop the per game FCI to $44.44. That would need to include a solution to add 500-1000 seats to the outfield corners and maybe left field. This is the weakest one of the three, but may be a good idea as it would reach another location to generate interest in the team.

The other two stadiums would suit the team fine (which may mean ignoring Harbor Park and just settling in on New Britain and Pawtucket). In New Britain, existing infrastructure allows for an FCI of $40.65 to break even. Temporary stands could raise the capacity to roughly 10,000 which would drop the FCI to $33.33. In Pawtucket, existing infrastructure allows for an FCI of $28.25. If only New Britain and Pawtucket were used with a $40 FCI, then with 80% and 70% fill of their respective stadium (8,250 tickets sold per game) would break even with the Rays current system. If they would be able to sell out their home schedule in those stadiums, they could make another 7.5MM. That is a 10% increase over their current draw based on the FCI.

Premium Games:

Yale Bowl in New Haven, CT
64,246
97 years old

The east end of the stadium would have to be closed off as those seats would be too far away from the action. Some replacements could be placed out into the right field. A reasonable estimation would be that the stadium would be able to fit about 57,000 fans. If need the far end of the stadium could be opened up to allow for another 10,000 fans to congregate in the stands and field. In addition to this, a see through fence would need to be erected in left field to make the short distance playable. Otherwise, you will have a 215 ft porch. It would quickly recess back to about 370-380 is left center, so the wall would only be needed for a short distance. An example would be the Los Angeles Coliseum when the Dodgers first moved out west. Another potential fix would be to put home plate at one end and have two extremely short porches that quickly move back. Essentially the porches would be about 195-200ft, while the alleys could be as deep as 430 feet. In this scenario the high walls would be present for about 25-30 ft. It would also make it easier to seat the fans close to the infield. It is not an ideal situation, but it has been done before. The hope would be that Red Sox and Yankee fans would be interested in coming to a road game within driving distance of home with a ticket price that is less than what it would cost in their respective stadiums.

Benefits:
1. Minimal cost in temporary seating and field adjustments.
2. Current infrastructure is already designed to meet attendance levels.
3. Greater region to draw fans. It may be easier to get one person to buy season tickets in New Britain and someone else to buy the other other season tickets in Pawtucket as opposed to one person buy a full season slate in New Britain.
4. Provides greater scarcity of a product in some locations. Fewer games means that the games take on more importance as an entertainment good.
5. If it is a complete fiasco, nothing large and expensive has been built to keep the team staked down to an area.
6. Greater cost efficiency in running a game as larger venues could be sought for larger crowds and vice versa.

Detriments:
1. Entire plan is based on the assumption that Boston Red Sox and New York Yankee fans would be willing to travel 1.5hr to New Haven to spend 30-40% less while potentially getting better seats than they would have gotten at home.
2. Few box seats.
3. Modifying a football stadium for baseball is somewhat difficult as one or both foul lines will provide for a short porch.
4. Local populace is not very large.
5. Local populace is largely divided amongst Yankees and Red Sox fans with the rest mainly consisting of Mets fans. Baseball is awash in this environment and there are probably very few fans who have no affiliation.
6. Fans are willing to watch MLB in minor league parks where the FCI is probably twice what it costs to watch a minor league game in the same park.
7. That the facilities could be upgraded well enough to provide proper clubhouse amenities for the players.

How would it make sense?

I think there would have to be an increase of about 20%. By using Pawtucket and New Britain, you could probably average about 8000 tickets sold per night. If their FCI was $40 and the premium games were $70, the premium games would need to have an average attendance of 57,000. That does not look very good. If both Pawtucket and New Britain could sustain sell outs every night, then an average premium attendance would be 53,000 to meet the 20% increase goal. I think the 20% goal would be far easier to make if the team was not good at all.

In 2005, the Rays had a season draw of 1.14 million tickets. According to the FCIs, that would be an income of 47MM, 30MM less than they are receiving right now. To get the 20% rise under such a scenario, if the non premium games averaged 8000 tickets, then 29,000 would be needed for the premium games. If the non-premium games were sold old, about 26,500 would be needed to the premium games. In terms of FCIs, with a draw of 1.14 million tickets, if the premium games had an attendance level of 38,000 . . . they would break even. In 18 home games, they would break even with what they could do in Tampa. All else would be increased profit. That should be pretty simple. I think it is pretty easy to say that if the Rays don't move and have a period of about ten years where they have difficulty to compete, their attendance will fall and a place like Connecticut and Rhode Island would look nice.

What about New Jersey?
I think it is more difficult here. First, it would be either going into the AL and depending primarily on Yankees fans to arrive as opposed to Yankee and BoSox fans. They could also try to draw on the Phillies and Mets fans. Also, there are no large minor league stadiums here. They are all in the 5,000 to 7,000 range. Assuming you could fit about 40,000 Yankee fans up in Giants Stadium. If you could get average 37,000 for Yankees and Red Sox games at Giants Stadium, to hit the 20% mark the FCI would have to be $22.68 in those non-premium games for those stadiums. The problem is that if the team is more successful and capable of selling more tickets in Tampa, an FCI of about $110 would be required for non-premium games . . . so you can see that this arrangement is even more limited than what Connecticut and Rhode Island could offer.

If you try to draw on the Mets and Phillies, you probably have to reduce the FCI to about $55. In this scenario, you can reach a 20% increase over what the Rays would make with a 1.14 million attendance mark if you can pull in an average of 35,000 fans in the Mets/Phillies games while hitting 7000 in the non-premium games with an FCI of $45.35. The assumption of Yankee fans being more present and willing to travel to watch a game in addition to the slightly higher draw of a BoSox game and you have a higher attendance rate and higher FCI. New Jersey is probably a better place to have a bad team, but not a better one to have a good team without a larger capacity stadium being built.

So in conclusion, the Rays would do just as well in Connecticut by drawing an average of 45,000 fans for premium games and 8,000 for non-premium games. Under 2005 attendance levels in Tampa, just 18 games of 37,000 attendance for the BoSox and Yanks games would have accounted for all of the revenue Tampa generated that season in 81 home games. An NL team would have very little draw in this region and should not be considered. If the team was placed in New Jersey, a 1.8 million ticket presence in Tampa could not be reciprocated in Jersey with the existing infrastructure. On the lower end of the spectrum, a team could probably get by in the NL, but would probably have a much easier time of it in the AL.