TV Contracts — The Next Frontier of Revenue

Over on the main site, I did an article in December about what the potential value of Pittsburgh’s local TV contract could be, since it is undisclosed.  I came to the conclusion by using other known TV contracts that the Pirates’ deal could be worth $16.5M to $23.5M per season to them.

Joel Sherman of the NY Post had an article a few days ago discussing how TV contracts are escalating at a geometric rate and causing new “superpowers” to develop on the baseball landscape.  With their new deals, the Los Angeles Angels and Texas Rangers are now considered to be on par with the Yankees and Red Sox.  Once the Dodgers’ ownership is solidified, it is expected that their new TV deal will be gargantuan as well, vaulting them into the same stratosphere.

All of that was fine and dandy with my reckoning.  And then came word yesterday that the San Diego Padres are on the verge of signing a new deal.  Their old deal was worth approximately $15M/year, but now that the Padres have a 20% ownership stake in the network the deal could be worth nearly $40M/year starting in 2012.  There is also a 4% escalator clause in each successive year, as well.

In the article I did in December, I compared metro populations to find the linearity between the TV contracts.  It seemed as if most current deals (pre-2011/2012) were clustered around $10/person in the metro area, but new deals forged by TEX and LAA were pushing that number closer to $12/person.  San Diego’s 2010 metro population is 3,095,313, which would mean this deal is worth $12.92/person.  That will continue to raise the bar for future contracts.

I have no idea if an opt-out clause exists in the 20 year deal that the Pirates signed with ROOT last year, but it seems as if the Pirates may be getting left in the dust by these recent deals.  It will be interesting to see if the recently-cash-starved Padres start to rapidly increase their payroll throughout the course of 2012’s season and beyond.

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About Kevin Creagh

Kevin Creagh resides in the suburbs of Pittsburgh and has been a Pirate fan since the mid 1980′s. Kevin joined Pirates Prospects in July 2010 and enjoys writing about the economic side of baseball decisions. Many of Kevin’s articles focus on the long-term decisions that the Pirates and other organizations may need to make in the future, in order to balance escalating player salaries with built-in payroll limitations. Kevin also enjoys following prospects throughout the Pirates’ minor league system and forecasting their potential to help the major league team.
  • Jimmy

    Not good if true.  We need to get as much money as we can. 

    BTW I hate ROOT. I hope this year the cameras focus on the game instead of what’s going on in the stands. 

    • Kevin_Creagh

      Not to deflate your hopes pre-season, but expect more of the same coverage from ROOT.  They want to highlight the ‘fan’.  But I think they got the message about the yinzer accents on the promos.

  • john.alcorn

    Kevin, is it possible that we are underestimating the value of the Bucs new contract? Their sudden willingness to increase payroll could be linked to a more lucrative contract than we are expecting.

  • Kevin_Creagh

    Of course it’s possible.  However, I think the increase in payroll is just the natural progression of two things:
    1.  Increased attendance during the 2011 season
    2.  The “core” is maturing and they want to grow the payroll in accordance with them.  Meaning that they have to supplement the talent base.

    The Pittsburgh TV market is a good, but not great one.  There’s not a lot of competition in the market, unlike the California and NY markets. 
    I will stick by the interpolated numbers in the original article and would guess it is around $20M/year.

  • john.alcorn

    What was the previous deal worth? How much of an increase in revenue would a $20 million/yr deal represent?

  • Kevin_Creagh

    No idea.  I searched all the way back to the KBL days and there was no release of $ amounts.