In a story that seems particularly appropriate in light of the Evan Longoria extension – or vice versa – word is spreading about the Los Angeles Dodgers’ upcoming new television deal. It is … robust.
Recall, when the Dodgers were sold for an unbelievable $2.15 billion, folks said, “well, there’s a big new TV deal on the way, so that’s a part of why the price is so inflated.” And then when the Dodgers traded for guys like Hanley Ramirez, Carl Crawford, Adrian Gonzalez, and Josh Beckett, folks said, “well, there’s a big new TV deal on the way, so that’s a part of why they’re willing to take on those crazy contracts.” And then when the Dodgers were attached to every notable free agent, folks said, “well, there’s a big new TV deal on the way, so that’s a part of why they’re just going to buy every player.”
Well … there’s likely a big new TV deal on the way. Really big.
Fox Sports could pay at least $6 billion to retain the Dodgers’ television rights, three parties familiar with the negotiations said Sunday.
The deal could be worth three times what the Dodgers’ new owners paid for the team and almost 20 times the value of the Dodgers’ current television contract.
The deal is not done, the parties said, speaking on condition of anonymity because of the ongoing negotiations.
If the two sides do not strike a deal by Friday, the Dodgers would have until the following Friday to present Fox with a final offer, according to the team’s current contract. Fox would then have 30 days to accept or reject the offer.
In the absence of a deal, the Dodgers would be free to open talks with Time Warner Cable SportsNet or launch a team-owned cable channel ….
The Dodgers’ deal, proposed for 25 years, would average $240 million per year at $6 billion, or $280 million per year at $7 billion.
Let that marinate. The Dodgers’ current deal paid them an average of $29 million per year. Their new deal, in whatever form it ultimately takes, is likely to pay them 10 times that amount.
Your head should immediately be going where my head did: what does this mean for the Cubs’ TV rights? Well, it might mean something, but not for a little while. The Cubs are currently under contract with WGN for a little less than half of their games through 2014, and with CSN for most of the rest of the games through 2019. From a variety of sources, I’ve been able to glean that the total revenue for those rights, annually, is estimated at a little less than $50 million per year. That’s not a terrible rate for the past 10 years, but, with the direction the dollars are going, it’s hilariously and comically low.
So, what can the Cubs do about it? Well, they can obviously sell the WGN rights when that contract comes up in two years, but that’s just a portion of the games, and they’d undoubtedly be able to get more of a premium for the whole lot. They could try and leverage the available chunk against a price bump from CSN to take over the full slate of games, but I doubt they could get into that $250 million annual range, given that CSN would still have five years left on their deal at a far reduced rate. They could try and buy out the CSN games at that time (the Ricketts family does own 25% of CSN Chicago, so maybe there’s some play there), but that may not be possible.
In other words, there’s a lot of ways this could play out, but it likely won’t play out for another two years at the earliest. TV rights could continue to escalate between now and then, and the Cubs could actually be better for having to wait. Or, the TV rights bubble could bust, and the Cubs could have missed out on their window.
One thing is abundantly clear: for large market clubs, TV rights deals are going to be a huge, huge, huge chunk of the revenue pie, and if the Cubs want to be able to act like one of the big boys, financially, they’ll need to get a better deal. Soon.