Wednesday, March 16, 2005

Angelos Hinge on TV Rights

Thomas Heath has a nice column today about the television rights issues with respect to the Nationals and Orioles. While Heath appears to spot all the issues, his conclusion that P. Angelos must be compensated for giving up territory is somewhat mistaken.

What the Orioles are giving up is exclusivity in this particular area, whether it is de jure exclusivity (i.e., MLB has granted exclusive rights to the Orioles) or de facto (i.e., they are exclusive by the fact that there was no team in DC from 1972-2004). It is not uncommon for two franchises in the same market to share that market. For example, the Chicago White Sox and Chicago Cubs share the Chicago market, and also have rights that expand into central Illinois, Western Indiana and Eastern Iowa as well.

It would surprise me both if the Orioles gave up the rights to being able to telecast any games in the Virginia/North Carolina reason. At best, they would be giving up exclusivity.

The other point worth making about exclusivity is that it is somewhat overrated. The benefits of exclusivity are defined by the amount of money you get above what you would have gotten if you were not exclusive. In other words, the benefit of exclusivity for McDonald's would be that they could charge $4 per burger if the other burger chains did not exist, whereas if Burger King is around, they can only charge $3. The $1 extra is the benefit of exclusivity (all other things being equal).

As it turns out, you can try to figure out the benefits of exclusivity yourself. Philadelphia is in the 4 largest market overall, with 2.9 million homes. According to the Commissioner's 2001 disclosure of Baseball's finances (note: Excel file), Philly got about $18.9 million from local broadcast, cable and radio rights. San Francisco, in the 6th largest market, got $17.2 million, about $1.2 million less. Oakland, sharing the market with San Francisco, got $9.5 million. Philadelphia's exclusivity doesn't really help it much versus the Giants...and note that the combined Giants/A's dollars exceed that of Philadelphia alone. There are, of course, a number of anamolies in these figures - the Red Sox have $33 million in local TV and cable rights despite being in a smaller market than Philadelphia, and Seattle, which has only about 90% of the population of Houston, got 3 times the local broadcast revenue in 2001 (Ichiro!). In any case, the benefits of "exclusivity" are really hard to pin down.

It will be interesting how this plays out. With a lot of the Nats/O's stuff, it strikes me that a little knowledge by Boswell and other reporters at the Post can be a dangerous thing.


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