A couple of months ago, word leaked out that the Dodgers were close to a TV deal with FOX that would bring the Dodgers somewhere in the neighborhood of $6-7 billion over 25 years, bringing them something along the lines of a quarter billion dollars a year. Today, Bill Shaikin of the LA Times is reporting that that deal will not come to fruition, and instead that the Dodgers are going to work with Time Warner to create their own TV Network (Sports Net LA).
On its face, this might seem to be unrelated to the Pirates. The Pirates don't have a great TV deal (Frank Coonelly denied at Piratefest that the Pirates were only pulling $18 million a year from ROOT Sports, but the reality is that they really can't be making much more than $30 million a year based on what other similar-sized markets are making, whether they own their own sports network or not), but they're not alone on that front. There are several other teams that signed TV deals just before the explosion of TV money that seem to be in similarly bad situations: the Braves, Cardinals, Brewers, and Royals all appear to be in similar situations.
This does affect the Pirates, though, in a bit of an unseen way. The new CBA, ratified after the 2011 season, requires large market teams like the Dodgers to share about a third of their TV revenues with smaller market teams like the Pirates. All of that money goes into a pot that is then paid out according to need. If you recall the leaked financial documents that Deadspin got a hold of a couple of years ago, the Pirates were receiving close $30-40 million a year back in 2008 and 2009 — well before the TV boom — from revenue sharing.
What makes the Dodgers forming their own TV network particularly noteworthy is that when the Dodgers were sold to Magic Johnson's Guggenheim Group last year, it appears that they struck a deal with the league to cap their sharable TV income at $84 million per year if they formed their own TV network. As noted in that article, that's twice what the Dodgers were making in TV rights at the team the terms were agreed to in bankruptcy court in 2011, but far, far less than the money the Angels received shortly after the cap was set in December of that year. In short, what the agreement means is that if the Dodgers pull in $170 million in TV rights from SportsNet LA in 2013 (which is on the low end of the estimates), their effective revenue sharing tax rate would be about half of the 34% specified in the CBA. This issue is apparently one of the things that's holding the TV deal up and it's something that likely could end up being settled in court.
It's only been a couple of years since the huge TV money has started to trickle into baseball, but it's easy to see its effects already. The Angels signed a monstrous TV deal in December of 2011 and in the last two offseasons they've committed huge, huge sums of money to Albert Pujols, CJ Wilson, and Josh Hamilton. The Dodgers took on an immense amount of payroll at mid-season last year in their trade with the Red Sox, basically on the assumption that a ton of money was coming their way this winter from the TV negotiations. Imagine where things are headed if the court decides in the Dodgers' favor. If that happens, it stands to be reasoned that other large market teams with their own sports networks (the Yankees, Red Sox, and Mets, along with the Nationals and Orioles to an extent) will want similar exemptions.
It's not like the playing field in baseball is level now between the big markets and small markets, but the Dodgers' decision to make their own TV network is going to kick off a fight that could result in things being even more slanted away from small markets than they are now. The way that this revenue sharing situation with the Dodgers is decided is a huge deal and it's one that's going to decide what direction baseball is headed in for the forseeable future.
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