Expos-O's television network considered

Hurdles remain, but New England, New York have lucrative joint deals

September 29, 2004|By Jon Morgan and Ed Waldman | Jon Morgan and Ed Waldman,SUN STAFF

Baseball's offer to establish a regional sports network to help assuage the Orioles' concerns over a competing franchise in Washington could prove highly lucrative, but would face a number of practical obstacles, according to experts.

Baseball's leaders first approached Orioles owner Peter Angelos this summer regarding the establishment of a regional television network, according to one source familiar with the discussions. A broadcast consultant, former CBS Sports chief Neil Pilson, attended the Executive Council meeting of baseball owners last week - underscoring the importance of the media component to the decision to move the Montreal Expos. He has declined to discuss the session.

A growing number of sports teams are joining forces to launch their own networks, producing their own games and keeping the ad revenue. The games can be aired over either cable systems or broadcast channels, which are paid a fee.

One of the best known is the New England Sports Network, which was launched in 1984. It is owned by the Boston Red Sox and NHL's Bruins, and carries the games of those two teams as well as those of various colleges, such as Harvard and Massachusetts.

There have been reports that the owners of the network are considering a merger with the owners of the Yankees Entertainment and Sports Network, which was formed in 2002 and broadcasts Yankees and New Jersey Nets games, among other programs. Cable subscribers pay about $2 a month extra for the YES Network. On Friday, Comcast SportsNet Chicago, a 24-hour regional sports network, will launch and be made available as part of expanded basic cable service. It will feature the Chicago Bulls, Blackhawks, White Sox and Cubs.

This is a break from the traditional format in which a team sells its broadcast rights to a local station or cable system, which then hires the camera operators and play-by-play personalities and sells ad time to sponsors to earn back its investment.

The Orioles began to break from the old model in 2002 when the franchise started producing some of its own telecasts.

"I think that if they're able to create a regional sports network that includes both teams, you can command top dollar for it," said Lee Berke, whose Scarsdale, N.Y.-based LHB Sports, Entertainment and Media helps teams put together their own regional networks.

"The issue is who gets what. Local television deals are usually struck by the respective teams," he said.

Details have not been released, but sources familiar with the discussions say the sport has discussed a range of scenarios. One would have a regional network set up to broadcast the games of the Orioles and Expos and give a disproportionate share of the revenue to the Baltimore franchise, at least for a certain number of years.

That would seem to satisfy some of the concerns raised by the Orioles that they would lose the more populous, southern end of a broadcast territory that consists of all of Maryland, Delaware, Virginia, Washington and parts of West Virginia, Pennsylvania and North Carolina. The team generates an estimated $20 million to $30 million a year from broadcast operations.

But the regional network would raise problems, too. The disproportionate sharing of revenue, for example.

"That initially breeds resentment. And if the Expos start playing better than the Orioles - and I'm not saying it will be in a month from now or two years from now - at that point, whoever the owner of the Expos is, is going to say, `Gee, this junior partnership doesn't work anymore,' " Berke said.

It could also reduce the price a buyer would pay for the relocated Expos, a team that is now owned by the other franchises. That would undermine the intent to make as much money as possible on the sale for the 29 other Major League Baseball owners, and might hurt the franchise's financial performance down the road.

"I can't imagine that if they created a regional sports network that they aren't going to allow all the games to be broadcast throughout the territory. The Orioles only have the American League rights to the Washington market," said Brian Hannigan, a spokesman for a group trying to bring a team to Northern Virginia.

Among the practical hurdles that would need to be overcome in establishing the network is negotiating access to Comcast and other cable providers. Comcast SportsNet, which is owned by Comcast Corp., holds the rights for the Orioles' cable broadcasts through 2006.

And it's not out of the question that Comcast SportsNet could bid on the rights to show both the Expos and the Orioles.

"Until something is done, it's all hypotheticals," said Chris Helein, a spokesman for Comcast SportsNet.

John Moag, founder and principal of Moag & Co., a Baltimore-based financial consulting firm active in the sports industry, said a regional sports network would definitely need more than just two baseball teams to survive 12 months a year.

"It doesn't work unless you're signing up a lot more than baseball," he said.

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