Nationals-Orioles MASN dispute goes public

Gardner discusses MASN dispute

Noah Frank | November 15, 2014 2:17 pm

WASHINGTON — The television-rights dispute between the Washington Nationals and Baltimore Orioles is on the verge of turning into a bloody legal battle.

The two teams have been involved in an off-the-field dispute over their television rights ever since their initial Mid-Atlantic Sports Network (MASN) deal came up for renegotiation in 2012. For two years, the conflict between Beltway neighbors has simmered under the surface, only mentioned publicly from time to time.

But all that has boiled over. A report published Tuesday by the Hollywood Reporter’s Eriq Gardner details legal threats, hush money and an impending public clash, shedding light on just how contentious this debate has become.

History of the dispute

The Nationals and Orioles initially signed a contract as part of the agreement that cleared the way for the Nats to move to Washington in 2005. The Orioles would own a 90 percent share of the MASN empire, with the Nationals picking up one percent per year after an initial two-year wait, eventually capping at 33 percent; they currently sit at 17 percent. But also built into that contract was the chance to renegotiate for “fair market value” every seven years, starting in 2012.

When it became clear that the two sides disagreed on the fair market value of their respective broadcasting rights entering 2012, Major League Baseball appointed a panel, made up of representatives from the New York Mets, Pittsburgh Pirates and Tampa Bay Rays, to render a decision, which was due long ago. When asked during the 2012 All-Star break when he wanted the situation resolved, MLB Commissioner Bud Selig intimated to the Washington Post that he had already expected it to be settled.

What is “fair market value?”

This is the heart of the dispute. According to the Post, the Nationals claimed that fair market value for their television rights was somewhere between $100 million to $120 million per year, which would represent an increase of $71 million to $91 million from their previous payment. That figure was based on recent deals for other teams, such as the Astros (roughly $80 million per year), Padres ($1.2 billion for 20 years) and Rangers ($3 billion for 20 years).

The Orioles countered the Nats’ claim with an offer of only $34 million a year, leaving the sides miles apart.

As Jonah Keri detailed in a February report on Grantland, MASN generated $167.8 million in total revenue in 2012, and was projected to see that rise to $179 million last season.

Both the Nationals and Orioles received an equal $29 million in rights fees from MASN in 2012. Each club then shared 34 percent of that number with the other clubs, per MLB’s revenue-sharing program. The Orioles’ extra money came from their stake as majority owner (roughly 85 percent), as that is considered by MLB to be a separate business venture.

It’s obvious that MASN wouldn’t be able to handle a massive spike in money for the Nationals while also paying the Orioles the same. In addition, the Orioles would have to pay the 34 percent revenue-sharing tax on $100 million instead of $29 million. Clearly, neither of these solutions work for Baltimore.

As a stopgap, the league has been paying the Nationals a previously undisclosed amount of money each year to keep them at bay.

The new information

That figure is a mystery no more. Perhaps the most damning piece of evidence for the league office is Turner’s revelation that Selig authorized a $25 million payment to the Nationals last year, as the negotiations dragged on well past their set resolution date.

The idea, according to Thomas Hall, attorney at Chadbourne & Park representing MASN, was that MLB would then recoup that money from the new revenue -sharing deal.

Hall’s letter — just one step in a line of escalating legal rhetoric exposed by Gardner — also made reference to the Orioles’ right “to obtain the impartial review afforded by the courts,” not-so-subtly implying further legal action.

“This is something I’m sure Major League Baseball didn’t want to go public,” Gardner says. “However, it happened, and despite Bud Selig’s directive, the teams decided that the courts would be their option to litigate this.”

But the most relevant information revealed in Gardner’s piece is the fact that the panel sided with the Nationals in their fair market value claim.

The entire string of emails that follows is a direct result of this decision, which placed the Orioles and MASN in the position of immediately owing their neighbors money, according to Stephen Neuwirth, an attorney at Quinn Emmanuel representing the Nationals. Neuwirth told MASN they owed $10 million for rights fees on April 1 and June 1, and warned of an impending default deadline.

“It sounds to me that the Nationals are quite adamant that they should be getting that amount of money, and that they’re willing to consider MASN to be in default if what was ruled upon is not enforced,” Gardner says. “And if that happens, who knows where this goes.”

What’s at stake

The network could be split 50-50, which would likely be a big blow to the Orioles’ finances and leave the Nationals still short of the annual windfall they believe they are entitled to. Or, it could lead to a breach-of-contract ruling, allowing Washington to seek out its own network, where it would be free of the Baltimore’s control.

Legal battles could draw on for years, and Orioles owner Peter Angelos — a former high-powered trial lawyer — is no stranger to the courtroom. But Gardner believes Selig will do what he can to force a quick decision.

“If I could bet money on it, I would bet on the short term,” says Gardner of a timeline for a decision. “I just can’t imagine how Major League Baseball can afford such a public dispute playing out, and I think the commissioner has every incentive to end this before his retirement.”

Regardless of how the situation resolves, it will certainly do so much more publicly than the commissioner ever intended.

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