If the Lerner family sells the Washington Nationals in the near future, the buyers will be acquiring an enviable set of assets. Despite occupying last place in their division, the Nationals are recent World Series winners, boast one of the game’s biggest stars and are located in a thriving city with a stadium just a few blocks from the U.S. Capitol. Forbes estimates the team is worth around $2 billion.
But there is an albatross the new owner may have to contend with: MASN. Mid-Atlantic Sports Network broadcasts the Nationals’ games. While most other baseball teams sell their local TV rights to a regional cable network, the Nationals’ rights are bound to MASN, a contentious arrangement put in place when the team moved from Montreal in 2005. And the network is controlled by the Baltimore Orioles.
“I don’t think you’d be able to close on a sale without a resolution one way or another [on MASN],” said Robert Malandro, a managing partner at Whitecap Sports Group, an investment bank that has consulted with major league teams on sales. “If someone is going to spend $2 billion, I would think they would need some certainty on the media rights.”
That could be in the works, according to two people with knowledge of the MASN agreement, who said they believe there will be an attempt to settle the dispute as an investment bank hired by the Lerners explores a sale.
Whether any attempt to settle will be successful is another matter.
A decade ago, the Nationals sued MASN over tens of millions of dollars in rights fees that they believed MASN owed them. That lawsuit is ongoing. Meanwhile, the relationship between the network and the Nationals has become so acrimonious that the sides are also embroiled in a separate lawsuit over how the network’s profits are distributed.
Aside from the legal disputes, MASN has frustrated the Nationals and their fans with cost-cutting in recent years. Coverage for games has been trimmed, and this season MASN tried to cover games without sending announcers on the road, resulting in technical difficulties.
Neither team is reaping financial benefits, at least compared with some other franchises. According to a person with knowledge of the finances, the Nationals and Orioles received around $60 million apiece last year for their TV rights. In comparison, the Philadelphia Phillies in 2014 signed a 25-year, $2.5 billion rights agreement with Comcast.
A deal for the O’s
Before the Nationals’ arrival in 2005, the Orioles had sole reign over a regional TV territory that stretched from Delaware to North Carolina. Orioles owner Peter Angelos reached an agreement with Major League Baseball to compensate his franchise for sharing its geographic territory with a new team.
Enter MASN. The Nationals and Orioles are part-owners of the network, with the Nationals owning 23 percent and the Orioles 77 percent. The Nationals’ stake increases annually by 1 percentage point until it tops out at 33 percent.
There was skepticism from the start. According to a summary of an MLB executive committee meeting the same day the agreement was signed, multiple owners, including Jerry Reinsdorf of the Chicago White Sox and Bill DeWitt of the St. Louis Cardinals, expressed reservations about the deal because of its length and potential impact on the sale price of the Nationals.
Yet the deal went through. And it makes clear that a sale of either team would not unwind it.
“In the event that either the Orioles, the Nationals, or the RSN [regional sports network] are sold …” the agreement reads, “all subsequent purchaser(s), assignees or transferees shall be unconditionally bound to all terms and conditions of this Agreement.” The meeting summary refers to the length of the deal as “in perpetuity.”
In a joint statement to The Washington Post, MASN and the Orioles reaffirmed their position that the agreement is necessary and firmly in place.
“The adverse effects that MLB’s decision to relocate the Expos to Washington inflicted on Baltimore, the state of Maryland, and the Orioles will continue indefinitely so long as the Nationals play in Washington,” the statement reads. “Accordingly, under the 2005 MLB-Orioles Settlement Agreement, MASN’s exclusive ownership of both the Orioles’ and the Nationals’ telecast rights throughout the Orioles’ Exclusive Home Television Territory continues in perpetuity, regardless of who the owners are of each Club.”
The Nationals declined to comment.
Commissioner Rob Manfred could undo the agreement under the “best interests of baseball” clause, an ambiguous yet broad power outlined in the MLB constitution. But one person familiar with the commissioner’s office’s thinking said MLB probably would have a hard time doing that because the Orioles have been successful arguing in court that MLB is not an unbiased party to adjudicate MASN disputes.
The upshot, according to two people familiar with the contract, is that the MASN deal is extremely difficult to unravel absent a negotiated settlement.
A changing landscape
Still, there are reasons to believe a new deal could be reached. They start with the rapidly shifting media landscape.
MASN is an independent RSN, which means the company only operates a single cable channel. Cord-cutting has made life difficult for all RSNs but perhaps even tougher for MASN, which does not have the scale to help it negotiate with cable distributors as do Comcast or Bally’s, which own multiple sports networks.
According to Kagan, the media research division of S&P Global Market Intelligence, MASN’s subscriptions have fallen from 5.6 million in 2018 to 3.6 million this year. And anyone who has watched MASN in recent years has noticed the network has responded by cutting costs; there is no analyst on pregame and postgame shows for the Nationals, and the set beyond center field that hosted that coverage was dismantled.
“If MASN was owned by Comcast, this wouldn’t be happening,” said Bill Isaacson, a partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP who has worked on RSN litigation. “You would see much more money pumped into it.”
That could have been a possibility. According to two people familiar with the discussions, MASN had conversations around a decade ago about selling itself to Comcast for more than $1 billion. The deal that was discussed would be paying both teams more in rights fees than they are getting from MASN currently. It’s unclear why that deal fell apart.
Any new deal would have to overcome several complications. The Orioles, worried the team would struggle to sell TV rights on its own in the small market of Baltimore, have long insisted that any settlement continue to compensate them for the Nationals’ place in the market and that the teams’ rights remain partnered. The Nationals, meanwhile, would like to free themselves of any link to the Orioles and to operate their TV rights like any other team.
According to the person familiar with the commissioner’s office’s thinking, MLB is sensitive to the idea that a settlement would require more protection for the Orioles than simply returning the Nationals’ rights to the D.C. team and would need to ensure both teams had viable TV revenue.
But the Nationals also have a new form of leverage. In addition to MASN’s outlook, a New York court found that MASN owes the Nationals some $100 million in back pay for rights between 2012 and 2017. The Orioles are appealing, but the Nationals’ TV rights since 2017 could be an entirely new lawsuit. Perhaps the outline of a settlement could be found in forgiving that payment in exchange for amending the MASN deal.
Another wrinkle: Angelos is 92, and rumors of the Orioles’ own interest in a sale have circulated around baseball lately. If the Angelos family were interested in selling the Orioles, they could collect a big payday in advance of a sale as part of a settlement — or new Orioles owners could be more interested in a settlement.
The same is true of the Nationals: Prospective owners could negotiate directly with the Orioles as part of the buying process. Malandro suggested prospective Nationals buyers who weren’t interested in those talks could approach their bids another way: Offer one price if a deal is worked out and another if there is no deal before the sale.