- The Washington Times - Saturday, May 7, 2005

Major League Baseball (MLB) denied Washington baseball fans a home team for 33 long seasons. Then, a few days before the first season opener of a Washington baseball team since 1971, MLB commissioner Bud Selig moved to drastically limit the team’s long-term competitiveness. Perhaps fearing a lawsuit that would expose the way baseball is really run — which would almost certainly invite an investigation into baseball’s abuse of its antitrust exemption — Selig acceded to the outrageous demands of Baltimore Orioles owner Peter Angelos, the trial lawyer. In an unprecedented arrangement that becomes ever-more-shocking as additional details emerge, Selig effectively — and wrongly — handed control of the Nationals’ television rights to Angelos.

As Eric Fisher of The Washington Times recently reported, an industry source who has read the terms of the Selig-Angelos deal said that the agreement “is even worse for the Nationals than has been reported.” Given the details that were then publicly known, that is truly scary. As reported in early April, the Selig-Angelos agreement established the Mid-Atlantic Sports Network (MASN), which would televise Orioles and Nationals games. Despite the fact that the Washington market is vastly larger and much wealthier than the Baltimore market, Angelos would initially own 90 percent of MASN.

In his recent article, Fisher also reported that Angelos would receive two payments totaling $75 million. Indicating a capitalized value of $750 million for MASN, the $75 million would represent the Nationals’ 10 percent stake in the regional sports network. MLB would make the first $37.5 million payment by June 30; the second $37.5 million payment will be due a year later. Presumably, the eventual owners of the Nationals would be responsible for the entire $75 million.

Over the next two decades, according to the Selig-Angelos agreement, the Angelos ownership share would gradually decline to 67 percent, thus guaranteeing forever that the owner of the team in the much smaller market would retain overwhelming control of the network and receive the vast majority of its profits. As Fisher also reported in The Times, MASN plans to pay the small-market Orioles the same rights fees the large-market Nationals will receive. This arrangement effectively guarantees that the Nationals will receive below-market rights fees; meanwhile, the small-market Orioles will make a killing, further enhancing Angelos’ profits from this absurd deal.

Interestingly, the Angelos-controlled MASN would be receiving a total of $75 million in 2005 and 2006 for the Nationals’ stake, while Comcast SportsNet retains control over 100 percent of the Orioles’ local pay-TV telecasts. Moreover, whether Angelos will be able to transfer the Orioles from Comcast to MASN in 2007, as he intends, remains a very open question. Comcast, which is the nation’s largest cable company, has filed a lawsuit charging that its current contract with the Orioles gives it the right to match any agreement between the Orioles and any third party for future local pay-TV rights to the Orioles.

Much is being made of the fact that the Nationals will receive $21 million in rights fees from MASN this year. In an essay in The Washington Post praising the agreement, D.C. Mayor Anthony Williams and D.C. Council member Jack Evans — both of whom were responsible for the poorly negotiated stadium deal — note that the $21 million is “more than what’s earned by 17 other teams.” Well, that means that 12 teams receive higher rights fees than the team in the nation’s fourth-largest market, measured in terms of personal income. Something doesn’t add up. Moreover, as Fisher further reported, Evans, who has spoken extensively with MLB executives about the Nationals’ role in MASN, was not aware of the $75 million payment. Beyond the obvious, this begs some other questions. How was the implied $750 million value for MASN determined? To reflect his 90 percent ownership stake, will Angelos be contributing $675 million in capital to MASN? If so, will such a cash infusion be verifiable?

Throughout the 1972-2004 period, as Washington’s thriving market made the metropolitan area one of the nation’s wealthiest, MLB used the sport’s uniquely expansive antitrust exemption to prevent smaller-market, money-losing teams from relocating to the nation’s capital. As long as RFK Memorial Stadium remained empty, baseball owners across the country could threaten, both implicitly and explicitly, to move to Washington. That leverage enabled extremely wealthy owners to extort hundreds of millions of dollars in taxpayer subsidies to finance the construction of new ballparks.

Before the Nationals could play their first game, Selig and Angelos again exploited MLB’s antitrust exemption to craft this terribly unfair television arrangement. Congress needs to intervene. Baseball’s expansive antitrust exemption must be curtailed.

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