TV Contract

[reillymcshane]

One thing nice about sports for advertisers is that it's as close to DVR-proof as you can get. Advertisers know that the majority of people watching a sporting event will watch it live. Thus they can't skip the commercials. This will only grow as more and more people add DVR capability to the TVs, plus things like Netflix and other types of streaming and downloads. This will make all MLB teams games more and more valuable.

[MJLiverock]

As Hawing said FSN WI is probably the best choice for the Brewers because of the statewide coverage. TWC doesn't cover much outside of Milwaukee and for sure isn't in the Madison area and won't likely be available to satellite/U-Verse customers which area big part of the viewing audience in WI.

 

A place like San Diego is 91% penetrated by pay TV services and the market is dominated by traditional cable at 77% vs. only 14% for alternatives like DirecTV, DishNetwork, U-Verse, etc.

 

Milwaukee is 79% penetrated with cable at 60%, alternatives 19%. Once you get outside Milwaukee the numbers shift more toward the satellite and internet providers.

 

Madison is 84% penetrated with cable 50%, alternatives 34%, La Crosse/Eau Claire 86% with a 54% cable 32% alternative split, Green Bay/Appleton is 82% with 51% cable and 31% alternatives. So even working out a deal with Charter and TWC together would eliminate about a third of the subs in all the markets outside Milwaukee. Advertisers also like those alternative subs because they tend to be higher income households, at least in DirecTV's case. Nationwide the trend has seen alternatives gather their highest share ever and continue to grow while traditional cable has been losing subs not only to DirecTV (DishNetwork has been shrinking) and U-Verse, but also the cord cutters who are opting just for netflix, Hulu, etc.

 

The overall penetration of pay TV has declined in the Madison market over the years, and likely in some of the college towns as the younger crowd is happy to use HULU and such for TV. The diehard sports fans won't drop the pay TV as long as they can get the sports they want.

 

Unlike reilly's post above, I rarely watch sports "live". I typically don't start watching a game until about half an hour after it starts just so I can FFWD the commercials, pause it make lunch or dinner, and skip half time.

[pebadger]

I think another thing that has to be taken into consideration with the Brewers TV deal is the fact that stuff is just less expensive here than it is on the coasts or in places like Chicago. Advertising rates on Brewers broadcasts simply have to be in line with rates charged for other local broadcasts in the market. Even with smaller absolute viewership a team like the Nats is going to make more on their deal just because they're getting more per ad than are the Brewers.

 

In fact, lower viewership is not necessarily a horrendous situation for the Nats or Padres once you take the idea of competing with the big markets off the table because the Nats or Padres can actually compete on price for advertisers in the DC/SD markets. Obviously they want to maximize revenue, but so long as they stay ahead of their most direct baseball competitors in terms of revenue they're still ahead of the game from a baseball standpoint, even with revenues that aren't as good as they could be in a given market. If you can turn that revenue advantage into a superior on-the-field product, you can then further harness the untapped potential of your already larger market. And because this dynamic potentially exists, it makes it easier to sell in the first place because you can provide incentives for advertisers to "get in early" so that they too can benefit if/when viewership spikes due to success of the club.

 

Turn that around and the high Brewer numbers can actually be seen in a bad way. Where is the room for audience growth? What extra value can the Brewers sell to advertisers?

 

Don't mean to be a downer about this, but the market size is what it is and the revenue potential is subject to some pretty binding constraints.

[djoctagone]

doug melvin revealed to the milwaukee journal sentinel that the brewers' local tv contract in 2013 will be around $21 million . . . an increase from $12 million.

[brewmann04]

wow good Job by Mark getting an increase like that,even though it still on the low end of Local Tv Deals.

[TURBO]

That is disappointing...

[brewtank34]

That is disappointing...

 

+1

Our fan base is one of the best out there which is evidenced by our annual attendance at MP as well as our TV ratings on FSN. What a weak and disappointing number that is compared to the likes of other teams. I know where never going to be in the same category of the LA Dodgers ($121 milllion) but c'mon! FSN is fleecing MA and the Crew! I'll take the increase as any increase is a good thing, but this is still very disappointing.

[fondybrewfan]

They must have signed some 20 year contract around 2004; that is such a low low number. Brewers have had some of the best local rating in MLB in the last couple of years. I am sure there are some escalators built in to account for ratings but the starting point is just way to low. Other teams are getting 3x, 4x, 5x, the amount the Brewers are getting. With the attendance that MIL draws; just imagine what the payroll could be and what players we could go after if we were getting $40+ Million a year instead of $21?

[jerichoholicninja]

FSN can only pay out less than they're selling in advertising. We can complain about high ratings and high attendance but ultimately it's very affordable (i.e. cheap) to do business in Wisconsin compared to other markets so the amount that FSN Wisconsin is making off of commercials is probably dramatically lower than everywhere else.

[Invader3K]

Yeah, FSN Wisconsin gets advertisers like J&L Tire and Robert Haack Diamonds (not knocking them, but they are what they are) while teams in other markets have huge companies like Taco Bell doing local spots. The disparity in potential ad revenue is huge.

[BradWI]

Piggy Wiggly pays that hack Jerry Garcia too much to spend more on ads :p

[Roderick]

doug melvin revealed to the milwaukee journal sentinel that the brewers' local tv contract in 2013 will be around $21 million . . . an increase from $12 million.

 

I assume Melvin would be downplaying the local TV contract revenue coming in (as the point of the article is the lack of money to spend). Hence the vague "around" $21M.

 

Quite probably, the actual TV deal is for more, but structured in such a way that Melvin feels he can lowball and say "around" $21M to a reporter now and explain it later if he has to.

 

And in six months when some article comes out we may get a more accurate larger number. At least that is what I am hoping.

[TheCrew07]

I assume Melvin would be downplaying the local TV contract revenue coming in (as the point of the article is the lack of money to spend). Hence the vague "around" $21M.

 

I think it's more likely that people are just going to have accept the idea that last year's payroll is about as good as it gets in Milwaukee, we are the smallest market in baseball. The Brewers will never land the type of local TV contracts that the top tier market teams can, our best hope is for more of a push towards a national TV contract like the NFL. I was hoping the new FSN deal would be around $30 mil per year after the renegotiation, but if it isn't I don't think it's fair to assume that Melvin would be playing coy or lying about it, and I'm not even a Melvin fan. If the truth would come out he'd get buried, it would be an epic PR disaster for the organization who's still getting public funds...

 

We'll get a bump in revenue with the new national TV contract in 2014, but Mark A and his staff have already maximized attendance and all revenue streams available. There just doesn't appear to be much opportunity to expand revenue outside of TV contracts and we're already locked in to a local and a new national deal.

 

The simple truth is that the revenue disparity in baseball continues to grow at an alarming rate.

[RobDeer 45]

I think the problem here is a good rating of a market with X amount of people can still be reaching way less people than a poor rating in a market of Y amount of people. I also agree the businesses in the area have way less money to spend on advertising.

 

Just tough for us to compete with other markets. It then makes every signing, draft, trade so crucial. There is way less room for mistakes, and that's why I think DM has done a great job with what he has to work with.

[torts]

I think the problem here is a good rating of a market with X amount of people can still be reaching way less people than a poor rating in a market of Y amount of people. I also agree the businesses in the area have way less money to spend on advertising.

 

Just tough for us to compete with other markets. It then makes every signing, draft, trade so crucial. There is way less room for mistakes, and that's why I think DM has done a great job with what he has to work with.

 

agreed. and thats why teams like the Dodgers can get 2 trillion dollars for their TV rights because even poor ratings are still going to reach five times the people they do in markets like Milwaukee or Pittsburgh.

[monty57]

To put it in perspective, signing someone like Greinke would take 100%+ of the annual TV revenue of the Brewers, while teams like the Angels have TV deals which pretty much pay their entire payroll (which of course is much higher than the Brewers).

 

Attanasio added a lot of "alternate revenue streams," which coupled with the increase in attendance to allow the Brewers to increase their payroll in the recent past. Risk management would seem to preclude that the Brewers brass wouldn't assume 3 million in attendance going forward while generating their budgets. Therefore, I'd only expect Melvin/Attanasio to max out payroll in years in which they feel a World Series (or at least a division championship) is a distinct possibility, as they presumably were going into 2012.

 

Our hopes going into the future (all things remaining the same in the MLB revenue structure) rely on growing talent on the farm, extending "core" players while they are still in their pre-arby years, and trading away guys when (A) they get expensive and (B) we have younger, less expensive alternatives in the system. This may seem pretty obvious, but it's not really the strategy Melvin's used to this point (in his defense, we were growing revenue up to this point), and it's hard to stick to your guns when everyone else is throwing money around the way they have been in the recent past.

 

We have a good, although somewhat aging, core. We have a lot of depth in high-upside pitching coming up through the ranks. Those are both good things, and if Melvin acts shrewdly and we have some luck with our young pitching remaining healthy and productive, we could still be a relevant team for the foreseeable future. This TV deal just shows that the Brewers have a significant uphill battle to remain in playoff contention relavtive to their competition.

[Bombers]

An update to the T.V. Money topic. Bob Wolfley has part of the story that came from the sports business journal:

http://www.jsonline.com/blogs/sports/201106331.html

 

I don't have an account with SBJ but here is the link to the article: https://www.sportsbusinessdaily.com/Journal/Issues/2013/04/01/Media/MLB-team-rights.aspx

 

I find it mind boggling that the Dodgers signed a deal that is $7 billion over 25 years. Or $280 million per year. That is unreal. (In addition there is some sort of clause that could give them another $1 billion. (Considering the Brewers are pulling in a whopping $20 million per year.) And our deal runs through 2019. The discrepency is getting out of hand. I would like to know how much revenue sharing the Dodgers contribute to out of that $280 per year they are getting.

[MJLiverock]

I saw that article yesterday and was surprised that the new Brewer TV contract was only $20 million/year after so much conjecture of a number closer to $30 million. Still dwarfed by the big market teams TV deals but every $10 million helps.

[trwi7]

Mariners now hold a majority stake in their RSN and sign a 17 year, $2 billion deal.

 

http://www.forbes.com/sites/mikeozanian/2013/04/16/seattle-mariners-sign-estimated-2-billion-network-deal-with-directv/

[TooLiveBrew]

That would work out as roughly $117-118m per season. And what is the Brewers' new deal supposed to be? $30m? Yeah.

[logan82]

How much longer until Mark A. decides to start a RSN? I am not sure we have a big enough market for one.

[PrinceFielderx1]

The Brewers new tv deal gives them 20 million, and the old Mariners deal gave them 45 million (450/10= 45). Am I missing something or could the Brewers have gotten way more money...

[Patrick425]

I saw or read an interview with Attanasio recently (maybe it was the Business Journal?) where he admitted that he may have left some money on the table when they negotiated the latest deal.

[TooLiveBrew]

How much longer until Mark A. decides to start a RSN? I am not sure we have a big enough market for one.

I think you're probably right, but I guess you never know.

 

One likely reason the M's got so much money is that Portland is basically South Seattle when it comes to MLB fandom. Two relatively large metro areas, and essentially all of both the states of WA & OR is a good amount of territory.

 

I wonder how many Japanese MLB fans remain Mariners fans after Ichiro's tenure there, and whether or not that would factor into how much money the M's got in this deal.

[Bikeage77]

 

I wonder how many Japanese MLB fans remain Mariners fans after Ichiro's tenure there.

 

Probably about as many United States NBA fans remain Cavaliers fans after LeBron's tenure there.