A Major League Baseball panel's recent decision would rewrite the economics of the relationship between the Orioles and Washington Nationals, diverting tens of millions of dollars in annual profits from the regional television network that primarily benefit the Baltimore team, according to baseball sources.
The private decision, made by three club owners selected by Commissioner Bud Selig, would diminish the amount of money the Orioles receive under a 2005 agreement establishing how money from Mid-Atlantic Sports Network is to be divided by the neighboring teams. The agreement gave the Orioles a majority stake in the network that the team said was necessary to ensure its viability after the Nationals arrived from Montreal, taking a large swath of what was once Orioles territory.
The decision could be challenged in court soon. The Orioles and Nationals have filed court petitions that could be precursors to full-blown litigation.
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Neither the Orioles nor the Nationals would comment on the decision since it has not been made public.
Under the decision, released to the parties in recent weeks, a substantial portion of MASN's profits would be redirected, the sources said. That is a blow to the Orioles because 85 percent of MASN's profits currently flow to Baltimore and 15 percent to Washington. The ratio reflects the teams' current ownership stakes in MASN. Washington's share will climb by one percentage point a year up to 33 percent.
The profits would be redirected to the teams as part of the annual television rights fees they receive from MASN. Under the original agreement, the rights fees — which are reset every five years to account for ratings and other considerations — are the same for both teams. The rights fees are considered part of the teams' local revenues, of which MLB claims 34 percent for revenue sharing.
"It's going to be an issue for the courts to decide," said John Mansell, president of a D.C.-area sports and media consulting firm. "It really boils down to the particular language of the contract."
MASN's petition, filed recently in a New York court, seeks to vacate the owners' decision under arbitration laws. The Nationals want the owners' ruling upheld.
Such a scenario — a suit by the Orioles, Nationals or both — is one that Selig, who is retiring in January 2015, eagerly hopes to avoid.
In a letter quoted by the Hollywood Reporter, Selig recently chided both sides for their "unfathomable inability to agree on a fair division" of the television revenue, and threatened to use the full weight of his authority as commissioner if the parties escalate the dispute into a legal battle.
Asked for comment Wednesday, an MLB spokesman referred a reporter to a statement issued earlier. "Although certain legal maneuvering has taken place, [commissioner] Selig remains hopeful the parties can reach an agreement in an amicable manner," it said.
The maneuvering grew out of a dispute over how much the Nationals should receive in television rights fees. The club received $29 million in 2011 — the last year for which figures were available — plus more than $6 million for the team's equity stake in MASN.
The Nationals sought a television deal many times higher than that — up to $120 million reportedly — on par with the lucrative long-term deals that other clubs have recently signed.
MASN has countered in the past that there should be no dispute over rights fees because the 2005 agreement calls for using a formula developed by Bortz Media & Sports Group, a Colorado consulting firm. MLB was among the signatories of the 2005 deal.
The assimilation of the Nationals — formerly the Montral Expos — was initially complicated. Accommodations had to be made by both teams as they learned to share a territory — for television, ticket sales and marketing — that had long been the Orioles' domain.
While Washington fans complained about the MASN structure, the relationship has been mostly cordial until the rights fee issue heated up several years ago.