The issue of how much more money the first-place Nationals deserve in annual rights fees from the Mid-Atlantic Sports Network (MASN) — which televises both teams' games — has been unsettled since winter and remains before a committee of three Major League Baseball owners.
The matter of how MASN divides up its money is critically important to both teams.
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The Orioles' majority stake in MASN — the team currently holds 87 percent — was designed to ensure the club's long-term viability after the Nationals arrived in 2005 into what was once exclusively Orioles' territory. The Orioles say MASN profits and fees enable the club to recoup money lost because of the presence of a second team in the Baltimore-Washington region.
For the Nationals, MASN fees and profits are integral to the franchise's continued growth. The franchise — which lost more than 100 games as recently as 2009 — is enjoying its best season since arriving in the nation's capital and wants a television deal on par with the lucrative, long-term deals that other clubs have recently signed.
The Nationals received $29 million in rights fees in 2011, plus more than $6 million for their equity stake in MASN. Washington holds 13 percent of MASN, and its share will climb by one percent a year up to 33 percent.
The Nationals are seeking a rights fees increase up to a reported $120 million annually.
MASN says Washington's amount should increase by far less — to more than $34 million in the first year.
MASN points to language in the 2005 agreement under which the former Montreal Expos relocated to Washington. The agreement says the rights fees — which are to be equal for both clubs — should be reset every five years using a formula developed by Bortz Media & Sports Group, a Colorado consulting firm. The formula takes into account network revenues, expenses, ratings and other considerations.
Even though the Nationals arrived in 2005, it was not until 2007 that MASN had rights for all Nationals and Orioles games except for those televised nationally. That's why 2012 — five years later — became the first year to "reset" the rights fees.
Using Bortz's formula, the Nationals would get a rights fee in excess of $34 million in the first year, plus more than $7 million in equity distributions, according to a source familiar with the figures. The source, who declined to be named while the matter is pending, said the rights fee would gradually increase to about $46 million — plus almost $12 million in profits distributions — in the fifth year.
"Contracts are meant to be honored," said Alan Rifkin, counsel to MASN and its managing partner, the Orioles. "The (2005) settlement agreement provides in clear and certain terms the formula to be applied to determine the fair market value of the rights fees for the clubs. That formula has been consistently applied by baseball for over 16 years and is well known and well understood."
If the Nationals' five-year deal was extrapolated over 20 years, it would provide more than $2.1 billion in rights fees and profit distributions, according to a document prepared by Bortz.
The rights fee "reset" year comes at a time when the Nationals' television ratings are up over recent years, the club is in first place and other teams have been locking into long-term deals.
Nationals spokesman John Dever declined requests to comment for this article , and Rifkin said he needed to limit his remarks because the process is not public.
MLB commissioner Bud Selig told reporters on the day before last week'sAll-Star game that baseball was in the midst of "very intense discussions" over the rights fees and that he hoped the issue would be resolved soon.
The assimilation of the Nationals 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.
But the relationship has been mostly cordial. Orioles owner Peter Angelos said several years ago that he won't fret if Orioles fans slip away occasionally to a game in the nation's capital.
"I think there's plenty of room for two teams in the region," Nationals chief operating officer Andy Feffer said earlier in the season.
But Feffer declined to discuss the rights fee matter. That's private, he said.