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Orioles, Comcast spat hurts the fans


If the Baltimore Orioles and Comcast Corp. cannot work through their legal problems, a regional cable network - thought to be a boon for the club - could be more of a short-term bust, and many baseball fans in the Baltimore-Washington area could lose the opportunity to watch their home teams almost every night.

Or, industry analysts say, the standoff could be no more than posturing between giants who realize it's in their mutual best interest to reach a deal.

"Obviously, they're both losing money in the short term, but this isn't about losing, it's about winning," Roger Caplan, whose Howard County ad agency places commercials on local sports broadcasts, said yesterday. "There is a huge amount of money to be won at the end of the day, and you've got two of the best poker players in the region in Comcast and Peter Angelos."

Comcast SportsNet is suing the Orioles, claiming the team breached its contract with the network by creating the regional Mid-Atlantic Sports Network to broadcast Washington Nationals and Orioles games. The team has responded by filing a complaint with the Federal Communications Commission, claiming Comcast is unfairly using its dominant market position to keep MASN-produced Nationals games off the air.

MASN, which is co-owned by the Orioles and Major League Baseball, was thought to be the plum in a compensation package that Peter G. Angelos, the Orioles' owner, negotiated when the Expos moved from Montreal into what he considered to be competing territory.

The first casualties in the battle have been about 60 Nationals games, unavailable to Comcast subscribers in the Baltimore-Washington area. Orioles fans have been unaffected because the team's contract with Comcast SportsNet lasts through 2006.

But the Orioles hope to produce and broadcast most of the team's games on MASN beginning in 2007, and if Comcast won't carry the channel, a large portion of the team's fan base - the cable giant serves about two-thirds of households in the Baltimore-Washington region - might be unable to watch.

A protracted standoff could blow a hole in the value of MASN. But that doomsday scenario will probably never happen, analysts say.

"I think these sorts of regional sports networks do encounter distribution problems but, inevitably, they work themselves out," said Lee Berke, a Scarsdale, N.Y., consultant who has worked on similar network launches. "There's obviously a great demand for the games, and these networks are valuable."

The situation resembles the New York Yankees' awkward attempt to launch a regional network in 2002. Cablevision Systems Corp., the primary provider in the New York metro area, balked at the team's terms and refused to carry games for a year. Fans were outraged and an arbitrator had to intervene. The sides reached a deal, and the YES network, valued at about $1.2 billion, is viewed as a major factor in the Yankees' financial dominance of the sport.

"There was a lot of public bad blood there, but, you know what, they reached a deal," Berke said. "My experience is that these networks don't even necessarily plan to have full distribution in Year One. I have little doubt that MASN will be very profitable."

Twins' effort failed

The Minnesota Twins provide a more cautionary example. The team launched the Victory Sports One network in late 2003 without having agreements with the five major cable providers in the Twin Cities market. Fans were left without access to games, and by May 2004, the team had folded the network - estimated to be losing millions of dollars - and cut a deal with Fox Sports Net.

Attempts to create regional networks also failed in Anaheim, Calif.; Kansas City, Mo.; and Houston, but analysts such as Berke say the Baltimore-Washington market is lucrative enough to support both MASN and Comcast SportsNet.

The Orioles might have to take a short-term hit because Comcast is protecting its own regional network, said David Ehrlich, a Denver consultant who helped launch a Colorado regional sports network.

"It's obviously very difficult in the short term, but if they focus on the long term, it's surmountable," Ehrlich said. "They have product, a terrific product."

Comcast could also overplay its hand and drive away subscribers if the company keeps baseball off the air for an extended period, he said.

Angelos will probably have to reach terms with Comcast because the company controls television access to so many households, said Caplan, the Howard County adman. But that doesn't mean Angelos has to give in easily.

"You're talking about two entities with deeper pockets than any of us," Caplan said. "It won't hurt either one of them long term. This is all about positioning for power at the end of the day."

MASN officials say they're moving ahead with plans to launch all-day programming in March and to put the Nationals on as many screens as possible between Pennsylvania and North Carolina. They say the Comcast obstacle is not a surprise.

"Anytime you expand your business, you're going to go through a period of capitalization expenses," said MASN President Bob Whitelaw. "It's part of the process."

Games, ad revenue

The Orioles don't disclose their revenue from selling television rights, so it's hard to predict how lucrative the cable deal could be for the team or how much could be lost if the club doesn't reach terms with Comcast. Major League Baseball paid about $75 million for its 10 percent share of the network. The Nationals could one day own 33 percent of the network under the agreement.

The Orioles would garner revenue from selling the games to distributors such as Comcast and by selling advertising time on the broadcasts. The distribution money tends to be the larger revenue stream, Berke said. Industry sources say MASN would charge cable providers $2 to $3 per subscriber to receive the Orioles and Nationals, a fee that would likely be passed on to cable consumers.

MASN officials say they offered Comcast a deal to distribute Nationals games but the cable company responded by demanding equity in MASN.

Comcast officials deny ever seeking a share of MASN.

Such an arrangement has precedent. Jerry Reinsdorf, owner of the White Sox and the Chicago Bulls, joined with the Chicago Blackhawks and Chicago Cubs to form a regional sports network that includes Comcast Corp. as a 30 percent partner.

Comcast will also partner in a planned New York Mets network.

The legal wrangling began in April, when Comcast SportsNet sued the Orioles, saying the team had violated the network's exclusive contract to negotiate for Orioles broadcast rights after 2006. The network claims it had exclusive negotiating rights through November and the right to match any offer after that.

The Orioles say MASN is not a third party covered by the exclusive negotiating clauses in the Comcast SportsNet contract. The club says MASN is a trade name for the team's broadcasting arm, TCR Sports, which has existed for years.

The only fans with full access to the MASN-produced games are 1.3 million DirecTV subscribers in the Baltimore-Washington area and about 185,000 residents served by cable provider RCN.

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