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MASN to place $99.2 million in escrow pending appeal of decision in Orioles’ dispute with Nationals

The Orioles-controlled Mid-Atlantic Sports Network will soon place about $99.2 million into a private escrow account pending its appeal of a decision that ran counter to the network in its broadcast rights fee dispute with the Washington Nationals.

The move will follow an Aug. 22 decision by New York Supreme Court Justice Joel M. Cohen awarding the Nationals the sum as additional rights fees from MASN for 2012 through 2016. The money — which a Major League Baseball arbitration panel had earlier ruled the Washington club was owed — would be on top of the $197.6 million that the Nationals already received from the network during the period.

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MASN is appealing Cohen’s ruling to the Appellate Division, First Department. In the meantime, the $99.2 million will be held by a private financial institution pending a decision by the appeals court “on whether to reverse or uphold the arbitration award,” said Jonathan Schiller, a New York-based attorney for MASN and the Orioles.

The Nationals had argued that the $99.2 million should be held in escrow by the court rather than “a third party.” In a recent court filing, MASN countered that “a deposit with the Court requires MASN to pay a 2% [over $2 million] fee to the City of New York and the funds will not generate any interest.”

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The court agreed Monday to permit a private escrow account to be used once MASN and the Nationals finalize the terms, according to Schiller. “There should be no difficulty in the parties reaching agreement over those standard terms, as the court recognized and expressed today,” he said.

Stephen Neuwirth, an attorney for the Nationals, did not immediately return a message seeking comment.

MASN broadcasts both teams’ games and annually distributes profits to the teams based on their stake in the network. Under the 2005 agreement that brought the former Montreal Expos to Washington, the Nationals’ stake in MASN — and the team’s share in its profits — started at 10% and increases by 1 percentage point a year, topping out at 33% in 2032. Washington’s stake is currently 20%.

The agreement set up MASN’s divided ownership structure and called for the rights fees to be reset at “fair market value” every five years to account for ratings and other considerations. But the teams have been unable to agree on the amounts due.

The clubs are also disputing how large an award the Nationals should reap from Cohen’s ruling, if it is sustained.

While Cohen gave the Nationals a victory on television broadcast rights fees, he didn’t rule specifically on how to divide MASN profits for the five years in question.

The more money MASN pays in rights fees, the less it has available each year for profits to the clubs. Accordingly, MASN lawyers have argued in court documents that — after Cohen’s decision — the network must recalculate its financial results for those five years, reducing its profit to pay the higher TV rights fees.

The Nationals’ attorneys counter that the “suggestion that profit distributions to the Nationals should be deducted” amounts to an attempt to undo the court’s decision.

MASN won a victory earlier this month when the court’s appellate division granted the network’s request to have the profits dispute decided by the American Arbitration Association. The network had long argued that it needed an independent forum to settle such issues rather than have them decided by Major League Baseball.

Like many networks, MASN has been losing subscribers in recent years. “MASN has lost over 2 million subscribers in the past eight years due to cable customer cord cutting and cord shaving, a well-publicized industrywide phenomenon,” network attorneys said in a recent court filing. It said it had 4.7 million subscribers in its market as of December 2018, and an additional 2 million out-of-market subscribers.

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