Analysis: Thanks to TV deals, MLB teams rich enough to swing for fences

SEATTLE — There he sat, politely answering questions in the Safeco Field dugout about the surprising turn in his spectacular baseball career, acting as if he didn’t realize his preposterous contract with a perennial loser was yet another marker in the decline and fall of major league baseball civilization.

“No, that’s not my job,” said Robinson Cano, responding to a query about whether the 10-year, $240 million guaranteed deal with the Seattle Mariners jeopardizes the industry’s financial health. “I hope everybody gets paid big time. I don’t really care.”

Fair comment. It is the job of sports media and fans to wring hands, shake fists or simply lament about their youthful failure to hit a curve ball, denying them access to millions. And Cano, sitting in his dugout, can thank Joe Sports Fan, who is sitting on his couch dutifully tuning in to watch 162 times each year.

Cano’s job is to see ball, catch ball, hit ball. Because he does those things as well as anyone on the planet and because he plays in a professional sport without a salary cap that supplies nearly daily TV entertainment for six months every year, Cano, a free agent, found himself in a delightful spot.

Coveted by a rich, reckless team and by a rich, desperate team, he chose the Mariners, which gave him three more years and $65 million more than the New York Yankees, Cano’s old club, which traditionally spends as if every day were the last day of shore leave.

No one in baseball disputes the value of Cano, a five-time All-Star who is the only player in major league history to have five consecutive seasons of at least 25 homers and 40 doubles. What disturbed many is that Cano, who will be 41 at the end of his contract, will be paid $24 million in 2024, perhaps five to seven years after his expiration date as a premiere player — and maybe any kind of player.

It is argued that long-term guaranteed contracts to midcareer stars is the acme of baseball foolishness because the last part of the deal will be a waste, due to the inevitable vagaries of injury and age.

To which the Mariners — and several clubs before and numerous ones after the Cano deal — retort, Bah.

These clubs are neither ignorant nor dilettante. They are, as was said, rich. And getting richer, to the point that the declining productivity of an expensive player over time is far secondary to the immediate prospects of success hat the player brings in his prime. And competitive success stimulates more revenue for the team.

So Cano is right: He doesn’t have to care that some see his contract as damaging to the game.

The source of the increasing wealth for baseball and all other major sports is TV. In October 2012, Major League Baseball announced an eight-year, rights-fee agreement with a partnership of national networks Fox Sports and Turner Sports. Fox pays $800 million annually and Turner $500 million. Three months earlier, ESPN struck a similar deal with MLB that doubled its annual rights-fee deal, to $700 million.

That adds up to $2 billion a year through 2021 from the national broadcast partners. And that barely begins to cover the revenue opportunities.

As with college and pro football and basketball, baseball has entered a time when technology and consumer habits have intertwined to create a cultural gold mine: Sports are the only regular programming that can be called appointment TV.

The consumer market is flooded with devices, software and subscription services that allow easy viewing of nearly every kind of TV programming, including most news, at the time and pleasure of the buyer. Fewer consumers wait to watch the news at 6 p.m. or a favorite program at 9 p.m., just as fewer consumers venture to bookstores or libraries or to the end of the driveway to fetch a newspaper.

But sports bucks the trend: Most live events are must-see TV, because the old notion that it’s possible to avoid learning the outcome of a game being recorded at home for later viewing is, well, so 20th century.

News of American team sports is ubiquitous, relentless and unavoidable and is a huge platform for the exchange of gambling dollars. Only the Oscars and presidential elections command similar millions of eyeballs in the moment. And those nonsports moments happen once a year and every four years, respectively.

Sports are about the now. And among the sports, baseball commands a special place with networks and carriage operators for one reason: It’s daily. The 162 games that each team plays in a regular season provide a huge amount of content for regional sports networks (RSNs), which are willing to pay large sums in rights fees to telecast all the games skipped by the national networks.

In fact, it is so lucrative that numerous major league teams have become at least part owners in their marketplaces’ RSN — a tactic that basically eliminates middlemen in the relationship between teams and fans and sends more revenue to the teams.

The Mariners bought controlling interest in Seattle’s RSN, Root Sports, from its owner, DirecTV, in April 2013. The contract was for 17 years. Although neither party disclosed the ownership percentages or the value — except to say revenue would be in line with other major league deals’  — Forbes magazine reported that the Mariners own 71 percent and DirecTV 29 percent, with an average annual value of $103 million to the Mariners for the life of the contract. The magazine estimated that the total value of the deal, including the team’s equity stake, is $2.5 billion.

For perspective, the Mariners’ player payroll in 2014 — including $24 million to Cano and $23.5 million to their other superstar, pitcher Felix Hernandez — is $93 million. So if Forbes is right, the player payroll is more than covered by the RSN revenue alone.

RSNs have the virtue of two revenue streams: subscriber fees and advertising. Melinda Witmer, Time Warner Cable’s executive vice president and chief video and content officer, told Sports Business Journal that it makes long-term deals easier.

“We aren’t under the same kind of pressure to make our money or earn our keep by large margins on regional sports networks,” she said. “In that regard, we’re able to better afford economics to a team than we would if we were, on top of that, going to have to add a large margin in order to be successful.”

For diversified national cable companies such as Time Warner and Comcast, Witmer said, the investment in sports benefits the entire operation, with halo effects into video, high-speed data and telephone operations. 

So when the Detroit Tigers topped the Mariners’ Cano deal with one for their superstar, Miguel Cabrera — an eight-year, $248 million extension — baseball fans need not have wept over the seeming foolishness. Sports is about the here and now, and difference-making talents are rare assets that can convert into championships.

How Cabrera and Cano perform in their declining years is of less concern than the ascent of revenues. To those who suggest that the inflated values are a sign of another bubble such as real estate or derivatives, destined to burst, should not overlook the fact that the sports leagues and conferences are monopolies.

They aren’t making more teams.

But the teams are making more fans, nationally and internationally. Those fans will show up to watch their heroes at appointed times and willingly subject themselves to the advertising that supports the teams. It’s altogether an astonishing business model.

Cano is right. It’s not his job to worry. He doesn’t have to care.