The numbers are getting obscene.
The Dodgers will ink a new 25 year, $6 billion plus local television deal with Fox Sports.
The Angels just completed their own $3 billion local package.
The Cubs are going to start to uncouple the old Tribune broadcast contracts, beginning in 2014. The Cubs will be the last team to jolt their local television revenues.
Major league baseball's new national television contract is worth $12. 4 billion. It will kick $51.8 million to each team by 2014.
Professional baseball is no longer a sport. It is expensive television programming.
The Dodgers will soon bank annually $240 million in local television, plus $51.8 million in national revenue. The Dodgers will have to kick in 34 percent of local revenues back into the league subsidy pool, or $80 million. Even with that surtax, before the first game of the season starts, the Dodgers will have $211.8 million in revenue. With the luxury payroll tax set at $189 million (which clubs do not want to reach), before one patron buys a ticket for a game, the Dodgers are ahead in positive revenue by more than $22 million. If the Dodgers hold steady at 2011 ticket revenue numbers of $107 million per season, the team is a profit machine of more than $120 million per year.
Again, the revenue driver is not attendance in MLB. It is television contracts. In the Dodgers case, television revenue is 2.73 times more than attendance revenue.
Now, these television deals are long term contracts. The money is guaranteed no matter what the Dodgers record will be in the future. Cable operators are counting on a loyal fan base and ownership egos for a desire for championship seasons - - - to hold viewership and advertising ratings. But is there really an incentive for ownership with these huge television deals to continue to spend money on players to the lux cap max? Probably not. Owners and their investors want return on their investment. With these outrageously generous television deals for local rights, owners want to pocket as much profit as possible, and then flip the franchise at its peak value to a new ownership group.
There is a television "bubble" in regard to value of these television contracts. Just like with any other bubble commodity (real estate for example), there is a crash - - - a retreat back to the norm. The question is when that will happen. And who will be holding the hot potato when the bubble bursts.
