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As MLB faces a near-certain lockout following the current season, one of the biggest questions to be answered in new CBA negotiations is how the league’s local broadcast rights will look.
As part of its initial proposal to players, MLB laid out a framework in which all 30 clubs would share local media revenue equally, with the broader idea being that MLB could pool local broadcast rights together and sell the package to a streamer. That framework is almost certainly going to be tied to whether or not the league can win its battle with the players to institute a salary cap and salary floor.
As we wrote at the time of MLB’s initial proposal, the salary cap/floor and local media frameworks are inextricably linked.
Large-market teams like the Los Angeles Dodgers and New York Yankees stand to sacrifice a major competitive advantage over small-market teams by exiting lucrative local rights deals to join MLB’s centralized cohort. The Dodgers, for instance, earn an absurd $334 million per year from an antiquated deal with SportsNet LA, more than double the local media revenue of any other club.
Why would they choose to exit that deal? Well, that’s how valuable a salary cap is for owners competing for top-crust talent. Owners want a salary cap so they can limit their payroll liabilities. MLB wants large-market teams to join its centralized local broadcast hub, making it a more valuable package to sell to a streamer and increasing competitive balance in the league through revenue sharing. Large-market owners, at least in MLB’s ideal, should be willing to join the hub if the league delivers on instituting a salary cap because, in the long-term, owners should make out ahead by sacrificing some local media revenue in return for a salary cap, which will be a boon for franchise valuations.
The Athletic MLB reporter Evan Drellich, however, believes if there is no salary cap instituted in the next CBA, a 30-team centralized local broadcast hub would be “pie in the sky for a number of years.”
“Let’s say the world stays the same, there isn’t a salary cap and you don’t get this big change. The question for the local teams at that point will be, how many clubs are willing to join up together and allow the league to sell?” Drellich said on a recent episode of The Varsity podcast with Puck’s John Ourand.
Without the salary cap, there’s no incentive for large-market owners to join the central hub. There’s no leverage the league office can exert. At that point, teams that still have lucrative local rights deals are better off sticking with them until they expire. For the Dodgers, that means collecting paychecks from SportsNet LA through 2038.
In this scenario, MLB has a smaller local rights package to sell that might feature 20-odd teams, but none of the major draws like the Dodgers or Yankees.
This is partly why many expect MLB to be so dug in on a salary cap during upcoming labor negotiations. The future of its media business depends on it. Otherwise, MLB will be going to market with a much less attractive package to sell, and no guarantee that any of its glamour teams will join it in the future.
The post Evan Drellich: 30-team MLB local rights bundle ‘pie in the sky’ idea without salary cap appeared first on Awful Announcing.
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