DRaysBay Mailbag: How will the new national TV contracts affect the Rays?

Kim Klement-US PRESSWIRE - Presswire

Money is pouring into MLB from new television contracts, so one DRaysBay reader asks: will this help or hurt the Rays?

1. By my computation, the Rays' share of the new contracts with Fox, ESPN and TBS will generate at least $25 million per year for the Rays. Will it be spent on hitters and retaining pitching?

Before delving into the ramifications of the new national television contracts, let's break down exactly what we're talking about here. In case anyone missed the news, MLB recently signed new long-term deals for national television coverage with ESPN, Fox, and Turner. ESPN will now be paying MLB $700 million per year -- up from $360 million -- while Fox and Turner will be paying a combined $800 million per year. This money is divided equally between the 30 clubs (although there's likely some skimming off the top by MLB), which means under the new contracts, each team will be getting around $50 million per year in national television revenue. That's around double what clubs were receiving before, so yes, it does equal out to around an extra $25 million in budget room for the Rays.

Before we start jumping for joy, though, these contracts are not going to work like a short-term boost to the Rays' pocketbook. First of all, these contracts don't kick in until 2014, so they won't help with budgeting for the 2013 season at all. The money is something the Rays can count on going forward, but it's not like the Rays just found a $100 bill in their jacket pocket.

And second of all, these contracts -- along with the huge local television contracts coming into the game -- are going to have a huge impact on the market. We began to see these effects somewhat last off-season, as teams started to wrap their brains around this new world of huge television contracts, and Joey Votto's huge contract extension with the Reds was a perfect example. As Dave Cameron said at the time (emphasis mine):

Put simply, we're seeing some positive shocks to the game's economy, and the result looks to be a significant uptick in willingness by teams to borrow from their own futures to finance talent acquisition in the present.

What we're seeing could be described as inflation, but it's not upward price adjustments in the traditional form. Pujols, Fielder, Reyes, Votto, Kemp, and Zimmerman all landed contracts in excess of $100 million this winter, but in each situation, the surprising number wasn't the AAV but the amount of guaranteed years on the back end. [...]

And, perhaps this is exactly what we should expect as a reaction to potential new revenue sources opening up for MLB franchises. These TV deals that are being signed don't come with huge lump sum payments, so teams don't have buckets of cash burning holes in their pockets. What they do have, or may expect to have in the next few years, is a guaranteed revenue source that will allow them to be in a strong financial position for the next couple of decades.

In other words, this money is going to inflate the market, and we have little idea how that's going to play out in the long run. Maybe it will mean an upwards inflation of players' annual salaries, or maybe -- if the current trend continues (and Cameron seems to think it will) -- it could mean that teams are more willing to sign players to expensive, long-term deals, as they have those guaranteed revenue streams there as a safety net. Since this trend is just beginning, we're simply going to have to watch and see how the market develops, which could make this off-season very interesting to follow.

Either way, though, the Rays are still going to be in a tough spot. If annual salaries increase, it won't improve the Rays' buying power any; if long-term contracts just get longer and more expensive, it'll make it more difficult for the Rays to sign players to extensions. It's not exactly a game-changer, as they Rays are still on the low end of the MLB revenue curve. The only difference is that MLB's entire revenue curve just got kicked up about $25 million.

That said, this extra money does have one big positive for the Rays (and for any low-revenue team, for that matter): it gives them a much larger safety net. An extra $25 million may not make much of a difference to the Yankees or Rangers, who are going to pull in huge profits regardless, but it can make a huge difference to low-revenue teams, who may only be bringing in $50-75 million a year otherwise. If the incentive is there for high-revenue teams to remain below the luxury tax threshold -- which, in recent years, has been the case -- then the financial playing field in MLB just got leveled a little bit.

In practical terms, I'm not expecting the Rays to all of a sudden start pursuing top-level free agents, but I don't think it's unreasonable for us to expect them to be more financially aggressive than we're used to seeing. For example, with this new safety net, I'd be incredibly surprised if the Rays traded either James Shields or David Price this off-season. Why trade them, when there's no way they could sign a 4+ win pitcher on the open market for anything approaching $10 million a year? The Rays can afford them both and they now have more of a safety net if one gets injured, so why not hold onto your affordable, top-level talent? Before these contracts, the Rays' safety net was so low that Shields would likely have been traded; now, it seems unlikely.

Similarly, if a player is locked in to contract under current market conditions, those contracts just became even more team-friendly. Wade Davis's deal? Not as bad as it could have been. Ben Zobrist's deal? Yeah, we're picking all those options up. Matt Moore's contract? A-mazing! The Rays will obviously continue to pursue long-term deals with their players, and it's possible that this money could give them more flex room in negotiations to take on deals that are a bit more expensive or "risky."

This money also gives the Rays' a bit more freedom to acquire mid-level free agents. They're still not going to be able to chase players like B.J. Upton -- not unless things go very wrong for Upton -- but you never know, maybe they're now more willing to sign players to two or three year deals. Maybe they'll be able to shoot a little higher on occasion, and they won't be reduced to relying on the washed-up-Carlos-Pena's of the free agent market for some offense. Maybe. Hopefully. We'll simply have to see how the market develops.

Don't expect these national television contracts to be a silver bullet, but I do think it's fair to say they help the Rays more than most other teams. To what extent, though, we're just going to have to find out together.

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