WP: Nats MASN deal renegotations will have a huge impact

[NJ Ave]

Cash flow and Net Income are two different things.

Over the long haul cash flow is the far more important measurement, but the term "in the black" generally refers to positive net income.

Yeah, I picked this up a while back when I graduated business school with a degree in accounting:)

I'm just saying I find it misleading to your fans to include debt servicing when you have the money to pay off the team entirely. That's a BUSINESS decision regarding leverage that has nothing to do with payroll.

Take two teams. Owner A pays off his team, Owner B is 80% financed. With the same revenues, Owner A can support a payroll tens of millions higher than Owner B yet both would have "balanced budgets". If Owner B happens to own outright $3 or $4 billion in other real estate assets with no mortgages on them...financing is just a dodge designed to tell fans you're not taking any money out of the team by placing more of your business leverage within the team's finances.

[HalfSmokes]

Yeah, I picked this up a while back when I graduated business school with a degree in accounting:)

I'm just saying I find it misleading to your fans to include debt servicing when you have the money to pay off the team entirely. That's a BUSINESS decision regarding leverage that has nothing to do with payroll.

Take two teams. Owner A pays off his team, Owner B is 80% financed. With the same revenues, Owner A can support a payroll tens of millions higher than Owner B yet both would have "balanced budgets". If Owner B happens to own outright $3 or $4 billion in other real estate assets with no mortgages on them...financing is just a dodge designed to tell fans you're not taking any money out of the team by placing more of your business leverage within the team's finances.

since the debt is the team's (as opposed to the lerners') I wonder how much of it is about leverage and how much is about teams being able to include minority owners who don't want to actually front much money, but who the teams want to be associated with

[NJ Ave]

I see very little difference than if the Lerners putting a family member on the payroll at $10 million a year and saying "We gotta cut payroll by $10 million because operating expenses went up. We're not here to take a loss".

[NJ Ave]

since the debt is the team's (as opposed to the lerners') I wonder how much of it is about leverage and how much is about teams being able to include minority owners who don't want to actually front much money, but who the teams want to be associated with

I'm sure there are more nuanced reasons this occurs, including that one. However, it doesn't change the fact that whether a team runs "in the red" or "in the black" is heavily influenced by how much debt the team has taken on. I haven't even gotten into the fact that if you wanted to get serious about the Lerners "not taking a penny out of the franchise" they should have been running $30-40 million in the red every year in operating profit, since their equity has risen by about $250 million or more since they bought the franchise.

I don't really care, ultimately, because I think our payroll level is fine for long-term competitiveness.

But it's baloney for the Lerners to say they aren't "taking a penny out" of the Nationals. They've probably profited (in operating profits and equity) about $300 million over 8 years.

[tomterp]

But it's baloney for the Lerners to say they aren't "taking a penny out" of the Nationals. They've probably profited (in operating profits and equity) about $300 million over 8 years.

They're not lying, but nor are they giving any value to the increase in franchise value..  They acquired the franchise with a mixture of cash and debt, and they are allowing the business to run independently without dividending profits nor requiring additional equity raises (so far as we know).  Is the asset worth more now?  Of course.  But I don't think aa prudent business person would run a business spending $ equal to the rise in their equity - isn't this what the great recession was all about?  People cashing out the equity from their homes almost in lockstep with the increases in value, until the party ended.

No way to finance a lifestyle, no way to run a business either.

[welch]

I see very little difference than if the Lerners putting a family member on the payroll at $10 million a year and saying "We gotta cut payroll by $10 million because operating expenses went up. We're not here to take a loss".

Hey, now...you're criticizing George Preston Marshall and Calvin Griffith?

- When Edward Bennett Williams began to manage the Redskins -- after GPM's stroke -- he discovered that Marshall payed the profits to himself as a salary. Also that the Redskins owned houses in every NFL city, including the Georgetown house where Marshall lived. The 20% partner, Harry Wismer, had begged for a bit of the profit for years. EBW sold Wismer's 20% share to a Canadian department store owner for about $200K, which allowed Wismer to fund the NY Titans, now the Jets.

- Calvin ("baseball dumb", said Gabe Paul of the Indians) had his entire family on the Old Senators' payroll.

So...maybe Calvin was not forced out of town? And maybe the Redskins became profitable and valuable?

[PebbleBall]

Having the most money possible at your disposal is always important. When was the last time the O's and Royals did anything? The Royals got hot at the right time, and the O's lucked out and got Cruz at a bargain for one season. Who knows what these two teams will do next year. The Cardinals are below the Nats, but had a higher payroll in 2013. Money doesn't automatically bring you a WS, but it's still important.

Of course money is important.  My point was the Nats payroll is already at a level where you can have sustained success. 

[NJ Ave]

They're not lying, but nor are they giving any value to the increase in franchise value..  They acquired the franchise with a mixture of cash and debt, and they are allowing the business to run independently without dividending profits nor requiring additional equity raises (so far as we know).  Is the asset worth more now?  Of course.  But I don't think aa prudent business person would run a business spending $ equal to the rise in their equity - isn't this what the great recession was all about?  People cashing out the equity from their homes almost in lockstep with the increases in value, until the party ended.

No way to finance a lifestyle, no way to run a business either.

Yeah, this is just a fundamental disagreement. I view sports franchises more from the "public trust" mindset than I do the "strictly a business" mindset. I respect the opposite opinion.

I'm not saying the Lerners are doing anything differently than any other pro sports owners do. But they put down maybe $100 million in cash, and financed the rest. They do not pay those financing charges out of pocket, they pay them OUT OF REVENUES. They're setting up the franchise so they make about $10 million a year on average.

Is that fair? Is that a good business move? OF COURSE!

But they've still invested $100 million in cash and made probably close to $50+ million in profits and $250+ million in equity in like 8 years. They've quadrupled their investment in 8 years.

Again, fine. They're great businessmen.

But I hate the line they're selling that they "aren't taking a penny out of the franchise". Whether they're taking them out or not, they've made a killing.

[NJ Ave]

My point is that they're not spending the amount on payroll necessary to make a "healthy profit". They're spending the amount on payroll necessary to quadruple their investment over 8 years that spanned a terrible recession.

But I still wouldn't care if they weren't selling that "we're not taking a penny from the Nationals" baloney line.

[lylelgreen]

MASN hearing pushed to March after discovery dispute entangles Commissioner Rob Manfred
By Adam Kilgore November 10 at 6:15 PM 

http://www.washingtonpost.com/blogs/nationals-journal/wp/2014/11/10/masn-hearing-pushed-to-march-after-discovery-dispute-entangles-commissioner-rob-manfred/

The legal saga between the Nationals and the Mid-Atlantic Sports Network will drag for months longer than previously expected after a skirmish over discovery bumped a pivotal trial date from December to March and entangled incoming commissioner Rob Manfred. The delay ensures the Nationals will not receive a potential financial windfall until after this offseason.

A New York judge had been scheduled to rule Dec. 15 on the validity of the ruling Major League Baseball’s arbitration panel made this summer regarding rights fees owed to the Nationals by MASN, which is majority owned by the Baltimore Orioles. But after court filings made Friday, that hearing has been pushed to March.

On Friday, MASN filed a petition seeking discovery documents from MLB. MLB had claimed that Manfred, then acting as Bud Selig’s top lieutenant, only provided administrative and “other” support to the three arbiters who made MLB’s ruling – Pirates President Frank Coonelly, Rays Owner Stuart Sternberg and Mets COO Fred Wilpon. The panel members all stated Manfred did not attempt to dictate their decision.

In a motion filed Friday, MASN asserted that, “Manfred and his staff functioned not only as the exclusive gatekeeper between the parties and the [Revenue Sharing Definitions Committee] panel, but as either a fourth arbitrator or even a ‘super arbitrator’ who controlled all communications between the parties, made procedural and substantive decisions and ruling in the arbitrators’ names and actively participated in the arbitration hearing.”

In the filing, MASN again asserted MLB has incentive to assist the Nationals because it sold the franchise to the Lerner family for a “substantial” profit.

MASN’s lawyers requested all correspondence between Manfred and the arbiters to prove Manfred’s role. MLB declined. And so, the court will determine on Dec. 15 what material MLB must turn over.

Major League Baseball feared financial statements or other sensitive information could surface during discovery for a trial over MASN rights fees. In this instance, MASN is not seeking to make that type of information public. They only requested documents pertaining to Manfred’s control over the arbitration process.

For the Nationals, the delay means at least another four months without the possibility of an additional revenue spike. MASN has paid the Nationals $34 million in rights fees for 2012 through 2014, a total of $102 million. If the court upholds MLB’s arbitration ruling, MASN and the Orioles would owe the Nationals an additional $67.6 million. If the court vacates the ruling, a new labyrinth of hearings and challenges would surely ensue.

[UMDNats]

What a nightmare of a lawsuit.

Seriously.

[Natsinpwc]

Lots of fun for the lawyers

[Kevrock]

Can we counter sue for lost opportunities after our window closes and we can't resign anyone?

[CALSGR8]

http://www.washingtonpost.com/blogs/nationals-journal/wp/2014/11/10/masn-hearing-pushed-to-march-after-discovery-dispute-entangles-commissioner-rob-manfred/

Now postponed until March

[Jordanz Meatballz]

I love how the fourth post of this thread is a complaint over not signing BJ Upton. Now that we might lose hometown stars, things are getting more critical on the payroll front, though.

[KnorrForYourMoney]

http://www.washingtonpost.com/blogs/nationals-journal/wp/2014/11/10/masn-hearing-pushed-to-march-after-discovery-dispute-entangles-commissioner-rob-manfred/

Now postponed until March

You must be happy.

[CALSGR8]

No. I hated the deal from the start

[MarquisDeSade]

Can we counter sue for lost opportunities after our window closes and we can't resign anyone?

Pretty much this.  Even if they win and get some crazy windfall of money it's not like they're going to become the Dodgers or the Yankees.  Look at the stupid deal the Padres got and what they've done since the team got sold after signing it and you'll get a pretty good idea of what to expect. 

[PebbleBall]

Can we counter sue for lost opportunities after our window closes and we can't resign anyone?

The greatest trick the Lerners ever pulled was to have us believe their ability to spend is tied to the MASN deal. 

[Kevrock]

If we get $30mil more per year, we have $30mil more per year.

[MarquisDeSade]

If we get $30mil more per year, we have $30mil more per year.

[PebbleBall]

If we get $30mil more per year, we have $30mil more per year.

They'd spend more than they do now, but they wouldn't spend more than they can now. 

[tomterp]

As a fan I'd much rather them have the opportunity to spend more than not have the opportunity.

And more revenue = more opportunity to spend. 

[NJ Ave]

As a fan I'd much rather them have the opportunity to spend more than not have the opportunity.

And more revenue = more opportunity to spend. 

Exactly. These are totally separate issues. Even if you are pissed our owners won't dip into their deep pockets to run the team in the red, you should STILL want the team to have $25-30 million more per season, because the Lerners HAVE pushed most of the Nats' revenues towards the payroll.

[PebbleBall]

As a fan I'd much rather them have the opportunity to spend more than not have the opportunity.

And more revenue = more opportunity to spend. 

Me too, but the dependence on TV money is based on the preference of ownership, not their ability to spend.  They're already a top 10 payroll team, and there is really only one other tier: major market clubs that are willing to operate at a loss.  The Nationals will never be in that group, and they already spend enough to be competitive, so I don't really know what the clamor for the TV money is.  It's not going to transform anything.