Earlier today, Ken Rosenthal reported that the Diamondbacks expect they will "soon" sign a new local television deal with FOX Sports. That's not really much of a surprise: the current contract expires at the end of next year, so it would seem about time for a fresh agreement to be reached. However, he's the first person to have attached any kind of figure to negotiations - and it's a big one. "Sources say that the contract will be worth at least $90 million per season over a period ranging from 15 to 20 years -- and that dollar figure could go even higher."
This would represent a sharp increase, and is even well in excess of estimates from a couple of years back that the new deal would be for double the current price per game. Since that piece was written, the numbers have only gone up further, led by the Los Angeles Dodgers, whose 25-year deal with Time Warner cable is estimated to be worth a total of $8.5 billion dollars (a chunk of that will be returned to MLB for revenue sharing; the Dodgers will keep an average of about $240 million per year). We won't be near that, but if Rosenthal's numbers turn out to be correct, it would basically triple the existing one, which ran for eight years and paid the team $250 million.
As with the Dodgers, the Diamondbacks probably won't see every penny. About one-third of the income will be sent back to MLB for sharing, though of course, the team will see increased income from that, as the new television deals around baseball increase that revenue stream. Still, if would seem credible to think that, after 2015, Arizona will have at least another $60 million which could be spent on payroll - Rosenthal says, this was one of the reasons the team was able to make credible offers for the likes of Shin-Soo Choo and Masahiro Tanaka.
Naturally, we're not the only ones, and basic economics says there will almost certainly be increased inflation in the marketplace as a result of this increased money supply.. However, while this is a rising tide which will float all boats, it may not float them all equally, or at the same time. Pity, in particular, the poor (literally!) Atlanta Braves, who have the misfortune to be locked in to their current local television deal "at below-market rates" until 2031. The Royals, Pirates, Brewers and Rockies are all also at least six seasons away from seeing anything additional, beyond their slice of a larger revenue-sharing pie.
The amount quoted by Rosenthal seems in line with a similar deal recently signed by the Philadelphia Phillies, which kicks in after this season. Their agreement with Comcast SportsNett is worth $2.5 billion over the next 25 years, which works out at $100 million per season. The Phillies' previous deal was also in the same financial ballpark as the Diamondbacks, at $35 million per year, so they have close to tripled its value with the new local television contract. However, it's worth noting that Philadelphia is the fourth-largest local market: Phoenix is 12th, though obviously a far larger geographical area than Phoenix is involved.
It is something of a gamble for the cable companies. Sports have increasingly become the goose that lays the golden egg for them. I don't know about anyone else, but they're about the only thing we watch "live" these days, i.e. without fast-fowarding through the commercials. And, indeed, if it weren't for the Diamondbacks, we'd give very serious thought to cutting the cord entirely, and getting our entertainment from other (more or less legitimate!) sources, such as Netflix. This is also why I wouldn't expect to be able to watch the D-backs on MLB.TV any time soon: the day that happens, we'd likely be reaching for the scissors.
However, one of the factors that helps make this profitable is the "bundling" that the cable companies do. We'd love to have a basic cable package, then add just Fox Sports Arizona and BBC America on top, but it's currently impossible to do that. Want FSAZ? You also have to take and be charged for a bunch of other stuff: all seven ESPN channels, the Golf channel, etc., regardless of whether you watch them or not. And in most cases, the answer was "not." In the second quarter of last year, ESPN prime time viewership averaged a mere 1.36 million viewers. I know we certainly weren't among them.
This has been the subject of some friction, local Senator John McCain long opposed to the practice - a decade ago, he said, "When it comes to purchasing cable channels, consumers have all the choice of a Soviet election ballot." Last year, he introduced a bill that would force cable companies to offer "a la carte" programming, allowing customers the ability to pick and choose specific channels. Needless to say, the powerful cable industry has not sat back, funding and lobbying against a plan which one study estimated would cost $35 blllion in advertising. If unbundling were to happen, the cost of these new deals would become almost unsustainable.