Table 7.6 Growth in Team Values in MLB ($millions)
Team Value in
$2017 Value in 1991 or
First Year ($2017) Percent Change
Arizona Diamondbacks 1,150 432 166.2%
Atlanta Braves 1,500 163 820.2%
Baltimore Orioles 1,175 191 515.2%
Boston Red Sox 2,700 249 984.3%
Chicago Cubs 2,675 259 932.8%
Chicago White Sox 1,350 220 513.6%
Cincinnati Reds 915 172 432.0%
Cleveland Indians 920 163 464.4%
Colorado Rockies 1,000 183 446.4%
Detroit Tigers 1,200 210 471.4%
Houston Astros 1,450 201 621.4%
Kansas City Royals 950 229 314.8%
Los Angeles Angels of Anaheim 1,750 278 529.5%
Los Angeles Dodgers 2,750 335 720.9%
Miami Marlins 940 135 596.3%
Milwaukee Brewers 925 163 467.5%
Minnesota Twins 1,025 182 463.2%
New York Mets 2,000 335 497.0%
New York Yankees 3,700 384 863.5%
Oakland Athletics 880 163 439.9%
Philadelphia Phillies 1,650 268 515.7%
Pittsburgh Pirates 289 163 77.3%
San Diego Padres 1,125 163 590.2%
San Francisco Giants 2,650 163 1,525.8%
Seattle Mariners 1,400 172 714.0%
St. Louis Cardinals 1,800 268 571.6%
Tampa Bay Rays 825 334 147.0%
Texas Rangers 1,550 191 711.5%
Toronto Blue Jays 1,300 278 367.6%
Washington Nationals 1,600 397 303.0%
Source: Forbes.
In 1999, the Yankees and Nets agreed to what initially appeared to be an inconsequential merger of both teams’ business operations. The goal of the merger was to improve the business offices of both clubs and, through the realization of some efficiencies and the removal of duplicate operations, increase profitability. There also was interest in unifying marketing efforts to leverage increased revenues from the local broadcast of both team’s games.
With business operations merged and a cooperative marketing agreement, both teams focused on enhancing revenues from the sale of their broadcast rights to New York City’s largest cable television operator, Cablevision.
Initially the teams simply wanted higher revenues, but in the course of dis- covering the real value of their broadcast rights, they began to consider the feasibility of establishing their own independent network. Cablevision enjoyed control of the distribution of local broadcast rights to all seven of the region’s MLB, NBA, and NHL teams. Unified, the Yankees and Nets believed they would be able to entertain a variety of offers and opportuni- ties when it came time to renew their contracts.
After considering all of their options, the two teams decided to form their own network with financing provided through an investment by Goldman Sachs. When the New Jersey Nets were sold to Bruce Ratner (Forest City Enterprises), the stake in Yankees–Nets was not included. The Steinbrenner family has wrapped their share of The Yankee Entertainment and Sports (YES) Network into Yankee Global Enterprises LLC, which operates the New York Yankees and the family’s interest in the television network. The value of the network was placed at more than $3 billion in 2007 when Goldman Sachs expressed interest in selling their share (Davies, 2007). In 2017, Forbes estimated that the Yankees were worth $3.7 billion. In 2014, 21st Century Fox increased its ownership share of the YES network from 49 to 80 percent (YES Network, 2014). Then, in late 2017, the Disney Corporation proposed a $52.4 billion deal to purchase the majority of 21st Century Fox’s assets – including the YES network (Barnes, 2017).
The notion that teams could form their own network begins a bit earlier than 1999. Some might argue that Ted Turner’s linking of the Braves to his television empire was the first example of a team forming or being used to establish a network. The Braves were an important part of TBS and its suc- cess, but Turner acquired the local broadcast rights to the team’s games in 1972, four years before acquiring complete ownership of the team. It seems more appropriate to conclude that Ted Turner acquired the team to bolster the network, rather than having a franchise and then forming a network with the team as its core product. What is clear, however, is that the own- ers of the Boston Red Sox and Boston Bruins established the New England Sports Network (NESN) in 1984, beginning in earnest the era of teams and then leagues creating their own television networks and media distri- bution systems. These networks would then negotiate with cable television
operators and satellite providers to deliver their content as do ABC, NBC, Lifetime, CNN, or ESPN. The teams could use the popularity of their games as a way to entice the highest possible fees for the right to deliver the content to fans. The Red Sox own 80 percent of the NESN network and the Bruins retain the balance. In 2009, when the New York Times was interested in selling its stake in NESN (The Times Corporation is a minority owner of the Boston Red Sox and, therefore, owns a portion of NESN), the network was valued at $443 million (Farrell, 2009). The Red Sox’s stake in NESN is actually owned by New England Sports Ventures, which owns the baseball team, the 80 percent share of NESN, FC Liverpool, Fenway Park, and the Fenway Sports Group, which is a marketing, management, and real estate company that also has ownership interests in an auto racing business. These collective interests make the Red Sox part of a business empire that, while less valuable than the one that includes the New York Yankees and the YES Network, is far more diversified.
Several teams have added media corporations to their holdings and have vertically integrated television and radio into their operations. The Yankees, Mets, Red Sox, Bruins, Rangers, and Knicks are no longer just teams. They are media corporations with teams, or teams intertwined with a media net- work such that where one ends and the other begins is indistinguishable.
In addition, the fact that some baseball teams have created their own net- works has helped others receive very lucrative contracts from Fox Sports.
For example, the Los Angeles Dodgers’ contract with Fox Sports involved payments of $35 million in 2011, $37 million in 2012, and $39 million in 2013. Then, in 2016, the Dodgers entered into a 25-year, $8.35 billion contract with Time Warner (Hiltzik, 2016).
As will be discussed in the section that follows, the first part of the twenty-first century also saw the advent of college conference networks.
The prospect of additional revenues from media sales prompted realign- ments, with universities joining other conferences to ensure that conference championship games could be played and that additional media markets would be added to a network’s inventory.
Phase III saw the merging of teams, leagues, and media networks, as well as substantial growth in profits, but the relationship between sport and media remains complex. For example, a debate over the use of media funds sat at the heart of the NFL’s 2011 labor conflict. The scale and importance of the revenues earned by the league from its broadcast partners has made these contracts critical to the players, as they are the centerpiece of the rev- enue dedicated to player salaries. With their salaries inexorably linked to the size of the contracts negotiated by the league with its media partners, the players’ union agreed with NFL owners in the White Stipulation and Settlement Agreement (SSA) that owners alone would be depended upon to negotiate the best possible contracts with their media partners to assure
the richest possible pool of revenues for players’ salaries (White, 1993). The intent of the agreement was to ensure that the NFL would act in accord- ance with the best interests of both the players and owners in terms of maximizing revenues from the broadcast partners. In exchange, the play- ers agreed that the negotiations with the media partners would be left to the Commissioner’s office and the owners. The players’ perspective is that this agreement restrains the NFL and team owners from having individual interests in media corporations and then accepting lower broadcast fees to elevate the profits of their own media corporations. In addition, the agree- ment serves to ensure that the owners would never have any interest other than in maximizing the revenues received from the broadcast partners.
This agreement became a controversial centerpiece in the 2011 labor dispute when it was disclosed that the NFL would continue to receive pay- ments from the broadcast partners even if games were not played in 2011 as a result of a “lockout” or a strike by the players. The NFLPA argued that by accepting this benefit, the value of the contracts was likely lower than what they would have been if prepayments tied to a lockout were not included.
As noted in ESPN,
In TV deals made while the SSA was in effect, the players contend, the owners failed to obtain the maximum revenues the agreement requires.
Instead of using remarkable increases in television ratings to extract greater fees from the networks, the players assert, the owners accepted less money in return for payments during a lockout.
(Munson, 2010) The union’s blunt assertion was that money had been left on the table that would lead to lower salaries for the players. The players filed a griev- ance against the NFL and the owners, arguing that accepting guaranteed payments even if games were not played was a violation of the SSA and constituted an unfair labor practice with regard to the maintenance of a fair environment in which negotiations would occur. If the owners receive media revenues even if games are not played, they clearly enjoy an economic benefit not available to the players. In April 2011, a court found the owners had indeed violated the SSA and the players were entitled to damages and additional compensation (White, 1993).
Another change unique to Phase III involves the way teams, players, owners, and leagues are portrayed in the media. Phase I and II saw gener- ally positive stories on sport in an effort to engender consumer interest.
However, the wide-ranging number of news outlets, pundits, and bloggers created by the internet has made the suppression of negative stories dif- ficult in recent years. Difficult, but not impossible. Even though there was widespread evidence in the early 1990s that helmets either did not protect NFL players or were being used to inflict injuries, the issue was largely
ignored by the media. There was little criticism of the NFL, the NCAA, or high school athletic associations for lax attitudes toward the diagnosis and treatment of head injuries and concussions. Complaints of concus- sions in the NHL were also sparsely discussed. Such injuries were often comically referred to as a player having “his or her bell rung.” This under- played the severity of the situation and many players were encouraged to return to play too soon after a “bell ringing,” resulting in permanent and disabling conditions that emerged in later years. The issue of head trauma and its treatment did not become a centerpiece issue for the media or the major leagues until 2010 (Brain Injury Resource Center, 1997). While several players had suffered from head trauma, in January 2010, Sidney Crosby suffered a concussion that not only required him to miss the rest of the season – and significant playing time in the next two seasons – but at press conference in the fall of 2010 he detailed the effects of the concus- sion including his inability to drive or watch television (Baker, 2011). In the aftermath of his injury and several to NFL players, both leagues have developed new protocols to evaluate players and to restrict playing time if a concussion is diagnosed.
The relationship between sport and the media has continued to change the financial structure of team sport since its inception in 1913. Slightly more than 100 years after Western Union purchased broadcasting rights for baseball games – marking the first-ever purchase of sports broadcast rights – media rights now sustain teams and players at levels that were never dreamed of.
College Conference Networks
No discussion of Phase III of media and the sport business is complete with- out a review of the changes taking place in the NCAA. Unlike in the profes- sional leagues, college sport never went through a period where the media was relied upon to expand the popularity or fan base for athletics. Decades before the NFL established its identity and dominance, college football was attracting large crowds to its games. Each of America’s major universities had rivalry games that frequently attracted large crowds (e.g., Harvard–
Yale, Army–Navy, Texas–Texas A&M, Texas–Oklahoma, Michigan–Ohio State, USC–UCLA) that required no additional exposure from the media to ensure fans would attend. Ohio State and Michigan each had attracted more than 70,000 fans to football games by the late 1920s and early 1930s, and the men’s NCAA basketball tournament attracted sell-out crowds long before Brent Musburger employed the term “March Madness” in 1982 during the CBS telecast of tournament games (the term appears to have been used first to describe the state high school basketball tournament in Illinois in the 1930s). In fact, before the NCAA tournament was a staple on America’s calendar, the National Invitational Tournament (NIT), with
its final games hosted at Madison Square Garden in New York, was played before sellout crowds.
The initial issue for collegiate sport was not the role of the media in popularizing games, but rather the control the NCAA could exercise to regulate the number of times any one team could appear on television. Prior to 1984, the NCAA limited the number of appearances any team could make on national television and the number of games any university could televise of its football team. The NCAA would argue in court that too many televised games of any one team would lead to adverse effects on attend- ance. The NCAA had entered into contracts with CBS and ABC to televise football games, and it set the schedule with the networks. The University of Oklahoma challenged the NCAA’s authority, claiming it violated the Sherman Anti-Trust Act. In 1984, the Supreme Court agreed with the University of Oklahoma that the NCAA’s television plan violated the anti- trust law and that universities were free to televise as many or as few games as the market would demand and support, noting:
The NCAA television plan on its face constitutes a restraint upon the operation of a free market, and the District Court’s findings establish that the plan has operated to raise price and reduce output, both of which are unresponsive to consumer preference. Under the Rule of Reason, these hallmarks of anticompetitive behavior place upon the NCAA a heavy burden of establishing an affirmative defense that competitively justifies this apparent deviation from the operations of a free market.
The NCAA’s argument that its television plan can have no significant anticompetitive effect since it has no market power must be rejected. As a matter of law, the absence of proof of market power does not justify a naked restriction on price or output and, as a factual matter, it is evi- dent from the record that the NCAA does possess market power … The record does not support the NCAA’s proffered justification for its televi- sion plan that it constitutes a cooperative “joint venture,” which assists in the marketing of broadcast rights and, hence, is pro-competitive. The District Court’s contrary findings undermine such a justification.
(NCAA, 1984: 468) The ending of the NCAA’s control on the telecast of collegiate events cre- ated a surge in the supply of televised games. The increase did not have a negative effect on attendance levels. Records maintained by the NCAA indicate that at least 38.1 million fans attended Division I-A or I-AA games in every year from 2003 through 2017 (Table 7.7). While recent years have seen a slight dip in college football attendance, it still remains high com- pared to historical standards.
Just as the vertical integration of professional teams with television net- works was a major change in the industry with regard to the revenues earned by professional teams, a seemingly innocuous announcement by the Big Ten Conference had a very similar effect on collegiate sports. In 2006, the Big Ten Conference announced that while it would be extending its contract with ABC/ESPN for football games, the conference would begin televising other games not selected by ABC/ESPN on its own network (Big Ten Network, 2006). The network, created as part of a 20-year joint project with the Fox Entertainment Group, would be called The Big Ten Network (BTN). The Conference would own 51 percent of the network and provide all of its programming, including games and matches not televised as part of any national or league contract. This included, but was not limited to, football, hockey, softball, volleyball, and lacrosse games as well as all other matches.
The Fox Entertainment Group would own 49 percent of the network and provide the hardware and distributional mechanism required. Currently the BTN is available in 60 million homes across North America (BTN, n.d.).
A document secured from the Ohio State University through a Freedom of Information request by third parties disclosed that most of the universities in the Big Ten Conference received $21.5 million from television rights and the BTN in 2015 (Trahan, 2016). At a University of Michigan Regents open meeting in 2017, it was disclosed that the Athletic Department received
Table 7.7 Annual Attendance at NCAA FBS and FCS Football Games, 2003–2017
Year Attendance
2003 41.2 million
2004 38.2 million
2005 38.1 million
2006 42.5 million
2007 43.0 million
2008 43.5 million
2009 43.0 million
2010 43.7 million
2011 43.8 million
2012 43.1 million
2013 44.4 million
2014 43.7 million
2015 43.5 million
2016 43.5 million
2017 42.1 million
Source: NCAA http://www.ncaa.org/championships/statistics/
ncaa-football-attendance (accessed March 6, 2018).
$36.3 million in FY17 from the network and anticipates receiving a total of
$51.1 million in media revenues in FY18 (Snyder, 2017).
The success of BTN attracted substantial interest from other conferences that either launched networks of their own or expanded their membership to enhance their media presence and create a football conference champion- ship game. All of these activities expanded the number of televised games.
Most notable was the PAC-10’s expansion effort that initially seemed to focus on the University of Texas and other institutions in the Big 12 Conference. When Texas spurned both the Pac-10 and the Big Ten, the Pac-10 invited the University of Colorado and the University of Utah in 2011, creating the PAC 12. Utah’s decision to leave the Mountain West Conference encouraged that league to invite Boise State University to be a member, and then the Big 12 reached out to both WVU and TCU in 2012. The Big Ten Network added the University of Nebraska in 2011, and Maryland and Rutgers joined in 2014.
The creation of collegiate networks set in motion a wide-ranging series of management and business changes that are still reverberating, creating issues and opportunities for athletic directors and university presidents.
These potential opportunities make it more and more difficult for any aspir- ing or growing athletic program to avoid an alliance with one of these new networks. The Big Ten universities changed the game and profited from the creation of their own network, but the next few years may see even more innovations and media revenues generating an even larger portion of a uni- versity’s total athletic budget.
Media, Sport, and the Future: Emerging Competition in the Delivery of Games
Escalating revenue figures might lead some to wonder if a media “bubble”
exists. Real estate values plummeted in the aftermath of the collapse of the housing market and the Great Recession. Are escalating media deals yet another example of Shiller’s irrational exuberance (Shiller, 2005)? If they are, is a massive market correction in values inevitable? It is certainly pos- sible that prices will decline, but the escalating value of sport as a media product lies in (1) its ability to consistently attract large audiences, (2) the need of advertisers to place their product messages before large numbers of people, and (3) consumers’ willingness to pay fees through their cable and satellite providers for the entertainment provided by sport.
As an advertising medium, sport has benefitted from the fragmentation and expansion of the number of video options available to consumers. Add to all of the cable and satellite options those available on the internet, and it seems more appropriate to describe the televising of entertainment as
“narrowcasting” rather than broadcasting. The fragmentation and expand- ing number of entertainment choices has elevated the value of sport given