Don’t expect a potential Royals TV deal to affect the decision to rebuild

The Royals appear to be at a crossroads this off-season, with no clear indication whether the team will try to bring back some veterans and continue to try to compete, whether they will rebuild by tearing it all down and starting fresh, or some hybrid strategy. With many key players free agents and little help on the way from the farm system, some lean years could be ahead. Dayton Moore argues the team has been “living beyond its means” for the past few seasons, which suggests the team may look to reduce payroll and go young for a few seasons.

But one complicating factor is a potential television deal looming over the horizon. The Royals’ current deal with Fox Sports Kansas City, signed back in 2008, expires after the 2019 season. With a multi-million deal resting on high TV ratings hanging in the balance, might that induce the Royals to keep their players in an attempt to keep contending?

Don’t count on it.

Baseball has seen an explosion in money with their local TV deals in the past decade. Sure, the Dodgers are swimming in money to spend on players after signing a 25-year, $8.35 billion deal with Time Warner Cable (that has unfortunately blacked out the Dodgers from much of the non-Time Warner Cable carrying fanbase). But it’s not just the big market teams cashing in. The Indians signed a ten-year deal worth $400 million back in 2013. The cross-state Cardinals signed a 22-year deal worth a cool $1 billion. Local TV ratings for baseball are among the highest of any programming in the summertime, and live sports hold a captive audience that can’t fast forward through commercials, making them much more attractive to advertisers.

So with potentially hundreds of millions of dollars on the line, would the Royals be less inclined to do a rebuild, knowing that it could hurt potential TV ratings? According to Kansas City Star columnist Sam Mellinger, who briefly talked about the issue a few weeks ago on The Border Patrol on 810 WHB, the TV deal has little impact on the direction of the team.

“I’m told by people on both sides that - believe it or not - what the team looks like in that off-season that they do the deal does not have that much of an impact on what the TV contract ends up being.”

Which makes sense when you consider how long many of these deals are. The current Royals television deal with Fox Sports Kansas City is an 11-year contract. That is an eternity in baseball. Back then, the Royals were a laughingstock. You would have never predicted that the franchise would win two pennants and a championship during the life of the deal.

The most recent deals signed by teams are twice as long. Some of the players that will appear on the network at the end of the deal aren’t even born yet. How on earth can anyone predict the future of a franchise over the next 20 years?

Moreover, the Royals’ current television deal runs through the 2019 season (Mellinger reports that the Royals can’t even negotiate a new deal with anyone else until then, a laughably terrible provision in the contract). If they were to begin a rebuild in earnest this off-season, they would be two years into it by the time the deal expires. That is probably not enough time for a full turnaround, but you may begin to see some signs for hope by then.

A franchise rebuild has not hurt the negotiating position of other clubs. The Houston Astros were coming off a 92-loss season in 2014, breaking a string of three consecutive 100-loss seasons. That did not prevent them from signing a deal with Root Sports Southwest that fall, a new deal that would generate $80 million per year for the club.

And they are not alone. The 2011 Padres had their third losing season in four years and traded away their best pitcher, Mat Latos. Despite an unclear future, by the next spring the team signed a 20-year deal with Fox Sports that doubled their annual TV revenue to $30 million per year, and included a 20% equity stake. The Cincinnati Reds signed a 15-year TV deal with Fox Sports Ohio in October of 2016 after trading away veterans like Johnny Cueto, Jay Bruce, and Todd Frazier and losing 90 games for the second straight year. Terms of the deal were not disclosed, but it was reportedly a “nice increase” over the $30 million per year the team was previously getting, and included an ownership stake.

The Phillies signed a 25-year, $2.5 billion television deal in 2014, well after the team had been a contender, and the midst of a rebuild that still has not paid off. The Diamondbacks signed a 20-year deal worth more than $1.5 billion in 2015 coming off a 98-loss season. The Mariners signed a 17-year, $2 billion deal in 2013, after five straight losing seasons and over a decade without a playoff appearance.

You get the point, bad teams, rebuilding teams, sign lucrative TV deals all the time. Why is that? Television deals are based on market size. As Mellinger points out in a recent column, the Royals led all of MLB in local TV ratings in 2015. By a lot. But in terms of total households, the Royals averaged about 120,000 households tuning in to watch the boys in blue, which was very good, but still behind six other teams. And that was the absolute best-case scenario.

Most years, the Royals will probably sit near the bottom of the league in total households viewing games, not because ratings are poor, but because Kansas City is the third-smallest television market in baseball. The size of their potential deal will probably rely on that expectation.

That’s not to say the Royals can’t improve from their current deal, which is considered one of the worst in baseball. The Royals are currently getting around $20 million per season. With the sports television market continuing to rise, and with Royals fans showing very strong ratings when times were good, the club should probably expect to double or even come close to tripling that under a new deal.

But the potential of that deal won’t affect Dayton Moore’s decisions this winter. Eric Hosmer may stay or go, but if he does stay, it will likely be for baseball reasons. Signing him to a contract that would pay him $20 million or more per season to get a few million more per season in a television deal certainly doesn’t make business sense.