The Tampa Bay Rays have reportedly inked a new 15-year television deal with Fox Sports regional network Sun Sports that will pay them $82 million per year, with revenues starting at $50 million for the first year and increasing over the life of the deal. The previous TV contract that ran through the end of this year paid the Rays about $35 million per-season, one of the lowest amounts in baseball.
This deal is fantastic news for the Kansas City Royals, who have their own television deal with Fox Sports Kansas City set to expire at the end of the 2019 season. Here is what the Rays deal means for the Royals as they prepare to negotiate their own deal.
The Regional Sports Network bubble has not yet burst
The television industry is changing rapidly with satellite entering the picture, and more consumers opting to “cut the cord” in favor of streaming-only services. The Rays’ television deal is just another data point that the sports television market - specifically the baseball local TV market - is still thriving. In the past few years, the Cardinals have signed a billion dollar local TV deal, the Diamondbacks signed a $1.5 billion contract, the Reds signed a deal estimated to be worth around a billion, and the Phillies signed a $2.5 billion TV deal. With baseball dominating local TV market ratings in the summer, it is easy to see why networks are still willing to pay top dollar for the sport. Baseball offers live sports programming, and in today’s on-demand market, where viewers can zip by commercials with their remote, that type of content is at a premium.
Fielding a crummy team won’t hurt your TV deal
The Rays landed this billion dollar deal despite having traded away their franchise player, Evan Longoria, as well as valuable pieces like Stephen Souza, Corey Dickerson and Jake Odorizzi. The franchise has had four consecutive losing seasons, and hasn’t advanced past the ALDS since 2008, when they won the pennant. Fangraphs projects another losing season (although PECOTA has them for 84 wins), and with the Yankees and Red Sox both looking like serious contenders, it is hard to see how the Rays will seriously contend in the next season or two.
And yet, Sun Sports invested a billion dollars to broadcast this team. Why? Even if they don’t come out to the park, Rays fans still tune in. The team was 18th in MLB in local television ratings last year, and like most clubs, they draw some of the most eyeballs in the local market. As I wrote last year, television deals are looooong-term commitments, signed with an eye over the next 15, even 25 years. The immediate short-term prospects of the team are simply not a consideration. As Kansas City Star columnist Sam Mellinger put it, “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.” The Rays’ deal should be evidence of that.
The Disney deal with Fox Sports hasn’t hurt...yet
Disney has a deal to purchase several Fox entities, including the Fox regional sports networks like Sun Sports and Fox Sports Kansas City. No one is quite sure how that will impact these type of TV deals, but there were some worries that the fact Fox was selling these assets meant that perhaps the market was souring on live sports content. The early indication from this deal is that sports are still healthy. This Rays deal is contingent on the Disney purchase of Fox Sports to be approved by FCC regulators, and the Trump administration has held up the AT&T/Time Warner merger, so perhaps it is not a given. But if the deal goes through, Disney could find the Fox sports networks to be a lucrative opportunity to integrate baseball content with their other assets, such as ESPN.
A new television deal for the Royals gives them a great opportunity to increase their resources as they work on their rebuild to field their next contending team. They have a chance to greatly multiply their existing $20 million-per-year television revenues. If recent trends in the industry are any indication, the Royals could be in a very good position to capitalize on the market.