Phillies get $2.5 billion, equity stake in Comcast SportsNet

The Phillies were not interested in a bidding war for the rights to televise their games. They negotiated for the last year with Comcast SportsNet, their cable partner since the network's inception. The way Phillies president David Montgomery saw it, two powerful Philadelphia corporations could find a common ground that benefited both.

"We're pleased," Montgomery said Friday. "And I think Comcast is pleased."

The Phillies and Comcast SportsNet, according to two sources, agreed Thursday to a massive 25-year contract through 2041 worth more than $2.5 billion that will provide the network with precious live summer programming and the baseball team with another substantial revenue source.

The Phillies, Montgomery said, will acquire an equity stake in Comcast SportsNet Philadelphia, one of the nation's most successful regional sports networks. Sports Business Journal reported the Phillies will own 25 percent of the network. Advertising revenue from broadcasts will still be split in some manner, which is not common in other teams' agreements. The major financial provisions will not go into effect until 2016.

The average annual rights fee for the duration of the contract is $100 million, but the figure will begin smaller and grow each year, according to a source. The Phillies are paid approximately $35 million per season in rights fees under the current contract. Combined with the ownership share and advertising revenue, this new pact is one of Major League Baseball's most lucrative.

The Phillies stumbled last season to a 73-89 record despite baseball's fourth-highest payroll. Montgomery said he expects his club to maintain its level of spending. The Phillies are near their self-imposed $170 million payroll limit for next season.

"I don't see us going any higher than where we've been," Montgomery said. "For us, the secret is to spend it well. Since we've moved in here, we have been able to be a club that is substantial in its payroll. I assume we will continue to be in the top four or five in the game. Hopefully, we'll make some good decisions and people will see an improved club in 2014."

A change this year will be in how many games are available on broadcast TV. Comcast SportsNet was limited in the past to showing a maximum of 120 Phillies games on its cable channel, with the others in the 162-game regular season shown on PHL17. Beginning this year, Comcast SportsNet will have no cap on the games it can telecast, but 10 to 15 games will appear on NBC10, its sister station.

The Phillies did not surpass the Los Angeles Dodgers' record-setting TV deal for $8.5 billion signed last winter. The Dodgers engaged Fox and Time Warner in a bidding war for the rights. The deal, however, is commensurate with recent packages across baseball.

Media companies are furiously locking up the rights to live sporting events because the future of TV is unclear. There is still a premium for advertisers to target live televised sports, and the value is manifesting in these contracts. Major League Baseball owns the prized digital rights to live games and sells them to viewers (with local blackout restrictions).

The Phillies recorded the highest local TV ratings among MLB teams in 2011, when they won 102 games. Their 39.4 percent drop in ratings from 2012 to 2013 was third-worst in baseball, according to data from Sports Business Journal. The Phillies' ratings on Comcast SportsNet grew for nine consecutive seasons from 2003 to '11.

The deal preserves Comcast SportsNet's market power in the Philadelphia area; it televises Flyers and Sixers games, too.

The new contract represents further frustration for area satellite dish owners. Comcast enjoys a competitive advantage in the Philadelphia-area pay-TV market because it was not obligated to offer Comcast SportsNet to satellite providers because of a decades-old federal exemption. The Federal Communications Commission attempted to ease that rule, but over the last several years Comcast, DirecTV, and Dish Network have been unable to agree to terms.

A Comcast SportsNet Philadelphia spokesperson said the channel is available to any satellite or cable provider. (Comcast reached an agreement with Verizon FiOS in 2006.)

The Phillies were the latest Major League Baseball team to sell their lucrative TV rights for billions. Their deal with Comcast SportsNet is commensurate with other recent agreements.

Team   Market   Average Annual   Equity

Size Rank   Rights Fee   Stake

Dodgers   2   $340 million   0%

Angels   2   $150 million   25%

Rangers   5   $150 million   10%

Mariners   13   $115 million   50%

Phillies   4   $100 million   25%

SOURCE: FANGRAPHS.COMEndText

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