Evan Longoria signing his first long-term contract in 2006 (via Jonathan Gantt)

Once we get past the excitement of Rays fans over Evan Longoria’s new contract, and the jokes from other fans (“I was wondering who would be playing third base for the Brooklyn Rays in 2020″), the big question is: How can the Rays afford to give Longoria a $100 million contract extension? And the simple answer is “television revenue.”

First, there are the new national television contracts signed by Major League Baseball with Fox, TBS, and ESPN, which will double the Rays’ national television revenue to approximately $50 million per year. That is an extra $200 million over the next eight years alone.

In addition, the Rays will also see a huge boost in local television revenue after their current TV deal expires in 2016. That’s significant because Longoria’s new extension begins in 2017. And based on the Rays strong television ratings, and deals recently signed by MLB teams, the Rays’ next TV deal could be worth $50-100 million per year*. That would be an increase of 150-500% over the $20 million annually they are receiving now.

So by 2017, the Rays total television revenue could be $150 million per year. That would be ~$100 million increase in revenue every year without selling any extra tickets. And just another reason why the attendance problem is overstated.

In the end, the extension makes perfect sense from a financial standpoint and should not be surprising.

* This also makes me think the Rays have already had preliminary talks about a new local television contract. The Rays are very careful with their financials, and it would be surprising if they made a deal like this without at least have some confirmation about what their next TV deal will look like.

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13 Comments

  1. Joe D. says:

    Prof., do you think that the Longoria signing being the Rays first offseason move is no coincidence, as the Rays are looking to add an extra bat this offseason, all the speculation has been that they do so via trading a SP. But maybe, trading a pitcher, stocks up the farm system, even if none of the pieces is ML ready bat, and the rays are angling toward a real FA signing, like a 5 year deal, and they can say as a beginning chip, "we've got Longoria locked up, so you'll be hitting next to him for X number of years"

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  2. Gus says:

    1. Spend money on your own people, not on free agent risks. Check.

    2. Sign players when they are down in value. Check.

    3. Commit big long-term money only to non-pitchers. Check.

    4. Spend on your best players, not just good players (i.e. Upton). Check.

    5. Give your team something to market to sell season tickets long-term. Check.

    6. Give players in the system belief that the Rays (not some other club) will pay you if you perform and want to stay. Check.

    Nicely done.

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    • Beazy says:

      "Nicely" put.

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    • Sarah says:

      Yes, nicely done, but I'm not sure you are entirely correct with # 3. You are forgetting long term deal with Matt Moore (and also Wade Davis, but that wasn't big money). And James Shields was also signed to a 7 year deal. So pitchers signed long term -- sometimes!

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      • Gus says:

        Shields' real money was back end club options as he turned 30, so not the commitment there that they have with Longoria later. Moore is just through his arb years and isn't that big. I'm generally of the Bill James canon that all decline starts at age 27, slightly later for pitchers, and that you need to be very careful with money commitments out beyond that. But Evan's peak is so high, that even decline (if healthy) from now is going to be top of the league. More to the point, you are going to get a better TV contract and will have to spend that money somewhere. I'd rather have Longo locked up than patching $ for Pena and Luke Scott or Burrell and Shoppach every year.

        Plus, everyday players sell tickets and are good for ratings. The ladies like him. Evan is box office. This team needs box office. He needs to be on every billboard and commercial as "our Jeter" .

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        • Andy says:

          Excellent comments! But, it's not just the ladies who like Evan!!! ;-) Some of us guys do, too!!! 8-P Can I get a "WOOF!" :-D

          However, since I am definitely NOT a Jeter fan, I don't care for the reference to him in these discussions!! Surely, we can find another similar situation that wouldn't engender the heave reflex! Hmmmmmm, maybe a recent retiree - Chipper Jones :) Just sayin!!

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  3. Burn H. says:

    Is it now time to extend Ben too? Before he gets a full year at SS and is given the credit he so deserves. I say lock him in.....

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    • Sarah says:

      He's under contract through 2015, at which point he'll be 33. How far beyond that do you want to lock him up? Seems to me they've got him for exactly the years you'd want him.

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  4. don says:

    Putting all your eggs in one (broken) basket ring any bells?
    Get in line .200 hitters here comes Stuie and the Rays with their $1mil a year offers....poor pitchers..1to0 3to2 here we come...

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  5. Dre says:

    I'll take the Brooklyn Rays jokes over the "he'll look great in a Yankees jersey one day" comments anyday of the week

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  6. Beazy says:

    WHO SAID TAMPA BAY ISN"T A BASEBALL CITY?

    http://www.bestplaces.net/docs/studies/best_baseball_cities.aspx

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