With so much attention focused on getting the Tampa Bay Rays a new stadium it is easy to overlook another revenue stream situation that will almost certainly improve in the next year or two. With the Rays television contract set to expire in 2016, the Rays could be sitting on a gold mine that will mean more revenue for the team and more money to spend on players.
Currently, Sun Sports is paying the Rays about $20 million per year for the rights to broadcast games locally. That is one of the smallest local TV deals in baseball even though the Rays are in the middle of the road when it comes to local TV ratings.
We all know it should go up. But how much? Let’s take a look at some other teams that signed new deals in recent years including the Phillies (~$100M/year), Rangers (~$80M/year), Angels ($150M/year), Mariners (~$118M/year), Padres (~$60M/year), Diamondbacks (not signed yet, but expected to be at least $90M/year), and the Twins (~$29M/year) and compare those deals to their 2014 TV ratings.
When we plot ratings versus annual TV revenue, two things stand out: 1) most of the dots create a fairly straight line which suggests there is a approximate going rate “per household” as shown by the green arrow. In other words most of the recent deals fall on or near that line depending on what their ratings are. I say “most” because the one outlier is the Twins. It is unclear why, but for now let’s ignore them; 2) The Rays are nowhere near the line.
Basically, this chart suggests that while the Rays are only taking in $20 million per year, their ratings are worth somewhere in the range of $80-100 million, depending on how we consider the Twins deal. That’s an extra $60-80 million in revenue EVERY YEAR without having to do a thing except hire some lawyers to negotiate the deal.
Now this is just a guestimate at this point and there are plenty of red flags that could affect this number. First of all, I used just the 2014 ratings for the other teams while I used the average of the last six seasons for the Rays. Most of these deals were signed prior to the 2014 season, so they were negotiated based on ratings from previous years. Those numbers could be different, but I’m confident that most of them are still in the same ballpark.
Also, in many cases, teams are also given equity in the network broadcasting the games. That may be included in the annual value of the contract. If it is, then the actual take-home revenue at the end of each year will be less. However, in most cases, the equity portion of the value is only a small chunk of the overall value.
And then there is the uncertainty of the stadium situation and how that may play into the negotiations.
But the biggest factor is that none of the networks that negotiated deals in the chart above will be bidding for the Rays (although Fox Sports does own some). If Sun Sports balks at the idea of paying $80 million per year, where are the Rays going to go to get that money? That’s not clear and until a new stadium is in place, the Rays won’t even think about starting their own network as leverage.
Not all deals are great (see the Twins) and there is no guarantee the Rays will get $80-100 million per year. But even a “bad” deal at $60-70 million per year would be a huge boost to revenue and payroll flexibility.
In other words, things are going to get better, a lot better.