Thursday, February 02, 2006
TAKING CARE OF BUSINESS
Seems to me, it wouldn't have cost them much to continue to sell the Friday night games to Ch. 4/38, especially since the people at WBZ were willing to double the rights fees. But baseball is a business, and the Sox are in this to make money. - Sean McAdam from a Q&A
McAdam is probably right about the short-term financials. The additional ad revenue just from the Boston area isn’t going to be significantly more than “double the rights fees.” Even with the revenue sharing benefit (think Cayman Islands and tax shelters), it doesn’t pass the sniff test. Ending this deal and putting all Sox games on their own cable network is about the long-term gain.
Controlling content is a benefit, as have been mentioned, but as with any monopoly, the skies the limit on prices. Along with ad buy rates, our cable and satellite bills will be increasing, in part, due to this change. Cable and satellite operators will just pass on the NESN service fee rate hike on to us, the consumers. If Red Sox Nation wants to watch the Olde Towne Team, then we will have to pay. The Sox and NESN distributors will profit at our expense; the only question is how much will they benefit.
The New England division will be Comcast's smallest, comprising 3.5 million customers from Comcast's Maine properties and Adelphia (Pink Sheets: ADLQ) and Time Warner systems in Massachusetts, Connecticut, New Hampshire, Vermont, and western Pennsylvania.
Comcast and Time Warner are exchanging several municipal systems so each company can cluster operations more efficiently.
Comcast already controls the Boston/Manchester, Hartford & New Haven, and Springfield-Holyoke markets or 3.6 million television households and it will only be more after the transition from the Adelphia deal is complete. Since Comcast will control a large portion of New England, furthering their relationship with the Sox should be on their to-do list. But do the Sox want Comcast to be an acquaintance, a friend with benefits, an unmarried live-in partner, or “…something really cool that I don't even know about”?
If the price is right, Comcast would definitely want to own a piece of the Olde Towne Team for a variety of reasons. First, the value of any MLB franchise will likely continue to rise with the new television deals and the success of MLB Advanced Media. It is highly likely that the value of the Red Sox will only increase. High tides lift all sails. Second, the cable company would also benefit from a lower “real” service rate per subscriber. They would be paying themselves a portion of the fee reducing their operating expense. Third, Comcast would likely have a voice in the negotiations between NESN and their only competitors - satellite providers. Comcast could significantly increase the NESN fee to satellite companies and/or not distribute NESN HD to them (as is the case now) both would eventually move many members of Red Sox Nation to cable and Comcast. To summarize, the deal would lower Comcast’s operating expense, wound their competition, increase subscribers and revenue. It would be a fantastic purchase for nation’s largest cable provider.
Both Comcast and the Sox/NESN would benefit from sharing content, thereby reducing production cost, with Comcast SportsNet Philly, Balt/DC and South. The relationship would also give them better bargaining position with all kinds of advertisers. They could offer advertisers space at Fenway, the Wachovia Center in Philly, and during Sox, Bruins, Flyers, and 76ers games. Comcast and the Sox would have a significant interest in 50% of the sports clubs in the fourth and fifth largest media markets, which also happen to be crazy for their teams. The varying kinds of sponsorship/advertising deals are endless. The deal would give both parties an opportunity to lower operating cost and expand their revenue base.
Clearly, Comcast get more out of a deal, from a business perspective, with the Sox literally cashing in. The Sox ownership would cash out on the appreciation of their $700 million investment. A conservative estimate has the Sox valued at $1 billion, so selling 10% of the club would net $100 million or a 43% rate of return after only four years (how’s your 401K?). The Sox ownership would not loose any control, as Comcast would have partner status, and given the synergies mentioned above, it is likely that the Red Sox would continue to appreciate. It would be a good deal for both parties and moving all of the Sox games to NESN is the first step in getting this mega deal done. But in the long-run it could mean only one distribution choice for the tube and higher prices for all "citizens" of RSN or then would pawns of the Red Sox be more appropriate?
Questions, comments, issues, concerns, or just want to call me a dumb ass?
Seems to me, it wouldn't have cost them much to continue to sell the Friday night games to Ch. 4/38, especially since the people at WBZ were willing to double the rights fees. But baseball is a business, and the Sox are in this to make money. - Sean McAdam from a Q&A
McAdam is probably right about the short-term financials. The additional ad revenue just from the Boston area isn’t going to be significantly more than “double the rights fees.” Even with the revenue sharing benefit (think Cayman Islands and tax shelters), it doesn’t pass the sniff test. Ending this deal and putting all Sox games on their own cable network is about the long-term gain.
Controlling content is a benefit, as have been mentioned, but as with any monopoly, the skies the limit on prices. Along with ad buy rates, our cable and satellite bills will be increasing, in part, due to this change. Cable and satellite operators will just pass on the NESN service fee rate hike on to us, the consumers. If Red Sox Nation wants to watch the Olde Towne Team, then we will have to pay. The Sox and NESN distributors will profit at our expense; the only question is how much will they benefit.
The New England division will be Comcast's smallest, comprising 3.5 million customers from Comcast's Maine properties and Adelphia (Pink Sheets: ADLQ) and Time Warner systems in Massachusetts, Connecticut, New Hampshire, Vermont, and western Pennsylvania.
Comcast and Time Warner are exchanging several municipal systems so each company can cluster operations more efficiently.
Comcast already controls the Boston/Manchester, Hartford & New Haven, and Springfield-Holyoke markets or 3.6 million television households and it will only be more after the transition from the Adelphia deal is complete. Since Comcast will control a large portion of New England, furthering their relationship with the Sox should be on their to-do list. But do the Sox want Comcast to be an acquaintance, a friend with benefits, an unmarried live-in partner, or “…something really cool that I don't even know about”?
If the price is right, Comcast would definitely want to own a piece of the Olde Towne Team for a variety of reasons. First, the value of any MLB franchise will likely continue to rise with the new television deals and the success of MLB Advanced Media. It is highly likely that the value of the Red Sox will only increase. High tides lift all sails. Second, the cable company would also benefit from a lower “real” service rate per subscriber. They would be paying themselves a portion of the fee reducing their operating expense. Third, Comcast would likely have a voice in the negotiations between NESN and their only competitors - satellite providers. Comcast could significantly increase the NESN fee to satellite companies and/or not distribute NESN HD to them (as is the case now) both would eventually move many members of Red Sox Nation to cable and Comcast. To summarize, the deal would lower Comcast’s operating expense, wound their competition, increase subscribers and revenue. It would be a fantastic purchase for nation’s largest cable provider.
Both Comcast and the Sox/NESN would benefit from sharing content, thereby reducing production cost, with Comcast SportsNet Philly, Balt/DC and South. The relationship would also give them better bargaining position with all kinds of advertisers. They could offer advertisers space at Fenway, the Wachovia Center in Philly, and during Sox, Bruins, Flyers, and 76ers games. Comcast and the Sox would have a significant interest in 50% of the sports clubs in the fourth and fifth largest media markets, which also happen to be crazy for their teams. The varying kinds of sponsorship/advertising deals are endless. The deal would give both parties an opportunity to lower operating cost and expand their revenue base.
Clearly, Comcast get more out of a deal, from a business perspective, with the Sox literally cashing in. The Sox ownership would cash out on the appreciation of their $700 million investment. A conservative estimate has the Sox valued at $1 billion, so selling 10% of the club would net $100 million or a 43% rate of return after only four years (how’s your 401K?). The Sox ownership would not loose any control, as Comcast would have partner status, and given the synergies mentioned above, it is likely that the Red Sox would continue to appreciate. It would be a good deal for both parties and moving all of the Sox games to NESN is the first step in getting this mega deal done. But in the long-run it could mean only one distribution choice for the tube and higher prices for all "citizens" of RSN or then would pawns of the Red Sox be more appropriate?
Questions, comments, issues, concerns, or just want to call me a dumb ass?
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