The Braves are six years into a bad 20-year local-TV contract that might put the team at a competitive disadvantage as other major league teams sign significantly more lucrative deals that increase revenues and enable larger payrolls
However, Braves CEO Terry McGuirk said he’s not worried because the organization is positioned to stay competitive by enhancing other revenues and maintaining a strong minor league system that’s produced a steady infusion of young talent such as current Braves Jason Heyward, Freddie Freeman, Andrelton Simmons, Kris Medlen and Mike Minor.
The Braves also have an advantage over most teams in that their ballpark was constructed for the 1996 Olympics and paid for by private entities including Olympic sponsors.
“We pride ourselves in understanding our business long-term, and we’ve seen exactly where we are,” McGuirk said over lunch at a Midtown pizzeria this week. “We saw it coming years ago. The marketplace does change, but it’s not change we don’t know or understand or actually predict. We really made our zigging and zagging long ago, to get positioned correctly the way we are today.
“We have a long-term, 20-year deal. It is what it is. It was a deal that we didn’t like when we saw it, when we inherited it. And we knew that in the performance of time, it would probably not be the deal that we would like to have in the marketplace to exploit…. It’s not the only lever and dial we have to pull and turn to make this thing work, and we just have to be a little bit better in a bunch of other areas. And I think we are.”
The Braves deal, negotiated as the team was being sold by Time Warner to Liberty Media in 2007, is believed to be worth less than $20 million annually to the team. Some have said that figure is closer to $10 million annually, which would place it at the bottom of the major league scale.
The Dodgers are still in negotiations with Fox on a record-setting local TV deal that reportedly will be worth at least $6 billion over 25 years, which works out to at least $240 million annually, completely dwarfing the Braves’ deal.
The Dodgers were sold for a record $2 billion last year, and McGuirk noted that new Dodgers ownership will need huge revenues to pay down the debt they incurred. Still, the Dodgers have already shown a willingness to spend money on players like the Yankees did at the peak of their payroll excesses -- perhaps even more.
The Angels’ contract with Fox – Fox Sports West, to be specific -- pays a reported $147 million annually, and the Rangers will make $80 million annually in their new deal with Fox’s Southwest regional network. Even the lowly Astros will reportedly average $80 million annually in their new long-term deal with Comcast, and the Padres will average about $60 million per season in their deal with Fox Sports San Diego.
The Phillies get about $35 million annually in their current local TV deal, which expires after the 2014 season. Their rights fees could drastically increase in the next deal. The Nationals are part owners of the network that carries their games, and the team is permitted to re-set its rights fees every five years.
McGuirk said the Braves current TV deal was negotiated by Turner Broadcasting, which became part of Time Warner in 1996 when it purchased Ted Turner’s Turner Broadcasting System in a deal that included the Braves. TBS once carried all the Braves’ games, and a portion of games were still being carried on Turner South when it was sold to Fox in 2006, which changed Turner South’s name to SportSouth.
The Braves’ current TV deal covers all local-rights broadcast entities – Fox Sports South, SportSouth and Peachtree TV, owned by Turner Broadcasting.
“I’m not exactly sure whose final hands were on [the deal], but I’m pretty sure,” said McGuirk, who worked 35 years at TBS, rising to the rank of CEO from 1996-2001. “I think the guy is no longer with the company.... And I don’t know that it serves any purpose to put a bull’s eye on somebody.
“It was done simultaneously [when the team was being sold to Liberty]. It was to Turner’s advantage, obviously, to do it that way. They were parting with the team and they were able to structure a long-term relationship with Fox. If there was no deal it was far better for the team. But it is what it is. [The team] was bought with that in place. I know enough about the media business, I knew what we were working with and I just knew, that with the fullness of time, all these other elements of the [Braves] business were going to have to be stronger to compete.”
McGuirk didn’t provide specific dollar amounts on the Braves’ deal, but said neither the $10 million nor the $20 million figure was accurate. He did say it’s not a good deal going forward and that it included just a modest four-percent annual increase. There is no “out” clause.
“That deal was an iron-clad deal,” he said. “We are constantly trying to figure ways to improve it. We’re pretty good at that, and that will be our job today, tomorrow and going forward. We are able to improve it now and then and you’ll hear about that as we do it.”
McGurk was asked about this hypothetical situation: If the TV deal someday put the Braves at a disadvantage and undermined their roster construction and their on-field performance, might it be in the TV rights holder’s best interest to reconsider the terms of the remaining part of the deal if it would help the team on the field and presumably in the TV ratings?
“You’re exactly right,” he said. “Having spent 35 years on the television side of the business, there is a huge value to media outlets when the team is good as opposed to when it is not good. Ratings and all of the commensurate revenue streams that come off of that. So you’ve aligned the interest correctly, that they have some skin in the game in making sure that our talent level continues to grow.”
The Braves finished with a 94-68 record in 2012, tied for the fourth-best in the majors, and did it with an approximate $93 million payroll that ranked 15th in the majors. That figure included $10 million to cover two-thirds of Derek Lowe’s salary in the final year of his contract, after the aging pitcher was traded following the 2011 season.
McGuirk said the Braves have a payroll target of $98 million for 2013, which could give them about $15 million remaining to spend before or during the season (he didn’t say how much has already been spent, but that $15 million figure is based on known salaries of players currently under contract and expected pay raises for arbitration-eligible players).
“We’re still active; we’re not done building our team yet,” he said. “We’ve got some places, we still know [can be improved]. So we’re mindful.”
The Braves are still in the market for a left fielder, and a trade for Arizona’s Justin Upton doesn’t seem as far-fetched as it did six weeks after after the Braves had signed his brother, center fielder B.J. Upton, to a five-year, $72.4 million contract. The Diamondbacks have dangled the younger Upton all winter and are running out of trade suitors after he invoked his limited no-trade clause to quash a deal with Seattle.
The possibility of re-signing free agent Michael Bourn also hasn’t been entirely ruled out, but it wouldn’t happen unless he'd accept far less in terms of both dollars and years than the reported $16 million to $17 million annually his agent Scott Boras was believed to have sought when the offseason began. Bourn, too, has seen his potential suitors dwindle.
McGuirk said of the team’s payroll amount, he said: “It’s arbitrary. It’s what we think is the right thing for the business.”
He again referred to what he terms a payroll “sweet spot,” an amount that requires the team to fully utilize its scouting and player-development operations, to consistently produce affordable young talent that can be mixed with some higher-paid veterans. He said that produces a good mix in the clubhouse and a hungry, youthful team that excites the fans.
He didn’t say it, but a middle-market payroll might also allows the Braves to provide a better bottom line for corporate owner Liberty Media. They have been at or near the middle of the majors in both attendance and payroll in recent years.
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