Last week, the New York Court of Appeals, the state’s highest court, ruled 6-0 against the Mid-Atlantic Sports Network and Baltimore Orioles in an almost decade-long dispute about the fair market value of the TV rights for the Washington Nationals.
The ruling upheld a determination from the Revenue Sharing Definitions Committee of Major League Baseball that the fair market value of the TV rights for the Nationals for 2012-2016 was almost $300 million.
Here’s what we know about the case — including what could come next.
How did we get here?
In 2002, MLB bought the Montreal Expos for $120 million, and later announced that the team would move to Washington, D.C.
The Orioles, as one of the only teams in the mid-Atlantic from 1972-2005, objected to the move. The ownership group previously launched a regional sports network to broadcast its games in all of Maryland, Virginia, Delaware and Washington, D.C., in addition to parts of West Virginia, Pennsylvania and North Carolina.
MLB pushed for a resolution, which led to the creation of MASN.
Under a settlement agreement, MASN would exclusively broadcast both Orioles and Nationals games — except, for example, ones that were nationally televised — and pay each team the same amount every year in TV rights fees.
The Orioles would initially own 90% of MASN and receive most of the profits. That stake would decrease by one percentage point every year starting in 2010 until it went down to 67% in 2032.
The agreement set out the TV rights fees for 2005-2011. The settlement required the sides to negotiate after that point for five-year periods.
MASN argued that the fair market value of the TV rights for 2012-2016 was $39.5 million per year. The Nationals contended that it was $118 million per season.
When the sides could not come to terms, pursuant to the contract, the Revenue Sharing Definitions Committee in 2014 determined that the fair market value of the TV rights for the Nationals for 2012-2016 was $298.1 million — or an average of $59.6 million per year. The panel was composed of representatives from the Tampa Bay Rays, Pittsburgh Pirates and New York Mets.
So MASN went to court.
New York Supreme Court Justice Lawrence K. Marks in 2015 threw out the arbitration award because the same law firm, Proskauer Rose LLP, represented almost every participant in the proceedings except for MASN and the Orioles.
Fast forward a few years and several steps.
The Revenue Sharing Definitions Committee in 2019 determined that the fair market value of the TV rights for the Nationals for 2012-2016 was $296.8 million — or an average of $59.3 million per year. The panel was made up of executives from the Milwaukee Brewers, Seattle Mariners and Toronto Blue Jays.
New York Supreme Court Justice Joel M. Cohen upheld the arbitration award in 2019 and entered a judgment in favor of the Nationals for more than $105 million.
The judgment included interest and took into account the TV rights fees that MASN had already paid the Nationals. MASN agreed to deposit the money into an escrow account, according to court records.
What did the New York Court of Appeals rule?
In an 18-page opinion, Associate Judge Madeline Singas wrote that the courts correctly upheld the second arbitration award but erred in entering the $105 million judgment. The settlement agreement, she said, has a different provision that deals with the nonpayment of TV rights fees.
If MASN does not pay either the Orioles or the Nationals in a timely manner, the regional sports network has the right to fix that within 30 days after one of the teams gives written notice. The O’s or Nats can seek money damages or pursue other remedies if that does not happen — including “termination of the license to their respective telecast rights,” according to the settlement agreement.
But Singas pointed out that a section in the settlement agreement about general dispute resolution also appears to deal with nonpayment of TV rights fees.
That provision in the settlement agreement states that the sides will first seek mediation. If that’s unsuccessful, the dispute would be arbitrated before the commissioner of baseball pursuant to the MLB Constitution.
“While it is unfortunate that our decision may send this protracted litigation into extra innings, that result is necessitated by the settlement agreement’s terms,” Singas said.
Associate Judge Caitlin Halligan did not take part in the ruling. The New York State Senate recently confirmed her to the state’s high court.
What are the Baltimore Orioles, Mid-Atlantic Sports Network and Washington Nationals saying about the ruling?
Right now, nothing.
The Orioles, MASN and MLB declined to comment. Meanwhile, the Nationals did not respond to several requests for comment.
John Angelos, chairman and CEO of the Orioles, could not be reached.
Several weeks before the decision came down, Angelos appeared on “Morning Joe” on MSNBC, where he was asked if the dispute will ever be resolved.
Angelos did not directly answer the question. He instead spoke about the intent of the settlement agreement, which was to provide financial compensation in perpetuity to the O’s for an MLB team moving in 38 miles away from Oriole Park at Camden Yards.
“So it’s really not so much a dispute between two teams,” Angelos said. “It’s just an assurance for the city of Baltimore.”
“This issue is assuring for the city of Baltimore, the state of Maryland and the Orioles that there is some permanent compensation from the league to the Orioles,” he added. “Because we’re the only team that’s had that happen to us.”
What could happen next?
It’s not entirely clear.
“I actually think this was the right outcome,” said Scott Zolke, a partner at Loeb & Loeb LLP in Los Angeles who’s represented teams and college sports networks in their media rights deals. “Now, whether it’s over is anybody’s guess.”
When two sophisticated parties agree to arbitration, Zolke said, “you arbitrate.” MLB “basically put the smartest guys in the room” to make the decision about the fair market value of the TV rights — instead of, he said, leaving that determination to someone who does not know the business.
Though MASN might be upset with having to pay higher TV rights fees, “at least they’re in business,” Zolke said. He noted that the Diamond Sports Group, the largest owner of regional sports networks, recently filed for bankruptcy.
Michael McCann, a professor and founding director of the Sports and Entertainment Law Institute at the University of New Hampshire Franklin Pierce School of Law, said he believes that any further appeal would be difficult, and said the fact that the decision was 6-0 is significant.
The U.S. Supreme Court receives about 5,000-6,000 of petitions for a writ of certiorari each term, but only grants and hears oral argument in approximately 60-70 cases.
McCann said the ruling reaffirms a viewpoint that’s been accepted for a long time: Arbitration as a way of resolving disputes within professional sports league is accepted.
“It basically came out the way one would expect,” said McCann, who’s also written about the case for Sportico.
Meanwhile, Marty Conway, an adjunct professor of sports industry management at Georgetown University, said the decision sets up a “very challenging environment” for MASN to make its TV rights payments.
Conway previously worked in the commissioner’s office and served in senior marketing leadership for the Orioles and Texas Rangers. He noted that the business has fundamentally changed in response to trends like cord-cutting.
In 2011, MASN had 5.9 million in-market subscribers and 3.3 million out-of-network subscribers, according to a court exhibit. By the end of 2018, those numbers had fallen to 4.6 million and 2 million, respectively.
The Lerner family that owns that Nationals has been exploring a potential sale of the franchise.
Conway said he thinks that the ruling “helps determine how a negotiated settlement could happen, which could then lead to the Nationals being able to be sold.” That’s because there would be clarity regarding the TV rights, which are one of the top revenue streams for teams.
Said Conway: “This probably just drives people closer to the negotiating table.”
— Baltimore Orioles reporter Andy Kostka contributed reporting to this article.