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Many teams sign long-term local TV deals of 10 years or more. Many times these deals end up being poor and below market-value after a few years. The Pittsburg Pirates deal being a good example (only about 40 million USD per year). It seems that teams that don't have their own networks, like NESN or YES get a bit screwed.

Why do teams keep signing these deals? What is the benefit to them if they typically end up being bad.

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2 Answers 2

Many times these long term contracts come with large amounts of cash up front, as is the case with the Texas rangers new 20 year $3billion deal with Fox Sports.

It doesn't take effect until 2015, but the Rangers received $160 million cash up front and an equity stake in Fox Sports Southwest.

http://www.usatoday.com/sports/baseball/story/2012-02-06/MLB-teams-using-lucrative-TV-deals-to-sign-talent/53032284/1

That article also goes on to state the viewership of a team like the Yankees on the YES network (318,000 average) vs a smaller market team like the Royals (32,000). Taken in that context, the Pittsburgh deal may not be all that bad.

It may not be the best thing for parity in the league, but considering many teams are getting large front loaded contracts, equity stakes in TV networks that can be worth more than their franchises, and predictable cash flow, these deals can be a huge win for organizations.

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A naive guess would be the charm of guaranteed income over hypothetical income. Don't know how the finances are run in trade based sports (as in american leagues) but in transfer based leagues, teams often try and spend only the money that they know they have/will have.

Again another difference is probably in the tv coverage of teams, most European leagues have centralized TV deals, profits of which are then distributed to teams based on their estimated viewership or public interest. In a scenario where teams sign their own deals, I presume the better teams with more fans will get the majority of the deals, while lesser teams try to get the best they can find. If that's a long term deal then it might even be preferable since it means that they dont have to worry about trying to find the best deal again the coming year.

As I mentioned earlier I am not too familiar with the system in the U.S. but I tried to mention some possible motives for signing long term TV-deals.

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